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Tuesday, March 31, 2020

Intra-corporate transferred foreign workers: A case of transfer to a joint venture in Vietnam and a real employer

Updated: 16:32’ - 28/08/2012

Dang Van Vuong
Bizconsult Attorneys

One of cases in which an employer is required to apply for work permit for foreigners working in Vietnam is an intra-corporate transfer (IT). Two issues which we should be aware of are whether transferring an employee from an offshore company to its joint venture company in Vietnam can be considered an IT case and who will be a real employer.

At first, we should seek for the IT definition. Decree No. 34/2008/ND-CP dated March 25, 2008, providing for the recruitment and management of foreigners working in Vietnam (Decree 34), Article 2.4, stipulates: “Foreign intra-corporate transferees include managers, executives and specialists, as defined above, of a foreign enterprise which has established a commercial presence in the territory of Vietnam, temporarily moving as intra-corporate transferees to that commercial presence and who have been previously employed by the foreign enterprise for at least 12 months.” By this definition, there are at least four criteria of an IT case: (i) there are three types of transferee (manager, executive and specialist), (ii) the offshore company has its commercial presence in Vietnam, (iii) the transferee moves temporarily to the commercial presence, and (iv) the transferee has been employed for at least 12 months.

Regarding the first issue of whether transferring an employee from an offshore company to its joint venture in Vietnam can be regarded as an IT case, to identify this case, we should rely on criterion (ii) of IT case aforementioned to determine whether a Vietnam-based joint venture of the offshore company can be regarded as a commercial presence.

Under Article 2.8 of Decree 34: “Commercial presence is a service provider having the nationality of a country that enters another country, establishes a legal person and provides services there. For example, a commercial bank opens a branch in a foreign country,” it is doubtful that “a legal person” here includes a form of joint venture, because such a joint venture is set up by the offshore company and its Vietnamese partner(s), not by the offshore company itself, and of course it is not wholly owned by the offshore company like a foreign commercial bank and its branch.

On the contrary, the Schedule of Specific Commitments in Services between Vietnam and WTO (WTO Commitment) regulates that “Unless otherwise specified in each specific sector or sub-sector of this Schedule, foreign enterprises are allowed to establish commercial presence in Vietnam in the form of business co-operation contract, joint venture enterprise, and 100% foreign-invested enterprise”. Apparently, joint venture is included in the definition of commercial presence in this WTO Commitment.

The current Labor Code, Article 3, also provides that in case an international treaty to which Vietnam is a contracting party provides unlike the Labor Code and other laws of Vietnam, such international treaty prevails. Hence, it is legally clear that a joint venture in Vietnam can be construed as a commercial presence in accordance with Article 2.8 of Decree 34. Consequently, if the offshore company dispatches its employee to its joint venture in Vietnam for work, the IT case will be applicable.

Yet, the reality presents a different view that all foreign employers and employees should be alerted. In opinions of a Management Board of Industrial Parks (MBIP) in South Vietnam, in case an offshore company transfers its employees to work in its Vietnam-based joint venture, in addition to complying with legal documents applicable to IT cases (as stated in Decree 34, Article 9.3, amended by Decree 46/2011/ND-CP (Decree 46), Article 1.9), it is also required to advertise the demand for recruitment of Vietnamese workers for vacancies on at least one central and one local newspaper before recruiting foreigners for such vacancies. Meanwhile, this requirement for advertisement is imposed on recruitment of foreigners to work in Vietnam, not on IT cases. In other words, MBIP does not regard this case as an IT one at all. This requirement does really make confusion between the case of recruiting foreigners to work in Vietnam and the IT case.

Regarding the second issue, qualifying the real employer well will help define his/her/its rights and obligations, for example the obligation to apply for a work permit (under Article 1.9 of Decree 46, the application form for a work permit is filed by an employer, Vietnamese partner or representative of a foreign non-governmental organization).

Employers, according to Article 1.2 of Decree 34, are “Enterprises and organizations employing foreigners, including: a/ Enterprises operating under the Enterprise Law and the Investment Law; b/ Foreign contractors (principal contractors and subcontractors) performing contracts in Vietnam; c/ Representative offices, branches of economic, commercial, financial, banking, insurance, scientific and technical, cultural, sports, education and health organizations; d/ Socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations; non-governmental organizations; e/ Non-business units of the State; f/ Healthcare, cultural, education and sports establishments licensed by competent agencies; g/ Vietnam-based offices of foreign or international projects; h/ Vietnam-based executive offices of foreign parties to business cooperation contracts; i/ Law firms operating in Vietnam in accordance with Vietnamese law; and j/ Cooperatives and unions of cooperatives established and operating under the Law on Cooperatives. The above enterprises and organizations are collectively referred to as employers.”

The concept of employer, however, does not cover offshore companies which usually dispatch their employees to work at their commercial presence in Vietnam. Decree 34 also sets forth one condition for IT case under which the dispatched employee has been recruited by the offshore company for at least 12 months before being dispatched. Interestingly, the employment contract between the offshore company and the dispatched employee is not terminated by or after the time of dispatch, because the offshore company dispatches its recruited employees to the commercial presence and the recruited make no objection. As a result, the real employer here is the offshore company.

However, as Article 1.2 of Decree 34 provides, the offshore company is not embraced by the concept of employer, of whom the commercial presence in Vietnam is regarded as an employer too. Assumedly this Article aims at making it convenient for completing work permit application procedures, tax declaration, or focusing on workplace and so on, but it is not correct in essence. The dispatched employee, after obtaining a work permit, may sign an employment contract with the commercial presence while the previous employment contract with the offshore company is still valid. Consequently, he/she could have two valid employment contracts at the same time, one in Vietnam and another offshore. So, in this case the real employers must be two, the offshore company and the commercial presence.

A question may arise is that who will a real employer of the dispatched employee be, the offshore company or the commercial presence? In my opinion, if we look at the whole scenario of IT case, the offshore company is the real employer, the case here is of dispatching, even if the workplace is in Vietnam, and such workplace is the commercial presence of the offshore company. Besides, if we regard the offshore company as an employer who could be named as the applicant in the application form for a work permit, it would not be troublesome much as long as the commercial presence pays, on behalf of the offshore company, wage arising in Vietnam for the dispatched employee, and carries out other legal procedures for the employment of the dispatched in Vietnam.

Now that Vietnam is rapidly integrating itself into the world economy and more and more foreigners come to the country for work in various forms, relevant regulations should be more explicit and consistent and the governmental authorities must observe and comply with such regulations seriously. The Government should work more on this area to improve and create a better legal environment for foreign workers to better contribute to the economic development of the country.-

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