MINISTRY Of SCIENCE THE SOCIALIST REPUBLIC Of VIETNAM TECHNOLOGY AND Independence-freedom-Happiness. ENVIRONMENT htmlhtmlhtml-- No. 28/TT-QLKH html---- Hanoi, 22 January 1994.
In a transfer technology, the following terms shall have the meanings ascribed to them hereunder:
Technology means a system of solutions created through the application of scientific know-how and applied to achieve one or more practical tasks in production and business. The various forms of technology are:
Technical know-how, technological methods and processes, preliminary and technical design documents: formulate, drawings, diagrams, charts, technical data and other technical information;
Industrial property as stipulated in article 4 of chapter I of the Ordinance on Protection of Industrial Property Rights dated 28 January 1989;
The solutions referred to above may include machinery and equipment which contain technological elements. Consultancy and support services.
Technology transfer means single or multiple operations carried out by two parties, the transferor and the transferee, where both parties co-ordinate legal and practical activities for the purpose of, and the result of which is, the transferee obtaining a nd exploiting independently the capabilities of a specified technology supplied by the transferor to achieve a specified purpose.
Requirements for technology transferred into Vietnam:
The basic requirements are stipulated in article 4 of Decree 49-HDBT and shall be interpreted on the basis of the following conditions:
Similar technology is not available in Vietnam or, if it is available, the transferee cannot exploit it in more favourable conditions and with higher efficiency;
The transferee must thoroughly understand and master such technology after a certain period of time;
The transferor must have ownership of or be authorized to transfer the technology required by the transferee.
The parties involved in a technology transfer are stipulated in article 2 of Decree 49-HDBT.
In cases where the transferee has full knowledge of the technology and the capability to apply such technology but is prevented from doing so because the technology is a registered industrial property of the transferor in Vietnam, the transferee must obta in from the transferor a certificate of the right to use the technology prior to application.
Transfers of technology which involve imported machinery and equipment funded by the State budget must comply with the provisions of this Circular.
Vietnamese legal entities which, and individuals who, transfer technology into enterprises and companies with foreign invested capital must comply with the provisions stipulated in this Circular.
II. Technology Transfer Contract
This principle provisions to be included in technology transfer contracts are stipulated in article 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 of Decree 49-HDBT.
The following are detailed guidelines:
Every transfer of technology which is commercial in nature or binding in terms of rights and obligations shall take place pursuant to a contract in writing. Any agreement between the transferor and the transferee which is not stated in the contract docume nt shall not be legally valid.
A model form of a technology transfer contract is attached to this Circular (Appendix I) for reference. This is a general form and encompasses all transfer of technology. Depending on each particular transfer of technology, the contract document may incor porate the whole or a part of the model contract.
Basic requirements of a technology transfer contract:
The contract must specify:
The names of technology and services to be transferred to the transferee;
The objectives of the technology transfer (for example-for the production of a new product or a new service, change of specifications, quality and output of a product, reduction of the consumption level of materials, fuel, energy and so on);
The contents of the technology transfer (in accordance with the contents of technology transfer referred to in article 3 of Decree 49-HDBT and the content must be stated in detail);
Technical and economic value of each item of technology to be transferred (if is possible to determine such value);
The results estimated to be achieve after the technology has been transferred to the transferee. Such results must be clearly shown in the contract (or as an appendix which is an integral part of the contract) in a table showing:
Technical specifications and quality criteria of the product produced or the service provided by the transferee on the basis of the transferred technology;
Technical - economic specifications of the technology which the transferee will acquire after receiving the technology. Such specifications must also reflect the ability of the transferee to understand thoroughly and master the technology. It is necessary to show a comparison between the specifications of the technology currently being applied by the transferee and the technology to be transferred;
Economic results from the application of the technology to be transferred; Costs, prices, terms and mode of payment for the purpose of achieving the objectives and results of the technology transfer referred to above; Duration of the contract and conditio ns for amending and terminating the contract; Commitments in respect of quality and guarantee, and warranties; Training related to the transfer of the technology; Procedures for resolving disputes and the governing law.
Parties to the contract:
The contract must state clearly the full names and addresses of both parties (the transferor and the transferee) which shall be the registered names and addresses, and if required, an additional abbreviation of the names. The contract must accurately stat e the name of the company and that of its duly appointed representative who is authorized to sign the contract and be responsible for the performance of the undertakings and obligations stated in the contract.
Terms relating to industrial property rights:
If the technology transfer contract contains provisions relating to industrial property rights, then the part of the contract which relates to such rights must be constructed as an independent contract or a separate part of the technology transfer contrac t governed by regulations of the law on industrial property rights and technology transfer.
The technology transfer contract shall, apart from the provisions relating to industrial property, also include other provisions on matters such as the transfer of technical know-how, technological information, and technical assistance which shall be impl emented by way of three main methods: provision of technical documents, training, and provision of technical assistance and consultancy services. The technology transfer contract may consist of all three methods or just one or two of the methods.
Technical documents consist of materials such as designs, processed, formulae, instructions, directions, and drawings which outline the technology to be transferred. A list of technical documents to be transferred is stipulated in clause 4.1 of the model contract. The contract must state in detail the names of the documents to be transferred.
Training must serve the purpose of assisting the transferee to understand thoroughly and master the technology in a specified period of time.
The training programme must include all the technology and information necessary for the production of products pursuant to the stipulated technical criteria. The training programme must also specify the number of employees and technicians, and the areas of training. Therefore, on the basis of the training programme of the transferor, the transferee needs to take the initiative and propose further training items for this programme in accordance with its requirements and conditions.
The contract must stipulate in detail provisions on training in accordance with the guidelines stipulated in clause 4.2 of model contract.
The training contract must specify the number of trainers and their levels of expertise and experience. The contract must also stipulate clearly the undertaking of both parties in respect of achieving the objectives of the training programme such as under takings relating to the skill and expertise which the trainees will acquire after the completion of the training programme.
Upon the completion of the training programme, the transferor must test the trainees and issue them with certificates of completion of the training programme. A model certificate is attached to this Circular and must be issued to each individual trainee.
It is necessary to specify the cost for each training module.
Technical assistance and consultancy services:
In respect of construction of production facilities, the transferor must provide technical assistance for the whole duration of the contract with special attention given to the following three main stages:
Pre-trial operation stage;
Trial operation stage; and
Official production stage.
Technical assistance must be stipulated in detail in the contract or in the appendices to the contract.
for support and consultancy services such as selection of technology, technological improvements, research, analysis, evaluation, feasibility and pre-feasibility studies, consultancy on technology management, provision of services relating to collecting, processing and providing information on technological markets and natural resources, a large part of the technical assistance shall be carried out through the direct involvement of experts. Therefore, the contract must clearly stipulate in detail the spec ific tasks and duties of each expert and the result of each service.
It is necessary to specific the cost of each item of technical assistance.
Technology from the Vietnamese party:
Both parties must clearly determine and state in the contract the items of technology, skills, expertise, consultancy services, types of raw materials, materials, machinery and equipment which the Vietnamese party may supply, the conditions for common usa ge, and the schedule for replacement. Where necessary, the body administrating the technology transfer shall have the right to request for the implementation of the substitution of the imports referred to above.
The duration and schedule for the transfer of technology, and the point of transfer of each item of equipment and technology must be clearly stipulated and be in accordance with construction, production, and business schedules. The contract must also stip ulate the extent of any errors committed in the transfer of the technology and ways to deal with those errors.
Undertaking in respect of guarantee and warranty.
Undertaking in respect of guarantee:
The transferor shall guarantee:
That the quality of the products produced will meet stipulated technical specifications and be of equal quality to the same products currently being produced by the transferor;
That the quality of the technology provided by the transferor will be able to achieve the objectives of the technology transfer, taking into account factors such as the feasibility and the suitability of the technology;
That, after the transfer, the technology will provide to be reliable, taking into account the operating conditions of the transferee.
That the design, purchase order, installation, and commissioning of the equipment which the transferor (or the sub-contractor) has the responsibility to carry out will be of high standard;
That it will undertake all responsibilities in respect of any breaches of industrial property rights of third parties.
Other undertakings of both parties to ensure that no errors are committed on the technology transfer, that each party's rights in respect of confidentiality, competitiveness, and safety is respected, and that regulations on hygiene and the environment are complied with during the period of performance of the contract.
Undertakings in respect of warranty: the warranty of the items of the items of technology transferred should be specified clearly. In the event that the warranty periods of the items of technology differ from each other, the warranty period of each item s hould be stated clearly.
The contract must contain provisions on the legal and material responsibilities of the parties in the event that there are breaches of the contract.
Where the technology fails to achieve the stated objects which results in the product or service being of a poor standard even through the transferee has followed correctly the directions of the transferor, the transferor must, at its own expense, determi ne the cause of the problem, remedy it, provide a full explanation, and pay the transferee compensation for any damaged caused. Where a number of changes need to be implemented in the production process and the transferee requires additional training or n ew technical documents and assistance, the transferor must comply with such wishes and bear all the related expenses.
The establishment and implementation of preventive measures for environmental protection and labour safety need to be clearly stated in the contract (in respect of the content, extent, specific measurers, and scope of responsibilities).
In the contract, both parties must undertake to implement the preventive measures, and to limit and overcome all adverse effects of the technology on the environment including effects which are known prior to the transfer and effects which the transferee may discover at a later date. The transferor has the responsibility to inform the transferee of any international restrictions or prohibitions placed on the products produced from the application of the transferred technology (especially in respect of che mical and pharmaceutical products).
The contract must include provisions on occupational safety, and on industrial conditions and environment for workers.
The following provisions shall not be included in technology transfer contracts:
Provisions which compel the transferee of technology to buy the whole or a fixed percentage of raw materials, materials, machine components, equipment, or semi-products either from the transferor of technology or from a source determined by the transferor except in cases where it can be proved that:
Such requirements are necessary in order to maintain the quality standard defined by the transferor (the transferor of technology must supply to the transferee the quality standards of the types of raw materials or semi-products which the transferor uses in the production of products);
The purchasing price is equal to international market prices or is equal to the price which the transferor must pay to a third party, and in addition there are no other cheaper sources.
Provisions which directly or indirectly restrict the export of the products manufactured by the transferee pursuant to a technology transfer contract except in cases where it can be shown that the purpose is to protect the legal rights of the transferor a nd the transferee of technology such as in the case where the products are exported to a country which will not respect the industrial property rights of the transferor, or which already has a monopoly licence for the exclusive use of that technology.
Provisions which restrict the scope of business production, and the volume and prices of products manufactured by the transferee of technology.
Provisions which compel the transferee to agree to the appointment or selection of sales agent or commercial agents by the transferor, provisions which compel the transferee to deliver the products to the transferor for wholesale distribution, and provisi ons which compel the transferee to comply with the operational mechanisms of the sales agents of the transferor except in cases where it is more profitable to do so than to have the transferee selling the product and where voluntarily recommendations are put forth.
Provisions which prohibit the transferee from utilizing freely the technology transferred after the duration of the technology transfer contract or after the industrial property rights contained in the contract have expired.
Provisions which provide that the transferee shall not research and develop further the technology transferred or received similar technology from other sources; provisions which provide that the transferor will have ownership of any improvements or innov ations of the transferee.
In cases of payment by instalments equal to a fixed percentage (%) of the purchase price, provisions which compel the transferee of technology to pay a minimum instalment before the products are sold (regardless of the output volume and value of products sold).
Prices and payment:
The payment price of the technology transfer shall be agreed to by both parties on the basis of fairness and mutual benefit. Whether the mode of payment is a lump sum, by instalments calculated on after-tax profit, or by instalments based on the purchase price, the price paid for the technology shall always be calculated on that part of economic profit which is earned from the utilization of the technology for the duration of the technology transfer contract. The exact price shall be determined on the bas is of comparison between the prices at the time of calculation of different international market sources which supply the same technology.
When one or more of the industrial Property rights transferred become ineffective as a result of the expiry of the protection period or as a result of the technical know-how becoming public information, the two parties shall re-negotiate the terms of paym ent.
The selection of mode of payment shall be agreed upon by both parties. The various modes of payment are:
Contribution of capital on the basis of the monetary value of the technology;
Payment by instalments equal to a certain percentage of after-tax profit or of the total selling price (refer to clause 13.2); Lump sum payment; Partial lump sum payment and remaining amount by instalments.
Contribution of capital using the monetary value of the technology (as stipulated in clause 27 of part III);
Payment by instalments is a mode of payment whereby the transferee must pay gradually to the transferor for the whole duration of the contract an amount calculated by one of the following indices:
Based on the profit earned from sales of products manufactured through the application of the transferred technology. The payment value shall be calculated as a fixed percentage of after-tax profit. This percentage shall range from five per cent to twenty five (25) per cent of the after-tax profit during the duration of the contract. for transfers of technology which have special significance in the development of the economy but are slow in making profits, the Ministry of Science, Technology and Environm ent may consider a higher percentage.
Based on the net selling price. The payment value must be calculated on a fixed percentage of the sales turnover of the products sold.
Lump sum payment is a mode of payment whereby the two parties define the payment as a fixed amount which may be paid once in full or paid in several instalments upon the completion of each stage of the technology transfer, for example: upon the date the c ontract becomes binding, upon the delivery date of technical documents, upon the completion date of training, upon the date when the installation is completed, upon the date when the trial or operation is completed, upon the final inspection date, upon th e commencement date of production, and upon the date the first batch of the products is sold. The total payment for the transfer of technology during the contract period shall be limited to three to eight per cent of the total invested capital (excluding contribution of capital in the form of rights to use land, compensation, site clearance costs).
The net selling price is the total sales turnover of products or total turnover from provisions of services after application of the transferred technology, calculated as the total amount stated in sales invoices after deduction of the following items:
Indirect taxes (such as turnover tax, special sales tax, and value added tax); Commercial discounts;
CIf import prices and import duties on semi-products, spare parts, and components supplied by the transferor or branches Of the transferor;
CIf import prices and import duties on semi-products, spare parts, and other components which are manufactured outside Vietnam;
Packaging and freight costs.
The payment calculated on a fixed percentage of net selling price paid for the transfer of technology depends on:
The extent to which the transferred technology satisfies the domestic requirements and the development objectives of the country, and whether it creates employment, promotes export, utilizes local resources, and saves energy;
The possibility of expanding the application of such technology in other production establishments within the country;
The scope and extent of the importance of such modern technology on the whole operation of the transferee;
The scope of the rights of the transferee in respect of the transferred technology (such as whether it is exclusive or non-exclusive, and whether it can be assigned to a third party).
The maximum instalment payment (five per cent of the net selling price) stipulated in article 10 of Decree 49-HDBT shall be the total payment amount for all the items of technology transferred such as industrial property rights (excluding the original bra nd names of the goods), know-how, technical documents, training, and all other technical assistance. This amount must be paid for technology which satisfies the following conditions:
The technology transfer has a significant importance for the economic development of the country;
The product (or the service) is of high quality and is able to earn large profits; and
A large proportion of the products are exported.
In cases where technology satisfies the criteria referred to above but the items of the transfer only consist of industrial property rights, know-how, and technical documents and information, the maximum instalment payment shall be three per cent of the n et selling price.
Normal instalment payments:
In the case of technology transferred for the purpose of producing products of export standard, the normal instalment payment which applies to all items of the technology transfer shall be two per cent of the net selling price.
Remuneration for the use of trademarks shall be separately calculated:
A trademark shall only be valid when it can promote the sale of products and increase the sales turnover of the products which bear such trademark. Therefore, the fee for the transfer of the right to use the trademark shall only be calculated and paid for if the trademark is well known in markets which currently use such trademarks. In the case of trademarks which are well known in Vietnam, the fee for the transfer of the right to use shall not exceed one per cent of the net selling price of the product b earing such trademark. fees paid for use of trademarks in respect of products which are imported into Vietnam mainly for the purposes of packaging, assembly, and sale shall be considered on a case by case basis but shall not exceed one half of one (0.5) p er cent of the net selling price.
In the case of transfers of technology in the forms of consultancy services, training, and technical assistance, the price payable shall be based on the reasonable amount of work which has been done:
Steps to follow in determining the price:
Divide the services into specific activities;
Determine the amount of time necessary for carrying out such activities;
Negotiate monthly payment (or weekly) with various types of experts;
Estimate the appropriate total cost for the whole service;
Agree on a procedure to verify the actual working hours of experts;
Consider services which may be provided in the country in order to reduce costs.
In the case of technology transfers which include imported equipment, it is necessary to calculate separately the cost of the transfer and the price of the equipment.
The duration of the contract is stipulated in article 11 of Decree 49-HDBT.
Where the parties wish to make changes or additions to the contract and thus require an extension of the duration of the contract, they shall submit an application to an authorized body for approval no later than three months prior to the expiry of the du ration of the contract.
Any changes, additions to, or extension of the duration of the contract shall only be effective upon obtaining the approval of the authorized State body in writing.
The technology transfer contract may be terminated in the following cases:
The two contracting parties agree to the termination of the contract;
One of the two contracting parties commits a breach of contract to such an extent that it is impossible to continue the performance of the contract;
In cases of force majeure which make it impossible to continue the performance of the contract;
The authorized body issues a decision to terminate the contract on the grounds that the two parties have committed serious breaches of Vietnamese laws.
Upon the termination of the contract, the two parties shall agree on the process for liquidation of the contract. In the event that the parties fail to reach an agreement, they may refer the matter to an authorized body for resolution.
In the event that one party unilaterally terminates the contract, the other party shall be discharged from its responsibility to perform its commitments. Where the other party suffers damages as a result of the unilateral termination of the contract, the aggrieved party shall have the right to claim compensation or refer the matter to the arbitration body agreed to by both parties.
During the period of validity of the contract, if either party has new innovations or improvements which relate to the technology transferred, that party shall have the responsibility of notifying the other party of the improvements or innovations. In cas es where there is a need, one party may request the other party to transfer the improvements and innovations. The two parties shall agree in the contract on payment for the transfer of such improvements or innovations.
The assignment of the contractual rights and obligations of a party to a third party shall be subject to the written agreement of the other party and the approval of an authorized body.
Resolutions for disputes are stipulated in article 14 of Decree 49- HDBT.
III. Transfers of Technology in foreign Investments
The following cases shall be considered as transfers of technology in foreign investments and shall be regulated by the provisions of part III of this Circular:
The transferee is a joint venture company or enterprise established under the Law on foreign Investment in Vietnam and the transferor is a party to the joint venture irrespective of whether that party is the Vietnamese or foreign party;
The transferor and the transferee are at the same time parties to a business co-operation contract entered into in accordance with the Law on foreign Investment in Vietnam.
Where a company or enterprise with foreign invested capital receives technology from a third party and such third party is not a party to the joint venture or business co-operation contract pursuant to the Law on foreign Investment in Vietnam, such entity shall not be governed by the provisions stipulated in this part.
Where an enterprise with one hundred (100) per cent foreign owned capital established in Vietnam receives technology from one or more companies and enterprises which are controlled and supervised by one organisation, the value of the industrial property r ights, technical know-how, and professional expertise shall not deemed as part of the investment capital (or the capital) or a factor of the costs of production or business expenses. However, actual costs incurred during the transfer and application of th e technology (such as the salary of experts, travel and accommodation expenses of trainees, and expenses relating to the costs of preparation and printing of documents) shall be considered as part of the investment expenses or part of the exploitation exp enses of the project provided that each expense is reasonable and certified by legitimate receipts.
Technology transfers in foreign investment referred to in this part shall not apply the method whereby the transferee (in a joint venture or a business co-operation) is obliged to buy the technology from one (or more) joint venture (or business co-operati on) parties on the basis of a lump sum payment executed by way of the following forms of contract:
The technology transfer contract is in the form of contribution of technology as capital whereby the value of all the items of technology transferred is calculated as a fixed amount (the value is determined as a lump sum payment or the total amount of ins talments for a period of seven years). After the transferor has performed all of its obligations and the transferee has achieved the specified results, this amount shall be included in the capital contribution of the transferor in the joint venture (or bu siness co- operation) and only then will the transferor be entitled to a share of the profits in accordance with the proportion of its capital contribution without receiving any other payment.
The value of the contributed capital of the whole technology shall be dependant on the size of the project and the nature of the technology in the project, and shall be limited to three to eight per cent of the total investment capital (excluding contribu tion of capital in the form of rights to use land, compensation. site clearance costs). In a number of specific cases which involve high-tech or complex technologies, or projects with small investment capital, the Ministry of Science, Technology and Envir onment may consider accepting a higher percentage value of the technology as a contribution of capital (the construction design shall be in accordance with the provisions of the Ministry of Construction).
Technology transfer contracts pursuant to which, during the period of validity of the contract, the transferee pays to the transferor instalments calculated on the basis of after-tax profit earned from the sale of products or provision of services through the application of the transferred technology are strongly encouraged.
Technology transfer contracts pursuant to which, during the period of validity of the contract, the transferee pays to the transferor instalments calculated on the basis of net selling price of products produced or services provided through the applicatio n of the transferred technology shall only be applied if, in addition to the agreement on the calculation and payment of such instalments, the concerned parties also agree that: the transferee shall pay all the expenses incurred in the transfer of technol ogy but is permitted to defer the payment of the instalments until such time as the transferee makes a profit provided that such payment does not result in the transferee making a loss (that is, where the turnover is not enough to cover expenses). The tra nsferee shall not be liable for payment of interest on the deferred payment.
The net selling price referred to above must be determined in accordance with the provisions of clauses 13.2, 13.3, 13.4, and 13.5 of part II of this Circular. This deferred payment shall not include the actual expenses incurred during the transfer of tec hnology such as travel and accommodation expenses of experts who are assigned to the transferee for technical assistance, or of employees of the transferee who are sent overseas for training.
Technology transfer contracts referred to in clause 24 in the form of contributed capital of a project must be signed by all parties contributing capital to that project (irrespective of the proportion of capital contribution of each party). Technology tr ansfer contracts referred to in points (b) and (c) of clause 26 of this part shall be signed by the transferor and the transferee. Where the transferee is a join venture and the transferor is a party contributing more than fifty (50) per cent of the legal capital of such joint venture, the contract between the transferor and the transferee must be examined by the other joint venture parties and signed accordingly.
Provisions of contracts which have technology contributed as capital and technology transfer contracts referred to in this part must be in accordance with the provisions of clauses 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 (excluding 19.1 (c) and 19.6), 2 0, and 22 of part II.
Contracts which have technology contributed as capital must be accompanied by an application for an investment licence. The evaluation and approval of such contract shall be carried out by the State Committee for Co-operation and investment after the Mini stry of Science, Technology and Environment has considered and approved the contract by way of an official document.
Contracts which do not involve capital contribution in the form of technology shall be considered and approved by the Ministry of Science, Technology and Environment. Application for approval of contracts which have technology contributed as capital and t echnology transfer contracts must satisfy all the requirements stated in article 16 of Decree 49-HDBT. In particular, contracts which involve capital contribution in the form of technology and are attached to an application for an investment licence may b e exempted from a number of the information requirements in clause 4 of article 16 of the above-mentioned Decree provided that such information has been included in other documents of the application for an investment licence.
The period for consideration and approval of contracts which involve technology contributed as capital shall be subject to the same provisions in relation to the issue of investment licences. The technology transfer contract referred to in this part shall be subject to the period of consideration stipulated in clause 34 of part IV of this Circular.
After the contract providing for technology to be contributed as capital and the technology transfer are approved by the State Committee for Co-operation and Investment or the Ministry of Science, Technology and Environment, the concerned parties must per form all their obligations in the contract.
The performance of the contract in part or in whole shall be evaluated and certified in an inspection document.
The inspection document of the results of partial or full performance of the contract providing for technology to be contributed as capital must be unanimously certified by the board of management.
The inspection document of partial or full performance of the technology transfer contract as referred to in points (b) and (c) of clause 26 of this part must be signed by the official representatives of the transferor and the transferee. In cases where t he transferee is a joint venture and the transferor is a party which contributes more than fifty (50) per cent of the legal capital of that joint venture, the evaluation of the result of the transfer (a part or the whole of the contract) requires the part icipation of official representatives of the other joint venture parties. The inspection document shall only be legally valid if it contains all signatures of all representatives of the joint venture parties.
In all cases of contribution of technology as capital as stipulated in this part, during the evaluation process and preparation of the inspection document, the parties must consider and adjust the prices of each item and of the whole contract, taking into account the actual expenses incurred during the transfer process. Depending on the actual situation, the value of each item may be adjusted but the total value must not exceed the total value stated in the signed contract. Where it is identified that the expenses incurred are not related to the purposes of the technology transfer stated in the contract, or where the parties to the technology transfer fail to perform fully their commitments, obligations, and the content of the contract, the Ministry of fi nance, the State Committee for Co-operation and Investment and the Ministry of Science, Technology and Environment may inspect, evaluate, and request the parties concerned to provide clear explanations, or to re-adjust the value of capital contributed as technology.
In all cases of contribution of technology as capital, the final inspection document of each contract must specify clearly the useful life of technology which is considered as part of fixed assets for depreciation purposes. The depreciation of items of te chnology such as equipment and machinery must be carried out in accordance with the provisions of the Ministry of finance.
The final inspection document of each contract providing for capital contribution in the form of technology, or of each technology transfer contract referred to in this part must be submitted to the local tax office, the Ministry of finance, the Ministry of Science, Technology and Environment, and the State Committee for Co-operation and Investment no later than thirty (30) days after the date on which all parties sign the document in accordance with the provisions of this part.
The contract providing for capital contribution in the form of technology approved by the State Committee for Co-operation and Investment, the technology transfer contract approved by the Ministry of Science, Technology and Environment, and the inspection document prepared in accordance with the provisions stipulated in this part shall be integrated to form complete documentary evidence for the purposes of: ¶
Certifying the contribution of capital in the form of technology of the relevant party and the value of the assets of the project;
Carrying out the distribution of profits to the parties which contributed technology as capital, or paying instalments to the transferor of technology;
Determining the depreciation rate and expenses incurred during the transfer of technology for purposes of tax calculation;
Resolving foreign exchange problems in respect of revenues derived from, and expenses incurred in the transfer of technology;
Realising the incentives provided for in national policies on technology in respect of the relevant party.
Where necessary (in cases where there are suspicious details), authorized bodies may request the parties concerned to produce further appropriate evidence or to carry out investigations to determine the authenticity of the documents referred to above.
IV. Management and Approval of Technology Transfer Contracts
Application file for approval of a technology transfer contract.
The required documents which must be included in the application file for approval of a technology transfer contract are stipulated in article 16 of Decree 49-HDBT. The application file for such approval must be signed by both parties.
Documents which verify the legal status and financial standing of the contracting parties may be submitted as originals, or as copies which are notarised by a notary public of Vietnam or of a foreign country.
The approval and registration of the transfer of industrial property rights stated in the technology transfer contract shall be carried out in accordance with the procedures and formalities stipulated in the provisions of the law on industrial property ri ghts.
When lodging the file, the applicant must pay a fee for the evaluation and approval of the technology transfer contract. Technology transfers pursuant to foreign investment contracts which provide for technology to be contributed as capital as stipulated in Part III of this Circular shall not be subject to the above-mentioned fee
Decision to approve and register the contract.
The Ministry of Science, Technology and Environment, or authorized bodies shall, no later than forty five (45) days after receiving the complete application (excluding the period required for evaluation of the transferred industrial property rights), info rm the applicants of the decision to approve, refuse, or request for amendments of, or additions to the contract. In cases of requests for amendments, or additions, the time period for the decision to approve the contract shall be calculated from the date when the Ministry of Science, Technology and Environment, or authorized bodies receive in full the final amended application file.
The model approval form of a technology transfer contract shall be issued by the Ministry of Science, Technology and Environment. This model form (Appendix II) shall also be used by all authorized departments in ministries, ministerial equivalent bodies, other Government bodies, and people's committees of provinces and cities under central authority.
Technology transfer contracts where the transferee is a company or enterprise with foreign invested capital shall be approved by the Ministry of Science, Technology and Environment.
Technology transfer contracts which are not approved by the Ministry of Science, Technology and Environment must be registered at the Ministry of Science, Technology and Environment within thirty (30) days from the date when the contract is approved. The registration of such contracts shall be carried out by bodies which are vested with the authority to approve contracts.
The basis for determining the value of technology transfer contracts to be used by authorized bodies in their approval process (article 20 of Decree 49-HDBT) shall be the total value of all related payments (including both lump sum payments and instalment s) estimated for the whole duration of the technology transfer contract including expenses for training, and technical consultancy and assistance, and the value of equipment and machinery which contain technical data.
In order to supervise compliance with State regulations and policies, and the performance of agreements staled in the contract signed by both parties, the transferee must submit an annual report on the operation of transferred technology to the administra tive body which approved the contract. The content of the report must clarify the following matters:
Report on the performance of the two parties of the obligations stated in the contract: (the inspection document of the technology transfer prepared by the parties);
The benefit which the transferee receives from the transfer of technology including any improvements or innovations derived from the transfer.
Where necessary, the Ministry of Science, Technology and Environment shall, together with the relevant bodies, inspect or audit the performance of technology transfer contracts.
The following acts shall be deemed as breaches of provisions of Vietnamese laws:
Signing a technology transfer contract (or pledging capital contribution by means of technology) without submitting it to the authorized Sate bodies, or without submitting it within thirty (30) days from the date of signing;
Submitting contract documents (or pledges) which are inconsistent with the agreement between the two parties, or which do not reflect the actual situation;
Deliberately increasing the value of the contract which results in a smaller tax liability and a higher amount of foreign currency payable to foreign countries;
Preparing an inspection document on the results of the technology transfer and the value of the capital contribution which is inconsistent with the actual situation;
Preventing authorised administrative bodies from carrying out inspections or supervision, and failing to submit a report, or late submission of the report.
Depending on the seriousness of the breach, the administrative body in charge of the technology transfer may impose administrative penalties, a fine of one half of one (0.5) per cent to fifty (50) per cent of the Value stated in the contract, or terminate the contract. Serious breaches such as the use of technology transfer contracts, or the pledge of capital contribution in the form of technology as a means of tax avoidance, or as a means of illegally remitting foreign currency abroad may result in crimi nal prosecution before the law.
V. Implementation Provisions
This Circular shall be of full force and effect as of the date of its signing.
Ministries, ministerial equivalent bodies, bodies of the Government, and people's committees of provinces and cities under central authority shall have the power to evaluate, approve, and issue licences for technology transfer contracts, and shall be resp onsible for notifying and registering with the Ministry of Science, Technology and Environment technology transfer contracts which are approved prior to the promulgation of this Circular.
for The Ministry of Science Technology and Environment Minister