Work permit exemptions in Vietnam: internal transfers

Under Vietnamese Labour Laws, companies in Vietnam seeking to employ foreign individuals are generally required to obtain a Work Permit for the individual before the individual can sign a Labour Contract and commence work. However, there are exemptions to this requirement.

One of the significant Exemption Categories available is for individuals who are transferred within a group to a Vietnamese entity (Internal Transfer). Where an individual meets the requirements of an Exemption Category, they are exempt from obtaining a Work Permit and instead they are to obtain an Exemption Certificate to confirm their ability to work in Vietnam.

Recent changes to internal transfer regulations

Circular 35/2016/TT-BCT (“Circular 35”) was issued in 2016 and made important changes which widened the potential application of the Internal Transfer exemption opportunities.

Specifically, Circular 35 revised the definition of a “commercial presence” in Vietnam, which now includes:

• Foreign invested enterprises
• Representative office or branches of a foreign corporate, and
• Managing office of foreign investors in business co-operation contracts

This wider definition has meant that partially owned group companies can now satisfy the Internal Transfer requirements, where previously a company had to be a 100% owned subsidiary.

Applications in practice

A foreign individual internally transferring within an enterprise group under this exemption means a manager, executive director, expert or technician of a foreign enterprise which has established a commercial presence in Vietnam, who temporarily transfers internally within the enterprise to the commercial presence in Vietnam, and who was recruited by the foreign enterprise at least twelve (12) months prior to such transfer. Further, the enterprise must meet the requirement to belonging to any one of the eleven (11) Service Sectors contained in the Vietnam – WTO commitments.

Given the above, the application process for an Internal Transfer is essentially simplified when compared the personal documentation required for a Work Permit application, as some of the more difficult or time-consuming elements of a standard Work Permit application are not required.

Eleven service sectors

Where the foreign corporate or the Vietnamese commercial presence does not meet the definition of the specified Service Sectors (for example, manufacturers), employers have the option of amending their Vietnamese Enterprise Registration Certificate to add a complying service line. An example would be Business Consulting, which is generally an unrestricted service line for a foreign owned enterprise in Vietnam.

Comparison: Work permit application vs. internal transfer exemption application

The primary external documents that are required to be lodged for an “Expert” Work Permit (the most common Work Permit application category) versus the primary external documents required for an Internal Transfer exemption application are: