Vietnam Legal Update: Vietnam Announces New Rules Governing Investment in Vocational Education

The Government of Vietnam’s Decree 15/2019/ND-CP dated 1 February 2019 detailing the regulations and measures for implementing the Law on Vocational Education (“Decree 15”) replaces Decree 48/2015/ND-CP detailing the regulations for the Law on Vocational Education (“Decree 48”). Decree 15 took effect on 20 March 2019 and introduces major differences with the requirements previously required under Decree 48.

MAJOR AMENDMENTS IN CONDITIONS TO ESTABLISH A VOCATIONAL EDUCATION INSTITUTION (“VEI”) WITH FOREIGN INVESTED CAPITAL (“FIC”)

The financial conditions as well as the conditions of minimum site size are two of the major changes which have been amended to facilitate the investment as follows:

The minimum land use area for different types of VEIs has been changed from an area per student ratio to fixed minimums as follows:

(a) A Vocational Education Centre must be a minimum of 1,000 square metres; or

(b) An intermediate level school must be a minimum of 10,000 square metres in urban areas and 20,000 square metres in non-urban areas; or

The minimum investment requirement is now based upon fixed investment minimums rather than per student investment minimums. The investment minimums (excluding land value) for each type of VEI are as follows:

(a) A minimum 5 billion VND for a vocational education centre;

(b) A minimum 50 billion VND for an intermediate level school;

In addition, the regulatory timeline to issue decisions on establishment of the VEI and the operational term have also been amended as follows:

The regulatory timeline for the issuance of the decision whether to approve the establishment of the VEI is reduced to 28 working days from the date of receipt of a complete and valid application dossier (previously 40 working days as stipulated in Decree 48).
The operational term of a VEI with FIC shall not exceed 50 years as from the date of the decision on establishment. If the VEI with FIC wishes to have a longer operational term then the VEI with FIC must provide a report to the Prime Minister for his decision. The law does not clearly state the maximum term for extension of a VEI with FIC. This differs from the clearer limitations outlined in Decree 48, which provided that the operational term may not be longer than 50 years and could be extended for an additional period of 20 years by Government decision.

CONDITIONS FOR ESTABLISHMENT OR TERMINATION OF OPERATION OF A REPRESENTATIVE OFFICE OF A FOREIGN VOCATIONAL EDUCATION ORGANIZATION OR INSTITUTION IN VIETNAM (“VEO”)

The applicant for establishment of a representative office of a VEO is subject to the following minimum requirements:

Having legal entity status in its home country;
Having principles and operational purposes (the details of which are not outlined under Decree 15);
Having operated vocational education facilities in its home country for at least 5 years; and
Having established regulations on the organization and operation of the prospective representative office in Vietnam in accordance with requirements of Vietnamese law.

The term of an operational license of a VEO’s representative office in Vietnam shall not exceed 5 years as from the date of the decision permitting establishment. Such license may be extended for a term not exceeding 3 years. If the license is reissued, then the term shall not exceed the term of the previously issued license.

The regulatory timeline for the issuance of the license for establishment of a representative office in Vietnam is 20 working days from the date of receipt of a complete and valid application dossier.

NEW REGULATIONS FOR VEI WITH FIC OPERATING FOR NON-PROFIT PURPOSES

Decree 15 now stipulates conditions for establishment of a VEI with FIC, which was not previously regulated under Decree 48. The conditions for determining whether a VEI with FIC operates for non-profit purposes are as follows:

The difference between revenue and expenditures (the “Profits“) from annual professional training activities and from scientific research activities of the VEI must be an undivided, commonly owned asset which is used to reinvest in development of material facilities, in development of the teaching and managerial staff, for scientific research activities, for granting scholarships to students and for other purposes serving the community interest.
In the case or a college, having a commitment to operate for non-profit purposes made to Vietnam’ s Ministry of Labor, Invalids and Social Affairs, or made to the local provincial people’s committee in the case of an intermediate level school or vocational educational center with its headquarters in such provincial locality. The commitment must be publicly announced for the information of the society and for supervisory purposes.
The owners of the investment capital sources must not be entitled to dividends or only receive dividends not exceeding the Vietnam Government’s bond interest rate stipulated for each period. The permission to issue a dividend is somewhat inconsistent with the requirement to reinvest the Profits of the organization or in the interest of the community as noted in the first point of this paragraph.

The competent authorities are responsible for assessing the grounds for whether or not a VEI with FIC implements its commitment to operate for non-profit purposes through review of the annual financial statements and periodical audit reports submitted by the VEI with FIC. It is not clear from the wording of Decree 15 who is given authority to conduct such a review.

The regulatory timeline for establishment of a new VEI with FIC to operate for non-profit purposes is 28 working days from the date of receipt of a complete and valid application dossier.

The regulatory timeline for recognition of a VEI with FIC to convert to a non-profit operation is 20 working days from the date of receipt of a complete and valid application dossier.

The information provided in this article is for information purposes only and is not intended to constitute legal advice should be obtained from qualified legal counsel for all specific situations.

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