QUICK REVIEW OF LEGAL AND POLICY ENVIRONMENT FOR CORPORATE PHILANTHROPY AND PARTNERSHIP BETWEEN...

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QUICK REVIEW OF

LEGAL AND POLICY ENVIRONMENT FOR CORPORATE PHILANTHROPY AND PARTNERSHIP BETWEEN CORPORATES

AND CIVIL SOCIETY ORGANIZATIONS IN VIETNAMHan Manh Tien, Nguyen Thi Thu and Le Thi Hai Yen

INFORMATION AND COMMUNICATION PUBLISHING HOUSE

This report was conducted and funded by Irish Aid.

Findings, interpretations and conclusions set out therein do not necessarily represent the viewpoints of Irish Aid and The Asia Foundation

The copyright of all photos in this report is held by the Asia Foundation.

QUICK REVIEW OF

LEGAL AND POLICY ENVIRONMENT FOR CORPORATE PHILANTHROPY AND PARTNERSHIP BETWEEN CORPORATES

AND CIVIL SOCIETY ORGANIZATIONS IN VIETNAM

INFORMATION AND COMMUNICATION PUBLISHING HOUSE

February 2016

Han Manh Tien, Nguyen Thi Thu and Le Thi Hai Yen

Corporate Philanthropy and Partnership between Corporates and Civil Society Organizations in Vietnam6

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TABLE OF CONTENTS

LIST OF ABBREVIATIONS .................................................................................................................. 2

ACKNOWLEDGEMENT ...................................................................................................................... 3

EXECUTIVE SUMMARY ..................................................................................................................... 5

I. BACKGROUND OF THE STUDY ...............................................................................................11

II. OBJECTIVES OF THE STUDY ...................................................................................................15

III. TARGETS, SCOPE OF THE STUDY AND BASIC CONCEPTS ..................................................19

3.1. Targets and scope of the study ................................................................................................................. 20

3.2. Basic concepts............................................................................................................................................... 20

IV. METHODOLOGY ......................................................................................................................23

4.1. Methods of data collection ........................................................................................................................ 24

4.2. Limitations and difficulties of the study ................................................................................................. 26

V. FINDINGS OF THE STUDY .......................................................................................................29

5.1. Legal and Policy Environment on Corporate Philanthropy ............................................................... 30

5.2. Legal and Policy Environment to regulate CSOs’ organization and operation ............................ 40

VI. CONCLUSIONS AND RECOMMENDATIONS ...........................................................................59

REFERENCES ....................................................................................................................................63

ANNEX I: LIST OF RELATED LEGAL DOCUMENTS ..........................................................................66

ANNEX II: KEY REGULATIONS FOR PROMOTING CORPORATE PHILANTHROPY ........................68

ANNEX III: MAPPING OF DECREE 93/2009/ND-CP ........................................................................75

LIST OF ABBREVIATIONS

CBO Community-Based Organization

CECEM Center for Community Empowerment

CECODES Center for Community Support Development Studies

CED Center for Education and Development

CISDOMA Consultative Institute for Socio-Economic Development of Rural and Mountainous Areas

CSO Civil Society Organization

CSP Center for Social ProtectionCSR Corporate Social Responsibility

EU European Union

INGO International Non-Governmental Organization

LIN Center for Community Development

MARD Ministry of Agriculture and Rural Development

MoIT Ministry of Industry and Trade

MOLISA Ministry of Labor, Invalids and Social Affairs

MPI Ministry of Planning and Investment

NGO Non-Governmental Organization

ODA Official Development Assistance

TPP Trans-Pacific Partnership

UNDP United Nations Development Program

VACD Vietnam Association of Corporate Directors

VCCI Vietnam Chamber of Commerce and Industry

VNGO Vietnamese Non-Governmental Organization

VUSTA Vietnam Union of Scientific and Technical Associations


ACKNOWLEDGEMENT

This study was conducted by a consultancy team including Dr. Han Manh Tien (team leader), Dr. Nguyen Thi Thu and Ms. Le Thi Hai Yen. The consultant team would like to express

our sincere thanks and appreciation to The Asia Foundation. During the consultancy implementation, we would not have obtained the results as expected without the continuous support and consultancy of the Social Development and Gender team at The Asia Foundation office in Vietnam.

We would like to thank The Asia Foundation’s project partners including the Center for Community Empowerment (CECEM) and the Center for Education and Development (CED) for their close collaboration during the study. We would also like to express our thanks to the Vietnam Association of Corporate Directors (VACD), the enterprises and civil society organizations in Ha Noi, Ho Chi Minh city and Da Nang for their valuable and effective cooperation for this study.

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EXECUTIVE SUMMARY

Within the framework of the project “Developing a Sustainable Civil Society Sector in Vietnam” initiated by The Asia Foundation with funding from Irish Aid, this study is to review and assess the opportunities and challenges of legal and policy environment in promoting

corporate philanthropy as well as mobilizing domestic resources for civil society organizations (CSOs) in Vietnam.

A large number of current legal documents and provisions were collected for review, focusing on the following two main areas: i) for the enterprises, there were tax incentives on corporate philanthropy and ii) for the CSOs, there were legal status, financial institutions and financial management to make sure that these organizations operate legally and transparently – critical factors to mobilize corporate resources.

Besides, a number of enterprises and CSOs in Ha Noi and HCMC were interviewed for in-depth assessment on law enforcement and its impacts in reality. These two key target groups of this study were also invited to a meeting to discuss and share their interests and concerns in relation to legal environment and policies that enable corporate philanthropy for the development objectives.

Basically, the legal and policy framework to promote corporate philanthropy is relatively completed with available key laws on taxation such as Law on corporate income tax, Law on value-added tax, Law on export-import tax and laws on personal income tax. These laws and other legal guiding documents largely regulates areas and activities that the enterprises can benefit from tax reductions and/or exemptions. Corporates’ knowledge and application of those legal provisions are, however, much more difficult for the following five reasons: first, relevant legal provisions cannot be found in any specific legal document but in different types of documents; second, these documents themselves became much more complicated after being amended and supplemented; third, eligibility procedures for tax reductions and/or exemptions are incomplete and complicated, making the beneficiaries unwilling to apply; fourth, legal knowledge of both businesses and CSOs remains limited; and fifth, legal dissemination and education of relevant Government agencies is limited and less proactive. These above stated five reasons explain why most legal and policy incentives have no practical meanings in reality yet. A large number of enterprises, particularly small and medium enterprises, have not applied these incentives in their philanthropy giving.

In spite of its rapid growth in terms of both quantity, type, scale and field of operation, the civil society sector has been encountering legal obstacles and vulnerabilities in both legal framework and practical activities. A common code that materializes constitutional rights of association, establishment of association and participation in State management has been under discussion for 10 years but the date of promulgation and quality of this Law are still questioned. The definitions of CSOs, non-governmental organizations, and not-for-profit organizations are still interpreted in different ways and in different cases. This has caused misunderstanding and even discrimination that hindered healthy operation of these organizations.

Among the 5 targeted types of CSOs in this study (including associations, non-state science and technology organizations, social funds/funds for charity, non-state centers for social protection, community-based groups), associations and social funds have a better legal position (clear legal status, regulations on establishment criteria, rights and responsibilities). For science and technology organizations that used to be called Vietnamese non-governmental organizations, there is no legal provision that confirms their non-governmental and not-for-profit nature. Centers for social protection have not had legal status yet. Whereas the community-based groups (CBOs) have not


been recognized or regulated by any legal documents. Actually, the regulations on financial management and control of social funds are relatively complete and strict. Associations and centers for social protection are defined as “prescribed by law”, but in reality there are no relevant regulations. Regulations on taxes, bookkeeping, statistics, and control of the VNGOs are not really clear. Therefore, the transparency and accountability of these CSOs (VNGOs, Associations, and Centers for social protection) mainly depend on their internal rules and their leaders.

Mutual understanding and linkage has been a challenge and an impediment to the partnership between corporate sector and civil society. Previous studies and this survey revealed that most of the enterprises did not have adequate understandings of CSOs. Some of them perceived CSOs as the beneficiaries (social/charity funds, social protection centers) while some regarded them as mass organizations established by the Government (Fatherland Front, Youth’s Union, Women’s Union, Red Cross Society, etc.). They expressed some mistrust in transparency and accountability of charitable activities since the operation was documented with some dishonesty which they experienced or were reflected in the media or by the public. Collaborating with CSOs has never been raised because the enterprises still cannot get their mind around the questions like why they have to collaborate with CSOs, how to cooperate with them, and what values or interests the partners can benefit from that partnership. Except a few CSOs that have established partnership or cooperation experience with the corporate sector, most of them have approached the enterprises in a way of asking for kindness and charitable giving. Most of CSOs failed to share common corporate interests, to understand the structure of making decision on businesses’ income-expenditure and difficulties of enterprises’ financial management and accounting. CSOs have not frequently appeared on the mass media, but when they do, they only focus on their charitable activities. Generally speaking, CSOs’ capacities remain limited in terms of organization, governance, access to the media and fundraising.

Enhancing the corporate to cooperate with the CSO sector in philanthropy giving and establishing a strategic partnership between these two sectors are considered the key targets of the sustainable development of the society in general and of the civil society in particular. It will be a difficult process to achieve these targets without an active participation of all three parties including the State, the enterprises and the CSOs. Legal and policy environment should be completed to encourage corporate philanthropy and ensure clear legal status, transparency and equality of the civil society. Public and corporate knowledge and awareness of the civil society’s nature, role and contributions should be enhanced. Capacity building for the CSOs should be strengthened in response to diversified development of the society. Mutual trust based on transparency and effectiveness should be built up between the three sectors. To do this, technical and financial assistance from international donors still plays a key role.

Following are the five main groups of policy recommendations:

1. Enhance knowledge and awareness of the society, especially government agencies and the corporate sector, on the roles, responsibilities and activities of the civil society organizations:

• State administrative agencies at all levels should have a more comprehensive and compatible views on the CSOs. Their contributions to community development should be acknowledged and regarded. The State management-related requirements should be made public and transparent (for a specific period, if necessary) to ease any unwillingness from the CSO side and enable them to diversify their activities.

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• CSOs should be supported or take action on their own by designing and implementing various communication campaigns to improve their image and enhance public knowledge and awareness on their roles, responsibilities and contributions.

• Both CSOs and corporates should organize forums or events that connect closely with interests of both sectors in order to enhance knowledge and share information, then build up trust and cooperation (for example, an event such as “keeping the environment clean” would attract more interest from environmental protection equipment distributors; and “Care about children’s health” would attract more interest from baby food providers.

• International non-governmental organizations (INGOs) are advised to play an important role in engaging relevant government bodies to organize annual forums for CSOs (similarly to Vietnam Development Partnership Forum of donors), in which relevant government agencies, INGOs, CSOs, and business associations will have an opportunity to share experiences and challenges, and discuss about strategies for partnership.

2. Supplement, amend and complete relevant legal documents to promote more corporate philanthropy and community support; Enhance the propaganda and popularization of these legal documents among the corporates.

• Policy makers should supplement, amend and complete relevant legal provisions and policies to promote corporate philanthropy. Specifically:

§ Amend and supplement several regulations in the Law on Enterprise Income Tax on deductible expenses from taxable income in a way to regulate “charitable” and “corporate philanthropic” acts, rather than listing detailed deductible expenses, because the Law cannot cover all circumstances of the real world.

§ Eliminate the requirement that some expenses should be prescribed through “government agencies who are eligible for fundraising”. Instead, any individuals or organizations who have a clear legal status should be allowed to act as direct beneficiaries or intermediaries of receiving the funding in order to address social issues. Procedures and paperwork when balancing the expenses should be simplified. Intermediate certificates for intermediate organizations (who play a role as recipients) in payment procedures should be eliminated.

§ Provide more guidelines on required financial and accounting procedures for expenses on scientific research funding.

§ Supplement the regulations on honoring and awarding enterprises and entrepreneurs with a greater priority given to the enterprises that have philanthropy activities and contributions to community development. It is recommended to formulate national, provincial and municipal prizes to honor corporates with best philanthropy activities for the community.

• State administrative agencies (Department of Enterprise Development – MPI, MoIT, MARD, etc), central and local tax departments, VCCI and business associations should develop large-scale communication and propaganda programs to widely disseminate current policies and laws. For example, a specific feature on legal information and updates on corporate philanthropy should be put on the website of these government bodies, or a manual or handbook on tax incentives on corporate philanthropy should be prepared and distributed widely to the enterprises and CSOs.


3. Continue capacity building (e.g organizational development, governance, professional capacity, fundraising…) of CSOs.

• INGOs should support CSOs to conduct “assessments of training and capacity building needs” on capacity building in the new development period, not only focusing on local NGOs but also other types of CSOs (e.g. associations and CBOs). Local NGOs which have received support from INGOs and become qualified and experienced enough should take the leading role in building capacity for other CSOs. These local NGOs should be encouraged to establish and facilitate CSOs’ network which aims at sharing experiences and building capacity among CSOs.

• Enterprises, universities and other educational facilities should pay attention to CSOs’ staff and reduce the tuition fees for them, especially for the training courses on organizational management, financial management and project management. There is a need to establish a training fund which will allow CSOs to send their staff to attend professional courses related to organizational development.

• The transformation of social protection centers and social/charity funds into social enterprises should be encouraged and supported in accordance with the Law on Enterprises 2014 and the Decree 96/2015/ND-CP. Development of a project to provide consultative, technical and financial support to facilitate this process of transformation should be considered. Support should be provided in the initial stage of this transformation for lessons learnt and improvements for replication.

4. Complete the legal framework to ensure that all types of CSOs operate legally, transparently and equally.

• National Assembly and relevant Government bodies should speed finalization and promulgation of the Law on Associations which constitute the key legal framework for CSOs’ establishment and operation. The CSOs are advised to actively participate in advocacy process of Law on Association to promote the process of finalization and promulgation of this Law.

• While working on the Law on Association, the Government is recommended to review, adjust and supplement the following four Decrees that regulate 4 types of CSOs as below:

§ Associations: The Decree 45/2010/ND-CP and Decree 33/2012/ND-CP that amends and supplements a number of articles of the Decree 45 should be revised to simplify the procedures for establishing associations. It is advised to remove the regulation that requires “the relevant line sectoral management agency” to approve “the registered preparatory board for association establishment”. In addition, the duration for approval of association establishment, internal regulations and position of a chairman of the association should be shortened. There should be a common guiding document for associations on transaction record, accounting and financial management.

§ Science and technology organizations/institutions: The Decree 08/2014/ND-CP should make clear the not-for-profit nature of these organizations and provide specific guidelines on financial management, accounting, tax and auditing policy for these organizations.

§ Social/charity funds: The Decree 30/2012/ND-CP should be reconsidered with an aim to reduce regulations on asset contributions to fund establishment and increase the proportion of fund management costs.

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§ Centers for social protection: The Decree 68/2008/ND-CP and Decree 81/2012/ND-CP that amends and supplement a number of articles of the Decree 68 should make it clear the definition of social protection centers, which also include caring facilities (studying, day-time boarding) and those (full-time boarding). Local governments should have priority policies on office spaces to enable these centers to fulfil the conditions of material facilities.

• For CBOs specifically, it is recommended to continue the policy advocacy efforts so that the Government would soon issue a decree to enable these organizations to register for operation, have legal status and ensure their activities in accordance with the law.

5. Further research.

• Agencies and organizations which take the roles of facilitating corporate philanthropy and cooperation with the civil society sector should have more in-depth and comprehensive researches on: i) the actual situation and the trends of philanthropic giving of different types of enterprises, included big state companies and corporations, ii) the roles of CSOs, including state CSOs, in mobilizing and using development resouces, iii) the roles of state management bodies in both policy making and enforcement, and iv) the methods, effiency and sustainability of resources that should be also evaluated by their own beneficiaries.

• Assessments and reviews of the existing practices and models of collaboration between CSOs and enterprises in community development programs to draw lessons and best practices for sharing with enterprises, CSOs, community and policy makers to improve legal frameworks and promote application of the best and effective practices for the cooperation between the two sectors.


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IBACKGROUND OF THE STUDY


After nearly three decades of Doi moi (Renovation), Vietnam has made impressive achievements in economic growth and become a lower middle income country since 20111. At the same time, the country has also experienced a rapid and diversified growth of the CSOs in terms of type, scale, scope and fields of intervention. According to the most recent statistical data of the Ministry of Home Affairs, up to December 2014, there were 52,565, of which 483 operated at the national level and 52,082 at local levels2, and 402 centers for social protection, of which 233 were the non-public. The summary report on the CSOs in Vietnam3 estimated approximately 2,000 science and technology organizations. Until now, there is no official statistical data on the number of active CBOs in Vietnam, but following the estimation by ADB, these types of groups amounted for around 200,000 in 2010.

At macro-economic level, multilateral and bilateral aid agencies have progressively cut down and/or strategically changed their aid and development programs to Vietnam4. Moreover, the global economic crisis has affected the sources of financing the development aid in Vienam for several years. In this situation, Vietnamese CSOs which had been greatly supported by INGOs and international donors have been encountering a lot of challenges to sustain and extend their resources for development/poverty reduction projects. Both local and international NGOs have started to initiate their more innovative and sustainable strategies of fundraising that give emphasis to the proactiveness and the domestic resources. Establishing the partnership with domestic corporates is considered as one of these strategies.

1 Social services for human development, the 2011 Human Development Report, UNDP, 2011

2 Government paper on Law on association, 2015

3 Summary report on CSOs in Vietnam, January 2012, ADB

4 Development Finance for Sustainable Development Goals in middle income Vietnam, UN-EU-MPI, 2011

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As a result of the economic growth, philanthropy giving and supporting the poor and vulnerable people have attracted more and more interest of the society and of the business community particularly. Up to now, there have have been no researches or statistics that make assessments on the scale and the amount of philanthropy giving by more than 500.000 enterprises in Vietnam5. According to some articles and studies, the philanthropy amounts were estimated not small at all. According to the report “Corporate Philanthropy and Corporate Perceptions of Local NGOs in Vietnam”6, among the 516 interviewed enterprises, there were 396 (77%) that engaged in philanthropic and charitable activities during the previous 12 months, with the total worth of VND 113 billion in cash, VND 14 billions of equivalents and 19,500 hours of labor. In April 2015, the MOLISA’s review on the 6-year implementation of the Government’s Resolution 30a on the rapid and sustainable poverty reduction program7 reported that the corporate sector (State-owned big company, corporations and other enterprises) supported VND 3,138 billion, equivalent to 150% of the local contributions that were estimated about VND 2,000 billion.

Theoretically, the relationship between the civil society sector that needs funds to finance their humanitarian and development programs and the corporate sector that is willing to contribute to those activities should have been close and sustainable. But in reality, this relationship is not really positive. There is much misunderstanding and mistrust between both sides. The question is what “gaps” are to be addressed to enable development of the partnership between these two sectors? Examination and assessment of the gaps from the legal and policy dimension is critical for the sustainable development of the CSOs in Vietnam.

5 According to the MPI assessment in “Draft plan for SME support -12/2015”, there were 535.000 active enterprises by the end of 2015

6 Corporate philanthropy and corporate perceptions of local NGOs in Vietnam, The Asia Foundation, CECODES and VCCI, October 2013

7 Prelimilary report on 6-year implementation of the Governmental Resolution 30A/2008/NQ-CP


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IIOBJECTIVES

OF THE STUDY


The review of legal and policy environment on corporate philanthropy falls within the framework of the project “Developing the sustainable civil society sector in Vietnam”, implemented by The Asia Foundation with financial support of Irish Aid. The project’s overall objective is to develop domestic resources and strategies to sustain Vietnam’s civil society sector. Three specific objectives supporting the accomplishment of this goal proposed by the project include: i) strengthening the fundraising strategy and capacity of CSOs in Vietnam; ii) promoting business understanding and engagement in strategic partnership with CSOs; and iii) supporting policy advocacy for an improved legal environment for CSO funding.

The overarching questions guiding this study include:

1. What are the policy gaps and opportunities that encourage corporate philanthropy among Vietnamese businesses?

2. What are policy contraints and support that enable Vietnamese CSOs to mobilize domestic resources for their development?

Additionally, institutional and legal recommendations are proposed by this study in order to encourage corporate philanthropy, facilitate CSOs’ activities and develop a strategic partnership between businesses and CSOs.

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IIITARGETS, SCOPE OF

THE STUDY AND BASIC CONCEPTS


3.1. Targets and scope of the study

Selection of CSO types. In Vietnam, the civil society is still a controversial definition and is understood in different ways. There is a greater diversity of CSO types and fields of intervention. Also, some are established, managed and financially supported by the State, and some are working independently in financial terms. Due to limitation of time and resources, it was agreed by The Asia Foundation and the research team that there were 05 types of CSOs selected for this study, including: i) Professional Associations, ii) Science and Technology Organizations (Vietnamese NGOs), iii) Funds for Charity or Social Funds, iv) Non-state Centers for Social Protection, v) Unofficial Groups (Volunteers Groups/Clubs, Community-Based Organizations). This sampling was based on the following three commons features: i) not being beneficiary of any state financial supports; ii) having difficulties in fundraising for development programs, and iii) having difficulties in completing the procedures of establishment and receipt of funding as prescribed by laws.

3.2. Basic concepts

Within the framework of this study, the consulting team agreed on the understanding of some definitions as follows:

Corporate philanthropy: The corporate philanthropy covers all philanthropic activities carried out by an enterprise. It is basically understood as an act of donation or support to solve any social problem at its roots. Corporate philanthropy does not have direct business benefits but indirect ones in the long run. Corporate philanthropic contributions can include cash, labor time, expertise, technical assistance, or any asset of the enterprises8. This concept differs from the traditional understanding (charity) in terms of both scale and approach. Instead of defining corporate philanthropy as only donations, relief or supports to communities, or the amounts that enterprise(s) should give away, enterprises nowadays also regard corporate philanthropy as their investments/contributions to the society in the long run as they will bring in benefits for the enterprises.

Civil society organizations (CSOs): The CSOs are the non-governmental organizations whose activities are non-for-profit and not-for-political-purpose. These organizations exist in public life, manifest interests and values of their members and others and are established on moral, cultural, religious and charitable basis9.

8. Handbook on Strategic partnership in corporate philanthropy and community development, 2015 developed by CED in the framework of

the project” Developing a sustainable civil society in Vietnam”. 9 Civil society organizations – Basic guidelines on partnership with the CSOs, ADB 2009

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The social organizations in Vietnam include10,11:

• Socio-political organizations: The Vietnamese Fatherland Front (Political Alliance Organization), Vietnam General Confederation of Labor, Vietnam Women’s Union, Ho Chi Minh Communist Youth Union, Vietnam Farmers’ Union, Vietnam War Veterans’ Union;

• Socio-professional organizations: Associations, Unions of Associations authorized for operation at (i) nationwide level, (ii) provincial level, (iii) district level and (iv) commune level;

• Non-state science and technology organizations (research institutes, centers, etc. - generally referred to as VNGOs) established by socio-professional organizations or individuals;

• Social funds, charity funds;

• Centers or institutions for social protection;

• Community-based organizations (CBOs).

10 The cooperation between Non-governmental organizations and States in Viet Nam, the Prospect of Restructure? Pham Bich San, Annual Conference of Non-government organizations in Viet Nam, 2011

11 Vietnamese Civil Society Organizations, Nguyen Ngoc Lam, MSD


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IVMETHODOLOGY


4.1. Methods of data collection

Methodologically, this study is mainly based on desk review and analysis of current legal and policy documents and other relevant materials. Besides, some in-depth interviews and focus group discussions with enterprises and CSOs were conducted in Ha Noi, Da Nang and HCMC in order to provide further information to desk-based assessment and analysis and policy recommendations proposed by the study team.

4.1.1. Desk Review

The Desk review focused on 2 groups of materials and documents:

The first group includes relevant legal and policy documents. For enterprises, the review targeted Law on Enterprise, tax-related laws including Law on Corporate Income, Law on Value-Added Tax, Law on Export-Import Tax, Law on Personal Income Tax, relevant Decrees and Circulars, and legal documents on honoring and awarding entrepreneurs and enterprises.

For CSOs, reviewed documents focused on three key issues: i) legal status, ii) establishment, organization and operation, and iii) financial management, bookkeeping and accounting.

In the next part of this study, legal documents are listed and quickly reviewed before the analysis. List of relevant legal documents and contents is detailed in Annex 1.

The second group is reference documents. Those are project documents and researches. List of references is attached at the end of this report.

4.1.2. In-depth Interviews

During one week in August through September 2015, the study team conducted in-depth interviews with enterprises and CSOs in Ha Noi and HCMC. In total, there were 17 CSOs and 17 companies interviewed, of which 07 companies and 10 CSOs in Ha Noi. The following table summarizes the types and the number of interviewed CSOs and enterprises.

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Types of CSOs and enterprises Number of interviewees

Civil society organizations

Non-state science and technology organizations (VNGOs) 07

Professional Associations 02

Funds for charity/ Social funds 02

Non-state centers for social protection 02

Community-based groups/ organizations (CBOs) 04

Sub-total 17

Enterprises State-owned enterprises 01

Private enterprises 02

Joint-stock companies 09

Limited liability companies 05

Sub-total 17

Grand total 34

In-depth interviews were conducted by using prepared semi-structured questionnaires. Semi-structured interviews with enterprises highlighted 4 key contents: i) the context of support/philanthropy giving and partnering with CSOs, ii) corporate knowledge and/or practice of current incentive policies related to philanthropy giving, iii) knowledge of CSOs and corporate requirements/expectations when performing donation/charitable giving, and iv) recommendations proposed by the enterprises to improve legal and policy environment towards corporate philanthropy. The questionnaire for the CSOs was designed with the focus on the 4 following aspects: i) issues/challenges in raising funds, specifically from local enterprises, ii) law enforcement in relation to fund reception and financial management of the CSOs, iii) CSOs’ knowledge of corporate philanthropy and their expectations/requirements to develop a sustainable partnership, and iv) their recommendations to improve the legal environment for this partnership.

Besides, a short self-administered questionnaire featuring the same contents was prepared and distributed to the enterprises which participated in the forum with Businesses in Da Nang organized by The Asia Foundation and CED within the framework of the above-mentioned project.

4.1.3. Focus Group Discussion (FGD)

In Ha Noi, with the support of VACD, the team successfully organized a FGD with enterprises on legal and policy opportunities and challenges to promote corporate philanthropy on September 4, 2015. The FGD aimed to facilitate sharing experiences, thoughts, points of views of enterprises and CSOs on the current support and encouragement policies on corporate philanthropy and community development. In total, there were 22 participants, of which 14 raised their voices on that subject.


4.2. Limitations and difficulties of the study

As this study is mostly based on the desk review of current legal and policy documents and conducted in quite short period of time, it has faced a number of limitations and difficulties mostly relating to selected methods of data collection.

Desk-based data collection and review have faced considerable difficulties due to the fact that legal and policy documents could not be found in any specific document but in different laws and decrees. In many cases, the same legal provisions are guided by different guiding documents (Circulars). As an example, tax deductible expenses stipulated by the Law on corporate income tax 2014 are listed in detail in Circular No.96/2015 but guided for tax exemption and reduction procedures by Circular 74 previously promulgated. Also, only a few similar researches and reports were available for review.

With 34 CSOs and enterprises interviewed in total, the results of in-depth interviews just contributed to making clearer desk-based analysis, rather than represented or provided further detail to the facts of law enforcement of the enterprises. In addition, the types of surveyed enterprises and CSOs were selected in a limited and subjective manner. Most of interviewed enterprises were small and medium-size enterprises that have made philanthropy contributions in small amounts and in direct and spontaneous manner and paid less attention to investments to specific social development programs/projects, whereas all interviewed CSOs were non-state organizations. The groups of state corporates and CSOs including state-owned big companies and corporations – considered as key contributors to the Government’s program 30A (the program on rapid and sustainable poverty reduction in the 61 hardship districts of the country) or socio-political organizations and unions – considered “government agencies who are eligible for fundraising” as stipulated by the State, were not targeted by this study. Therefore, interactional relationship between the public sector and the non-public sector in corporate philanthropy and domestic resources development of CSOs in Vietnam remains little known.

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VFINDINGS OF

THE STUDY


5.1. Legal and Policy Environment on Corporate Philanthropy

5.1.1. Legal and policy environment

Legal documents and policies on corporate philanthropy are summarized, analyzed and categorized into 3 main groups, including: i) Law on Enterprise 2014 and relevant documents under this Law, ii) Laws on Taxation (e.g. corporate income tax, value-added tax, export-import tax, personal income tax, etc.) and iii) policies on honoring enterprises. List of relevant legal documents is detailed in Annex 1.

a. Law on Enterprise 2014

Law on Enterprise No.68/2014/QH13 promulgated on 26th November 2014 took effects from July 1, 2015. This law replaces the Law on Enterprise 2005. The most highlighted point of the new Law is to define the legal status of a new type of enterprise: Social Enterprise (Article 10, Chapter 1). Recently, Decree 96/2015/ND-CP issued on October 19, 2015 by the Government detailed the Article 10 of the new Law, by i) confirming that the State encourages and makes incentive policies with regards to the organizations and individuals establishing social enterprises (Items 1 and 2, Article 2), ii) allowing social enterprises to receive both domestic and international resources of financing (Items 1 and 3, Article 3), and iii) promoting the conversion of Centers for social protection, social funds and funds for charity into social enterprises (Article 7).

With new regulations, the legal framework to facilitate social and philanthropy activities is more convenient, clearer and more transparent.

Decree 96/2015/ND-CP on October 19, 2015

Article 2. Policies on social enterprise development

1. The State stimulates and facilitates the establishment of social enterprises by any organization and individual for the purposes of solving socio-environmental issues for community benefits.

2. Social enterprises will benefit from investment incentives and supports as prescribed by law.

3. Social enterprises are fully subject to rights and obligations of any type of enterprises prescribed by the Law on Enterprise and the present Decree.

Article 3. Reception of financial aid and support

1. Social enterprises receive financial aid and support from INGOs to accomplish the objectives of solving social and environmental issues as prescribed by relevant laws on reception of non-Governmental aid.

2. Except financial supports stipulated by Item 1 of this Article, social enterprises are also eligible to receive supports in form of assets, finance or technique from domestic organizations and foreign institutions legally registered in Vietnam for socio-environmental purposes.

Article 7. Conversion of Centers for social protection, social and charity funds into social enterprises

1. Centers for social protection, social funds and funds for charity are allowed to use their assets, rights and obligations to register as social enterprises after having the decision on conversion into social enterprises by the authority that had issued the permit to establish these centers for social protection, social funds and funds for charity.

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b. Laws on Taxation

vLaw on Corporate Income Tax

The corporate income tax has direct impacts on the income-expenditure balance and the business result of the enterprise, hence affecting the decision making process of that enterprise on investment location, recruitment and philanthropy giving in regards of scale and aspects of sponsor.

Laws on Corporate income tax No.14/2008/QH12 dated 2008 and No.32/2013/QH13 dated June 19, 2013 and Law on Amendments to Taxation Law 2014 adjusted incentive provisions following two aspects:

Firstly, corporate income tax reduction and exemption are applied to enterprises that receive financial supports and grants for charitable purposes, have investments in disadvantaged areas and engage female and vulnerable employees. Following are some income items excluded and reduced from taxable income of the enterprise:

§ Income tax is exempted for income granted for implementing educational, scientific, cultural, artistic, charitable, philanthropic activities in Vietnam;

§ Income tax is exempted for income from producing and doing business on goods and services of the enterprises of which 30% employees or more are disabled, detoxified and HIV/AIDS-infected persons, or the number of annually average employees totalizes 20 persons or more, excluding enterprises operating in the fields of finance and real estate;

§ New investment projects in areas with extremely difficult socio-economic conditions will enjoy 10% of preferential tax rate for the period of 15 years (Article 13 and 14 of the Law on Corporate Income Tax).

Tax incentives in terms of period of tax exemption and reduction:

§ Enterprises’ income from the implementation of new investment projects in areas with extremely difficult socio-economic conditions; and enterprises’ income from the implementation of new investment projects in socialized education and training, health care, culture, sports and environment activities are exempted for maximum 4 years and reduced 50% of payable tax amounts for 9 subsequent years at most.

§ Enterprises’ income from the implementation of new investment projects in geographical areas with extremely difficult socio-economic conditions exempted for 2 years and reduced 50% of payable tax for 4 subsequent years.

§ Enterprises operating in the fields of production, construction and transport that employ female workers will benefit corporate income tax reduction equal to the amounts of additional expenses on female laborers.

§ Enterprises engaging ethnic minority laborers will benefit tax reduction equal to the additional expenses on ethnic workers.

Secondly, detailing deductible expenses when determining taxable income and relevant regulations on tax management. Following are the newest instructions according to Circular No. 96/2015/TT-BTC dated 22/6/2015 promulgated by the MPI. Detailed relevant processes and procedures were stipulated in Circular No. 78/2014/TT-BTC.


Deductible expenses when determining taxable income

Relevant procedures or documents

1- Expenses for education funding

(including funding for official education system and vocational education)

Funding physical foundations to serve teaching, learning and school activities;

Funding regular school activities;

Funding scholarships for students (which are directly granted to students or through agencies and organizations with fundraising function as prescribed by law);

Funding contests on subjects taught at school among students;

Funding the creation of education promotion funds in accordance with the education law.

Documents to prove education funding including the written certification of funding signed by representatives of the funding enterprise, lawful education institutions as the beneficiary, and students (or agency and organization with the fundraising function) who are beneficiaries (made according to form No. 03/TNDN issued together with Circular No. 78/2014/TT-BTC);

Enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding).

2- Expenses for health care funding

(for health care facilities established by law)

Funding for medical equipment, medical instruments and medicines;

Funding for regular activities of hospitals and health centers;

Funding in cash for patients through agencies and organizations with the fundraising function as prescribed by law.

Documents to prove health care funding including the written certification of funding signed by representatives of the funding enterprise and beneficiary (or agency and organization with the fundraising function) made in accordance with the form 04/TNDN issued together with Circular No. 78/2014/TT-BTC;


3- Expenses for funding the remediation of consequences of natural calamities

Funding in cash or in kind to overcome consequences of natural calamities provided directly to lawfully established and operating organizations and victims of natural calamities through agencies and organizations with the fundraising function as prescribed by law.

Documents to prove funding for the remediation of consequences of natural disasters including the written certification of funding signed by representatives of the funding enterprise and beneficiary which is affected by natural calamities (or agency and organization with the fundraising function) made in accordance with the form 04/TNDN issued together with Circular No. 78/2014/TT-BTC;


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4- Expenses for funding the building of charity houses, houses for the poor or houses of great solidarity

Of this funding, beneficiaries are poor households as prescribed by the Prime Minister. Funding includes funding in cash or in kind to build houses for the poor directly or through an agency or organization with the fundraising function as prescribed by law.

Documents to prove funding for building houses for the poor including the written certification of funding signed by representatives of the funding enterprise and beneficiary (or agency and organization with the fundraising function) made in accordance with the form 04/TNDN issued together with Circular No. 78/2014/TT-BTC; written certification of poor households issued by the local administration (for funding for the building of houses for the poor);

Enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding);

If the beneficiary is an agency or organization with the fundraising function, documents include the written certification of funding signed by representative of the funding enterprise and the beneficiary being the agency or organization with the fundraising function;

Invoices and documents for goods purchase (for in kind funding) or payment documents (for cash funding).

5- Expenses for funding under the State program

A State program means a program determined by the Government and implemented in areas with extremely difficult socio-economic conditions (including funding for the building of new bridges in areas with extremely difficult socio-economic conditions under a scheme approved by a competent authority).

Documents to prove funding under the state program for localities with extremely difficult socio-economic conditions including the written certification of funding signed by representatives of the funding enterprise (or agency and organization with the fundraising function) who are beneficiaries (made in accordance with form No. 03/TNDN issued together with Circular No. 78/2014/TT-BTC);


6- Expenses for policy beneficiaries Expenses for funding policies expenses must comply with relevant laws.

7- Expenses for funding scientific research Scientific research and procedures and dossiers for funding scientific research must comply with the Law on Science and Technology and relevant guiding legal documents.

vLaws on Taxation: Value-Added Tax, Personlal Income Tax, Import-Export Tax

Law on Value-Added Tax 2008, Law on Amendments and Supplements to Tax Laws 2014 and relevant guiding legal documents (e.g. Decree No. 123/2008/ND-CP on December 8, 2008 and Decree No. 121/2011/ND-CP dated December 27, 2011 and Circular No. 129/2008/TT-BTC on December 26, 2008, etc.) determining turnover amounts in relation to philanthropy and charity excluded from VAT


§ Renovation, repair and construction of cultural, artistic, public service and infrastructure works and residential houses for social policy beneficiaries, which are funded with people’s contributions or humanitarian aid;

§ Teaching and vocational training as provided by law;

§ Goods imported as humanitarian aid or non-refundable aid, gifts for state agencies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations;

§ Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid, and non-refundable aid to Vietnam;

§ Artificial products used for the substitution of diseased people’s organs; crutches, wheelchairs and other tools used exclusively for the disabled.

The most recent documents on Export and Import tax like the consolidated Document No. 19/VBHN/VPQH dated December 11, 2014 (Article 3) stipulated that humanitarian and non-refundable aid goods are exempted from export-import tax.

Personal Income Tax 2007 (Article 20), Circular No. 111/2013/TT-BTC (Article 9) and Circular No. 92/2015/TT-BTC (Article 15) guided the following deduction from income tax for: i) contributions to organizations/institutions devoted to the care of disadvantaged children, disabled and elderly people and ii) contributions to charitable and philanthropic funds and funds for educational promotion prescribed by law.

c. Legal documents on honoring entrepreneurs, enterprises

Actually, the acts of honoring enterprises are regulated by Decision No. 51/2010/QĐ-TTg on the regulations of examining, honoring and awarding businessmen and businesses, and guided by Circular 01/2012/TT-BNV. However, the regulations and criteria for examining and honoring enterprises (Article 7, Decision 51 and Article 4, Circular 01) do not take into account the enterprises’ contributions to resolving social issues (not in relation to their business field).

d. General comments

Following are several comments on legal and policy environment on corporate philanthropy:

§ The Government of Vietnam demonstrated a consistent point of view on encouraging and supporting enterprises to implement their corporate philanthropy. Scope and subject of regulations is clearly defined, strongly promoting social contribution and corporate philanthropy of enterprises.

§ Tax incentives (exemption or deduction) on corporates’ tax income, export-import tax or value-added tax are applicable to incomes from aids, production and business activities related to emergency aids, humanitarian aids, investment in geographical areas with extremely difficult socio-economic conditions, or use of vulnerable people for labor and expenses on charity giving. Policy amendments and adjustments which have recently been made show the tendency of encouraging the mobilization of more corporate resources for social and philanthropic activities.

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§ Legal incentives lie in different legal documents at different levels (Laws, Decrees, Circulars…) and have been subject to numerous adjustments and amendments. This causes difficulties in understanding and implementing these regulations. Moreover, the duration between issuance of laws and their respective guilding circulars is often prolonged.

§ The fact that the Law on corporate income tax strictly regulated the percentage of vulnerable employees made the enforcement difficult and less stimulating and unfair to the enterprises that have a rate of vulnerable employees lower than the stipulated one.

§ Legal documents have been made by using an old approach – listing things “encouraged to be done”, rather than using the approach that stipulates things “allowed to be done unless prohibited by law” and the approach of behavior change. Therefore, these legal documents cannot cover all circumstances of the reality but are often adjusted or supplemented by adding or removing any specific things or actions. For example, the Circular No. 96/2015 on corporate income tax was supplemented with two additional activities that included funding for vocational trainings and making civil bridge.

§ Processes and procedures to benefit from corporate income tax incentives are not fully guided; still inconvenient, complicated and do not stimulate philanthropic activities.

§ Expenses on supporting to overcome consequences of natural disasters or support patients by cash are considered applicable if they are channeled through “organizations which are eligible for fundraising according to the law”. Currently, there is no legal document defining and listing “organizations which are eligble for fundraising”; therefore, the implementation is unwilling, complicated, and time-consuming, not to mention the fact that individuals and donors prefer the simplicity and convenience in charitable activities and hope their money is delivered directly to the beneficiaries.

§ Expenses on funding for beneificiaries of social welfares and scientific research are not yet fully guided. While implementation instructions in the existing relevant Circular (Circular No. 78/2014/TT-BTC) only states that it needs to be implemented “following regulations of the law” which implies that it is imposible to implement.

§ All legal provisions on tax exemptions, reductions and deductions are only adjusted for “the organizations established by law”, which can be understood to be applicable to the organizations having a legal status.

5.1.2. Impact of practical elements from corporate perceptions on corporate philanthropy and partnership with CSOs

vCorporate awareness, interest and contribution to philanthropy giving have been increased

So far, there have not been any reports that acknowledged contributions of more than 500,000 enterprises to philanthropy giving and charitable donation. Through mass media and press, however, the attention paid to philanthropy activities by the society in general and by the corporate sector in particular has progressively increased specifically in cases of natural calamities.

According to the report “Corporate philanthropy and corporate perceptions of local NGOs in Vietnam” (October 2013), ¾ of more than 500 surveyed enterprises had made charitable giving and donation in the previous year. The number of corporate donors increased by 19% from 49% reported in the previous year. A quick survey conducted by the end of 2014 by CED resulted that 87% of surveyed enterprises confirmed business benefits that philanthropy giving can bring in.

Within the framework of this study, although the participants were not of big quantity, the result reflected their increased interest and contribution to charitable giving and donation.


All 17 interviewed enterprises had made charitable giving in 2014. Sai Gon Fuel Joint-stock Company had made the biggest contribution with an amount of VND 500 million and the others’ contribution was estimated between VND 30-400 million. There were enterprises whose business activities being at loss or profitless still mobilized philanthropic contributions like Đại kết HCM Company (VND 190 million), Ngọc Nam Phương Company (VND 200 million), Tích Tắc HCM Company (VND 100 million), and Ha Noi Communication and Management Technology Company (VND 95 million).

Ten out of 15 surveyed enterprises in Da Nang also confirmed their engagement in philanthropy activities in 2014.

Most of interviewed enterprises in HCMC stated that “Charitable giving is not only of “corporate social responsibility” but also of moral and spiritual meanings to respond to human vulnerability”. Whereas, the enterprises in Ha Noi affirmed that philanthropy giving creates a beautiful corporate culture “making charitable donation and giving is to minimize the ignorance of and maximize the compassion of their staff, building up a cultural corporate beauty”.

This is a contextual factor that promotes CSOs’ access to corporate resources and partnership with this sector.

v Corporates’ knowledge of policy incentives relating to corporate philanthropy is limited. There were almost no corporate enforcement and application of these policies by corporates.

The study team did not have enough time to directly survey a larger number of enterprises. The access to the websites of state management bodies, enterprises’ associations and CSOs, however, resulted that there were almost no specific propaganda documents on relevant incentive policies.

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The research “Corporate philanthropy and corporate perceptions of local NGOs in Vietnam” (10/2013) did not report this issue. The CED’s quick survey (2014) indicated that 50% of surveyed enterprises expressed their interest in tax-related benefits, while 34% had no answers.

Results of the survey with enterprises:

- 15 out of 17 interviewed enterprises in Ha Noi and HCMC were not aware of policy incentives on charity activities;

- All of 17 enterprises did not apply current policy incentives;

- There were 02 enterprises that had put charitable expenses into marketing and advertising expenses. Mr. Tran Van Lieng, General Director of the Cacao Company disclosed “every year, our company gives VND 300-400 million to make charitable donation. Except the amounts mobilized from staff, the rest was accounted as marketing expenses. Charity is virtue by nature from kindness but the giving to be hidden by marketing activites so we did not feel confortable”

- 13 out of 15 surveyed enterprises in Da Nang were not informed of these kinds of incentives either;

- All respondents that had made donations in 2014 did not apply those policy incentives.

There are many reasons to explain this situation. In an objective way, legal and policy priorities are scattered in different legal documents (including law, decree, circular…). Relevant legal documents themselves have been amended and supplemented many times, then so hard to be updated and followed. Subjectively, law propaganda and enforcement have been poorly and inactively performed by relevant state bodies like tax authorities. The results of focus group discussion also shared this point of argument. Some corporate representatives stated that tax officers were not qualified enough to clearly clearly explain legal and policies incentives to enterprises. Whereas some argued that tax officers were not active enough to promulgate such policies. “Tax agencies are there just for imposing taxes. Hence, enterprises had better act on their own to get informed of and acquire necessary knowledge on relevant policies”, concluded by the representative of Research Institute for Enterprise Development.

Tax policy incentives that have been issued since almost 10 years remain less effective in the real life and have less positive impacts on encouraging enterprises to participate in corporate philanthropy.

vEnterprises have less knowledge, information and trust of the civil society sector

These are big and multidimensional issues which have just been mentioned in recent researches (e.g. “Corporate Philanthropy and corporate perceptions of local NGOs in Vietnam” – The Asia Foundation October 2013 and “Civil society in Vietnam: A comparative study of CSOs in Ha Noi and HCMC” – The Asia Foundation December 201212).

This study could not put more focus on those issues. The results of interviews with enterprises revealed that this is seemingly the most important and decisive factor that is influencing and will influence CSOs’ mobilization of corporate resources and their partnership with the corporate sector. This conclusion is closely based on the in-depth interviews and discussion with 17 selected enterprises.

12 Civil Society in Vietnam: A comparative study of CSOs in Ha Noi and HCMC, William Taylor et al., 12/2012


Except 2 organizations in Ha Noi, the others have not known what CSOs are about. Some said that CSOs are the ones established by the Government such as the Fatherland Front, Women’s Union, Youth’s Union, etc., and showed out their disbelief on transparency of charitable activities through these CSOs as they have heard about them in newspapers or experienced with.

A director of a company released that his company gave VND 40 million to a provincial Fatherland Front to support the victims in a flood of the central region. One month later, the money was still not handed over to the victims yet. Up to now, he does not know where the money is and how it is used for. Since then, his company have taken charitable activities directly instead of giving through such CSOs.

Whereas, some companies thought of CSOs as social protection or charity funds and they often gave donations through these funds.

A director said CSOs are “sensitive to national security” as he was warned that CSOs had received money from overseas organizations for the purpose of making troubles and demolishing the democracy of Vietnam.

All of the surveyed enterprises have never collaborated with and given any assistance to the Science and Technology organizations.

After having learnt more about CSOs’ activities and contributions shared by the study team, the corporate reaction was more positive, however. The enterprises will be more willing to support and cooperate with the CSOs for community development. In order to build up a strategic partnership with the corporate sector, the CSOs are recommended to:

- Have a clear vision and mission statement;

- Provide evidence of effectiveness and transparency;

- Have leaders of high reputation;

- Have clear projects/projects;

- Have middle term and long term action plan that is accordance with the enterprise’s desires.

“Tranparency is key stone for charitable organizations to win trutworthiness from the enteprises” said by Ms. Bui Thi Le Phuong – Director of the Tax and Financial services and consulting Firm, at the discussion dated September 4, 2015 in Ha Noi.

“Suppose that we develop an input material cultivating project in a region. If we could find a potential CSO helping us to carry out a pilot project with the farmers in the region by a poverty reduction project then we are willing to support. This kind of cooperation will minimize risks, build trust and raise image of the company. All stakeholders are beneficial!” said by Mr. Tran Van Lieng, Director of the Ca Cao JSC.

The research report on “Image of the CSOs in the printing press and the internet” (ISEE 12/2011)13 highlighted that “Despite the fact that the CSOs in Vietnam have made significant contributions to the social life, a majority of the public have little knowledge about the CSOs misions, roles, functions and why they are neccesary to the development process. One of the reasons for this misunderstanding is little introduction of these organizations in the mass media. On the one hand, CSOs have been less proactive in developing and publicizing their images to the public. CSOs generally lack skills and experiences to approach the media, develop strategic messages and mobilize social support for

13 Image of the CSOs in the printing press and the internet, ISEE, 12/2011

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their mission. On the other hand, the media has not published information about CSOs profoundly and attractively.”

The evidences become clear that actions to be taken to make the CSOs success in making partnership with and aborbing financial assistance from enterprises (even more important than the incentive policy from the Government) would be: i) to improve awareness and understanding of the society and enterpries on the roles, missions, activities and contributions of CSOs to the corporate sector and the society; and ii) to ensure transparency and accountability of CSOs in operation, especially in financial terms; at the same time, they need to be competent of project establishment and management, plan making and qualifications of project implementation in conformity with the requirements of the enterprises.

5.1.3. Recommendations from the enterpries to improve effectiveness of the legal and policy environment for corporate philanthropy

Following are several corporate recommendations that resulted from the interviews and discussions in order to improve legal and institutional environment that enables corporate philanthropy and strengthens the partnership with CSOs in philanthropy giving for social development:

v Provision of adequate information, organization of forums and other means of communications between the CSOs and corporate sector are recommended to enhance the awareness and understandings and to set firm ground for trustworthiness and partnership;

v Tax incentive policies for charitable activities should be compiled and synthesized in a specific document, which is printed out and distributed to the corporation at the same time with the issuance of business registration. Tax offices, CSOs, professional associations of enterprises, mass media are advised to actively promulgate the Government policies on encouragement of enterprises to engage in charitable activities.

v Simplifying procedures and process for settlement of expenses relating to corporate philanthropy. For instance, removing requirement of accounting vouchers issued by intermediate institutions/organizations when settling tax accounting procedures for charitable activities.

v There needs to be more in-depth and comprehensive study about the actual status, trends of philanthropy of different types of enterprises, including big size State companies and corporations.


5.2. Legal and Policy Environment to regulate CSOs’ organization and operation

5.2.1. Overview of legal and policy framework on the organization and operation of CSOs in general

Citizen’s rights on meeting, association establishment and participation in state administration have been firmly stipulated since the 1946 Constitution and the later Constitutions of Vietnam. The Party and State’s policies also confirmed the necessity and the pertinence of people’s rights on association establishment (according to the 1990 Resolution No. 80B-NQ/HNTW).

So far, the institutionalization of Party’s guidance and the materialization of the Constitutional regulations remain “sluggish, scattered and inconsistent”, according to the examination report on the law project appraisal on association of the National Assembly’s Vietnam Law Committee dated October 28, 2015. Due to the distinctive conditions of history and political system of Vietnam, the legal framework has been set up, in which different types of social organizations are regulated by different legal documents at different levels. For the time being, this legal framework has been progressively completed to be more open and adaptive to socio-economic development and global integration of the country.

Following is the overview of current groups of CSOs in existence and legal framework that regulates these organizations:

v Social-Political Organizations are governed by specific Laws and State Ordinances, including: the Vietnamese Fatherland Front (Law on Fatherland Front No. 14/1999/QH10 and recently adjusted Law on Fatherland Front No. 75/2015 dated June 12, 2015); Vietnam General Confederation of Labor (Law on Labor Confederation No. 12/2012/QH13 dated June 20, 2012); Ho Chi Minh Communist Youth Union (Law on the Youth No. 53/2005/QH11 dated November 29, 2005); The Vietnam Veterans’ Association (State Ordinance on Veterans No a19/2005LCTN dated 18 October 2005); The Farmers’ Association, Women’s Union, established in accordance with the Resolutions of the Communist Party of Vietnam. These organizations act on the basis of charters, or follow the decision of the Prime Minister.

v Associations, unions of associations, social funds, charity funds and centers for social protection are established and regulated by separated legal documents at levels of Governmental decree, ministerial and municipal/provincial circular. Associations and unions of associations are classified into 28 “special” Associations whose scope of operation is nationwide, of which the staff and operational cost are distributed by the State. Municipal and provincial People Committees are authorized to make decision on the establishment of the “special” associations on their geographical areas (according to the Decision No. 68/2010/QDTTg dated 1st November 2010. Scientific and technological Institutions/organizations (or VNGOs) are established and regulated by the Law on Science and Technology and a relevant decree.

v Community-based Organizations: Up to now, there is no legal framework that governs the organization and operation of Community-Based Organizations (CBOs). This CSO type has rapidly developed in numbers, covering all socio-economic and cultural issues of the country. The CBOs are differently treated by the authorities at different levels. Some actively support them, some restrict or forbid them. In this context, the CBOs still encounter difficulties to be legally guaranteed.

The process of completing the legal frameworks for the CSOs in Vietnam has marked with the fact that Law on Associations had been put into the law-making program of the 13th National Assembly

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(2011-2015). In June 2015, the National Assembly proposed to delay the submission of this draft Law. The draft Law continued, however, to be prepared with greater consultation of specialists and organizations and submitted to be discussed in the last Session of the 13th National Assembly dated November 28, 2015.

It is obvious that there are still different views on the contents of this Law. Social democratization is, however, becoming an incontrovertible trend. Public opinion has acknowledged CSOs’ contributions and strongly excite their establishment (see “Rights to association establishment – Why be afraid of?”- Vietnamnet14 and “Situation of CSOs in Ha Noi”15).

5.2.2. Legal and policy environment in relation to the 5 CSOs’ organization and operation

This section is aimed at analyzing the legal framework of 5 types of CSOs (selected as the samples of this study, see the part on scope of study), with the focus on the factors that ensure their more transparency and convenience in attracting corporate funding. The social organizations financially supported by the State are not subject to this study.

a. Associations

The associations had been previously regulated by the Decree No. 88/2003/ND-CP dated July 30, 2003 on the associations’ organization, operation and management. Currently, these organizations are regulated by Decree No. 45/2010/ND-CP and Decree No. 33/2012/ND-CP dated April 13, 2012 that amended and supplemented Decree 45.

14 Rights to association establishment – Why be afraid of? Vietnamet, dated on 29th May 2015

15 Situation of CSOs in Ha Noi, 2015, DOST of Ha Noi


The following table is briefing relevant contents of the Decree 45:

Definition

An Association is defined as a voluntary organization of the Vietnamese citizens or organizations possessing the same profession or similar interests, gender, having the same purpose to gather, unify its members for regular and not-for-profit activity, and act to protect rights and legal benefits of the association and its members and community; help one another to achieve better results and contribute to the socio-economic development of the country.

Legal StatusAn association has a legal status, its head office, seal and bank accounts and possibly a symbol of association. The Head office must be located in Vietnam (Article 4, Item 2).

Conditions for Establishment

An association must have:

1. Objectives not violating the law, differing from the previously established ones in the registered name and main activities;

2. The Charter;

3. Head office;

4. Sufficient members (citizens, organizations): Alt least 100 members if scope of activity is nationwide, 50 if it operates within province, 20 within district and 10 within a commune level (Article 5).

Establishment Procedures (Articles 6, 9, 10, 13, 14 of Decree No. 45 and Article 1 of Decree No. 33)

(i) Preparatory Board for the association setup to be initiated;

(ii) Getting approval from relevant state authorities for the Preparatory Board;

(iii) Relevant local authorities acknowledging the Preparatory Board (Relevant Ministries, Provincial Departments/ District People’s Committees: deadline within 30 days);

(iv) Preparation of application form to submit for the permission;

(v) Decision made by the Ministry of Home Affairs/ Provincial People’s Committee to approve a newly established association within 30 days since the date of submitting completed documents;

(vi) An opening ceremony to officially announce the establishment of association within 90 days since the date of signing the decision;

(vii) Approval of the Association Charter by relevant authorities within 30 days (steps as in Item (v) above).

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Rights of Association (Article 23, Decree 45)

An association has the rights to

1. Organize and implement activities according to the association charter;

2. Promulgate the association objectives to the public;

3. Play the role as representative for its members in internal and external relations within functions and benefits of the association;

4. Protect rights and legal benefits of its members in conformity with its principles and objectives;

5. Coordinate activities among its members for the interest of association and settle conflicts/disputes in association;

6. Provide training and disseminate necessary information/ knowledge to its members;

7. Engage in programs, projects, research and consultancy; give feedbacks and social appraisal at the proposals of State agencies; provide public services to fields of intervention of the association, vocational training, etc.;

8. Establish its legal associates/ affiliated entities by the law;

9. Participate in and provide feedbacks to legal texts/ documents relating to operations of the association in conformity with the law.

Give recommendations to the state agencies problems relating to the development and fields of intervention of the association.

Provided with training services and other services granted with professional certificates in line with prevailing laws;

10. Collaborate with other organizations to fulfill the tasks;

11. Mobilize financial resources for association through members’ fees and revenues from providing services to cover its own operational expenses;

12. Receive donation, gifts from domestic and overseas individuals and organizations in accordance with laws; get financial support from the State for implementing delegated activities;

13. Central level of the association having scope of activities nationwide are enabled to engage in and sign agreements with international organizations and perform such agreements as defined by laws and report to the relevant authorities on branches, fields of operation.


Responsibilities of Association (Including financial management and reporting scheme) (Article 24, Decree 45)

An association has responsibilities to:

1. Strictly abide the law and regulations related to the organization, operation of the association and its charter.

Activities that make harmful to national security, social order, conducts, culture, custom, traditions, rights and legal benefits of citizens and organizations are prohibited;

2. Be accountable to the relevant State authorities in the area of activity or profession of the association;

3. Report in writing to the relevant authorities at least 30 days (Article 14 for reference) before the official meeting of the association to elect the Management Board according to working term;

4. Open representative offices in the locality other than the head office, which is required to get permission from the People’s Committee of province where representative office is located; at the same time, it has to report in writing to the relevant state authorities as specified in Article 14;

5. Report to the relevant state authority in case the association makes changes to the title of the Chairman, Vice Chairman and General Secretary, and to the location of head office or the charter;

6. Report to the relevant State authorities and fully obey the law in case the association establishes its affiliated entities;

7. Submit annual report of activity by 1st December to the relevant State authorities and State competent agencies managing the branches, fields of operation of the association as defined in the article 14 and the other;

8. Abide the guidance, inspection, supervision of the relevant state authorities in terms of legal compliance;

9. Keep files and archives on the list of members, affiliated units, and representative branches/offices, documents relating to assets, financial resources as well as the reports and meetings;

10. Use fees/ revenue as said in the Article 23 (Item 11 and 12. of the Decree) for association activities instead of sharing among members;

11. Use fees and financial sources in accordance with the law. Annual financial statements must be prepared and submitted to relevant authorities (Article 14) about the reception and use of domestic and overseas funding;

12. Set up and issue the code of conducts in the association.

b. Non-state Science and technology Organizations/Institutions (or VNGOs)

Legal documents that regulate science and technology organizations include Law on Science and Technology 2013 and Decree No. 81/2002/ND-CP (Decree No. 81) dated October 17, 2002 that specified and guided the Law on Science and Technology. Decree No. 81 then was replaced by Decree 08/2014/ND-CP (Decree 08) dated on January 27, 2014.

Within the framework of this study, analysis was made with the focus on the group of Non-state science and technology organizations. The following table summarizes relevant legal contents on these organizations:

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Definition

A science and technology institution is an organization with the main function to carry out scientific research, R&D, technological development and services in conformity with the law.

1. A State owned science and technology institution is the one established and invested by the decision of the relevant state authorities listed in the Article 12, Item 1, Sub-items a, b, c, d, e, g or by the social-political organizations;

2. A Non-state science and technology institution is one established by enterprises or individuals or other Vietnamese organizations other than the ones mentioned in the Item (1) above.

Legal Status It has a legal status with seal and bank account

Conditions for establishment

A science and technology institution to be established must satisfy the following conditions:

1. It must have a charter with the following details:

a) Name of institution, full and short names;

b) Objectives, master plans for development;

c) Head office with location address, telephone, fax, email (if any);

d) Representative before the law;

e) Functions, responsibility and rights must be in line with the objectives and development plans;

f ) Specific field of intervention

In case a science and technology institution established by individuals then its field of activities must be in line with the Article 20, Item 4 of the Law on Science and Technology. (Establishing a science and technology enterprise in of the fields as specified by the Prime Minister);

g) Specified Organization structure, responsibilities and rights of titles in the board of management and other bodies of the science and technology organization;

h) Chartered capital, cash and cash equivalents, principles of changes in equity and other financial management regulations;

i) Conditions, procedures for merging, splitting or dissolution if any;

k) Commitment to the legal compliance.

2. Staffing

a) A science and technology institution is required to have:

- Minimum of 5 staff qualified with university bachelor degree, of which, at least 30% having professional education associated with the main area of activities;

- 40% are fulltime staff.

b) Head of the institution is required to have university bachelor degree, management experiences and appropriate professional competence.

For a university institution, the head must satisfy professional criteria defined in the Law on Higher Education.

3. Material and technical basis

The association has the right to own, to use of its working offices, workshops, laboratory, machinery and equipment, intellectual properties and other assets for the purpose of implementing its functions and tasks.


Procedures for establishment of non-state science and technology institutions

1. Application documents required for a newly established institution include:

a. Application form using sample format of the Ministry of Science and Technology;

b. Draft Organization Charter;

c. Project of establishment of the science and technology organization;

d. Other supporting documents to meet the requirements for establishment.

2. For professional associations at central level, a decision of setting up the institution and appointment of leadership from the relevant authorities is required;

3. Ministry of Science and Technology (MOST) issues a certificate of science and technology registration;

4. For individuals, Department of Science and Technology of the province where the institution is located issues the certificate of science and technology registration;

Rights of the Science and Technology Institutions (Article 13 of the Law)

1. Self-sufficient and self-responsible for its activities. If it is a State owned institution, staffing is to be assigned by the relevant State authorities;

2. Registering to bid for the contract or to be delegated the tasks in the field of technology and sciences; Sign contracts, carry out human resource training and development in terms of science and technology;

3. Setting up enterprises or affiliated units, representative offices/branches domestically or overseas according to current laws;

4. Cooperating, engaging in joint ventures, receiving donation/gifts from organizations and individuals; making use of capital in cash/ assets/ intellectual properties for business activities;

5. Intellectual properties to be protected; rights to transfer the science and technology results/ achievements to the other by the law;

6. Announcing to the public the achievements/ inventions of science and technology according to the Law on Newspapers, Law on Publishing and other related laws;

7. Providing consultancy, raising comments and ideas on the policy making, legal formulation, socio-economic development plans, science and technology strategy to the relevant state authorities;

8. Engaging and integrating into the international community in the field of science and technology;

9. Rights to transform itself partly and fully into a science and technology enterprises.

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Responsibilities of the Science and Technology Institutions

(Article 14)

1. Registering the science and technology activities to the relevant State authorities; carry out the activities in accordance with the registration certificate;

2. Implementing the signed contracts, the tasks assigned by the authorities;

3. Ensuring principles of democracy, equality and transparency to be maintained in implementing activities as well as spending;

4. Conserving the fund for regular research activities and for investment in science and technology;

5. Registering, keeping archived and handing over the results/achievement of science and technology research to the relevant State authorities in case R&D financed by the state;

6. Submitting reports and statistics on science and technology;

7. Protecting the benefits of the State, society, rights and legal benefits of individuals in science and technology activities; Keeping in confidence of the State’s science and technology.

c. Social funds and funds for charity

Funds for charity and/or social funds were regulated by Decree No. 148/2007/ND-CP (Decree 148) dated September 25, 2007 which was replaced by the Decree No. 30/2012/ND-CP dated April 12, 2012.

Definition

A Charity Fund is an NGO established by individuals or organizations who give their assets to establish or establish through contracts of voluntary contribution, transfer of heritage and donation with the objectives and operation in accordance with the regulations specified in the Article 2 of the Decree 30.

Legal Status

A Charity Fund has

1. A legal status, its seal and bank account;

2. Established for not-for-profit purpose;

2. Voluntary, self-contributed capital and take responsibility for its expenses and activities before the law upon its assets;

3. Operation in accordance with the registered charter, provisions under this Decree and other relevant legislative provisions;

4. Keep the fund’s revenue, expenses, asset public and transparent.

Conditions for establishment

Article 8: Conditions for fund establishment:

A charity fund is certified if it satisfies the following conditions:

1. The fund’s objective is in line with the requirements specified in the Article 2 of this Decree.

2. Founding members satisfy the condition in Article 9 of this Decree

3. Board of founding members contributes sufficient assets for establishment as specified in the Article 12 of this Decree

4. Application for the fund establishment meets provisions of Article 13 of this Decree.


Financial Management (Article 28, organization and implementation of accounting, auditing and statistics)

1. The charity fund must apply accounting system according to the Law on Accounting, Law on Statistics and related financial policies:

a) Abiding regulations on accounting documents; bookkeeping and economic and financial operations related to the fund;

b) Opening general ledger accounts to record and reflect all accounting transactions related to the charity fund management (Revenue, collections, experiences, gifts, donation in cash or in kind etc.)

c) Preparing and submitting on time the financial statements to the relevant authorities that have the rights to award the fund establishment certificate and financial authorities of equal level or the financial authorities of the authorities having the right to award the fund establishment certificate;

2. Obeying the inspection, investigation and auditing activities of the above financial authorities and competent auditing authorities of the State as proposed by laws.

d. Non-state centers for social protection

Decree No. 68/2008/NĐ-CP, dated May 30, 2008 stipulated the criteria and procedures on the establishment, organization and operations of these centers. The Decree 81/2012/NĐ-CP, dated on October 8, 2012 adjusted and supplemented to the Decree 68.

Legal status Not defined

Conditions of Establishment

Article 10. Environment and location

Location of a social protection unit must be convenient for travelling, schooling, hospital caring and clean environment to ensure better living conditions for the protected. Electric power and clean water are necessary.

Article 11. Material and technical basis

A social protection unit must have the following material and technical bases:

1. Ground surface: minimum 30m2 per head in rural area and 10m2 in urban area on average.

2. Living room must be large enough to ensure 6m2 per head in general and 8m2 per head if it is used for caring of the protected 24 hours a day. Living room must have necessary equipment for daily life.

3. For a social protection unit caring and nurturing over 25 persons or more, it is required to have sufficient housing, kitchens, working offices, playgrounds, water supply, electricity, internal path; production and therapy area (if any).

For the unit serving 10-25 protected persons, conditions for housing, kitchen, working space, electricity, and water supply are required to meet the basics.

4. Equipment and facilities must be approachable and convenient for the disabled, the elders and children.

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Article 4. Responsibilities of Social Protection Unit

1. Receiving, caring, nurturing the protected persons as prescribed in Article 5 of this Decree.

2. Rehabilitating of human’s functions; Assisting the protected in self-managed activities such as culture, sports and other activities in line with ages and health of each groups.

3. Coordinating with educational and vocational centers to provide the protected with training and life skills, professional orientation in order to help the protected to fully grow up with regard to mentality and personality;

4. Collaborating with local administration to bring the protected back home and help them to re-integrate into community and life; helping them to lead a sustainable life.

5. Providing social services to individuals and families with social issues in the location where the offices are based (if allowed by conditions).

Sources of income

Sources of income and expenditure

2. For a Non-state social protection unit, sources of income may be from

a) Equity of the owners;

b) Donation and assistance from domestic and overseas individuals and organizations;

c) Voluntary contributions by the protected;

d) Other income sources by the law

e) Financial support from the State budget for the subjects agreed upon by the competent State agencies to accept for caring.

Financial Management

Article 8. Financial and asset management

1. Financial and asset management must be performed in accordance with the laws;

2. Use of income and expenditure raised in Article 7 must be transparent and disclosed as prescribed by laws;

3. Annual and periodical financial reports must be submitted to relevant authorities on time.

Article 9. Reporting scheme

1. Semi-annual reports must be submitted before mid-June and mid-December to the Provincial Department of Labor, Invalids and Social Affairs;

2. Before the year end (31st December) the Ministries in charge of managing social protection units must send report to the Ministry of Labor, Invalids and Social Affairs.


e. General comments

From the review of relevant legal and policy documents on the CSOs, it is concluded that, among the selected 5 types of CSOs, the funds (social funds and charity funds) are the only ones that have both clear legal status and specific regulations on operation and finance management. The remaining organizations have a legal status without legal provisions on finance management (e.g. associations), or have neither of both (e.g. science and technology organizations, centers for social protection), or have no legal framework (e.g. CBOs).

Review of legal and policy documents on foreign aids (Decree 93 on the use of sources of financing from INGOs and Decree 38 on the management and use of the Official Development Aids) concluded that a clear legal status is the prerequisites to fundraising of the CSOs. According to specific regulations of the Decree 93, except the case of CBOs, the 4 other CSOs have full legal status to receive INGO funding while the Associations are the only ones that have complete legal status to attract ODA funding on behalf of a governing body, stipulated the Decree 38. The results of the survey on corporate philanthropy also confirmed that, besides the legal status, the mechanism of operation and financial management of the CSOs constitutes critical and practical conditions that influence the decision of funding of the corporate sector. See mapping of Decree 93 in Annex III of this report.

Apart from those CSOs selected as research subjects in this study, there are also other types of existing social organizations, such as socio-political organizations and unions inherently considered “organizations that are eligible for receiving funding”. These organizations are not only owning and receiving a large amount of resources from the Government, but also able to mobilize resources from enterprises and the whole society, part of which has been used for charity giving activities. A deeper and more comprehensive research on advantages/disadvantages, analysis and comparison of fundraising strategies of social organizations, use of funding at types of social organizations, proposals for funding allocation, co-operation methods, methods of completion of governance institution is also needed for Government agencies, enterprises and social organizations, particularly CSOs.

The research will not be completed if the subjects of study are just limited to the enterprises and civil society. As mentioned above, apart from these two subjects, the State management agencies also play a pivotal role in promoting corporate philanthropy and partnership between the civil society and enterprises. Specifically, further researches should identify which State agencies involve in this process, and what their specific roles do they have in policy making, enforcement as well as promotion of partnership between the two sectors? What are the gaps between policy management and enforcement? As long as the interactive relationship between the three stakeholders including the State, the Corporate and CSO sector is clearly defined, specific and effective actions can be taken to enhance corporate giving for community development.

Finally, different types of community philanthropy and their efficiency should be assessed from the beneficiaries’ point of views. Who are the direct beneficiaries of corporate supports and/or CSO programs? The way that these direct beneficiaries evaluate on methods, efficiency and sustainability of these supports is critically important for relevant stakeholders to determine what actions should be taken to enhance the efficiency of resources’ usage.

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Following are specific comments on the advantages and difficulties relating to legal status and transparency in the operation and financial management of the selected CSOs:

vFor the Associations

- According to Decree No. 45/2010/ND-CP, the definition of an association is almost similar to that of a CSO. Social organizations, if meeting the conditions as required in the laws, have the right to establish the association correspondent to the scope and scale of their operation. The definition “Association” also covers the not-for-profit aspect of the Association. The legal status of the association is clearly defined. The association’s rights and responsibilities are complete and large. The association has the rights to mobilize all resources for their activities, including ODA funding (on behalf of the line agency according to the Decree 38/2013/ND-CP on management and use of ODA funding).

- The establishment eligibility of any association includes “that the fields of intervention of that association must not overlap with the associations previously established legally in the same geographical areas” (Decree 45). This regulation is not in line with the nature of the association defined above. There is no reason to hinder an association that has the same fields of action as the associations previously established.

- The establishment procedures of the Association are quite complicated. The preparatory board for the establishment of the Association has to determine by itself “the relevant line sectoral management agency” before submitting it for approval (In fact, there are fields of intervention of which the applicants do not know the line sectoral management agencies). The duration for verification and approval is too long. Financial management of the Association is just briefly mentioned as “in accordance with the laws”, but in fact no specific provisions are yet to be provided. Until now, there are still no guiding documents on bookkeeping system, accounting and use of invoices and documents for the Associations.

vFor science and technology organizations

- There is no legal provision that confirm the not-for-profit nature of these organizations.

- For scientific and technological organizations established by individuals, there are legal limitations related to fields of operations and interventions (Decision No. 97/QD/TTg issued in July 2009).

- There are neither regulations nor guidelines on taxation, expenses, and accounting and statistics systems for these organizations.

- In other legal documents (on taxation and finance, etc.), these organizations are named “the economic organizations established by socio-professional associations or the State economic organizations established by Government bodies”.

vFor social funds and charity funds

- Their legal status is clearly defined with legal personality and not-for-profit and non-governmental nature.

- The requirements on legal capital for establishment are considerably higher compared to the previous Decree.

- Regulations on sources of income are complete.

- Requirements on financial management are clear and strict.


vFor centers for social protection (CSP)

- The Decree provides no article or clause on legal status of the CSPs.

- The provisions on their sources of income are stated completely and largely.

- Their financial management is just mentioned “in accordance with the current laws”, but in fact there is no specific provision yet. There is also no guiding document on bookkeeping system, accounting and financial management of these organizations.

vFor the community-based organizations (CBO)

- Currently, there is not yet any legal framework for establishment and operation of the CBOs. These organizations are operating “outside the law”.

5.2.3. Influential factors to corporate resources’ mobilization and partnership with the corporate sector – in the CSOs’ point of view

v Due to difficulties and decrease in resources’ mobilization of CSOs, access to and mobilization of domestic corporate resources have become critical.

The ADB’s report “Overview on the CSOs in Vietnam” (2011, ADB) indicated that “the NGO Resource Center recorded greater decrease in INGOs’ resources in 2010 due to changes of bilateral assistance policies associated with Vietnam’s growth. To cope with this challenge, NGOs have been initiated new ideas to access to new sources of financing including building up partnership with private sector, conversion into social enterprises and providing consultancy services”.

The EU roadmap for engagement with civil society in Vietnam (dated November 11, 2014) delivered the same message: “ODA has been an important finance resource for CSOs. However, sources of financing for CSOs as well as the non-refundable assistances from international organizations and donors become sharply declined. CSOs must; therefore, diversify their financial sources and seek for alternative funding from private sector. CSOs are advised to build trust and raise their images to get creditworthiness from communities, enterprises and Government.”16

The research report on the situation, role, and challenges of the CSOs in HIV prevention17, conducted by the Ha Noi Medical University in June 2015, reported that 80.4% of interviewed CSOs confirmed that financial difficulties are their biggest upcoming threats. Obviously, when sources of financing are cut down, expenses related issues have become one of the top concerns of the CSOs.

The results of in-depth interviews also reflected the same situation of CSOs’ resources in the current context.

16 EU Roadmap for Engagement with Civil Society in Viet Nam, EU 2014

17 Situation and challenges of CSOs in HIV/AIDs prevention and care, Ha Noi Medical University, 2015

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All 17 interviewed CSOs in Ha Noi, Da Nang and Ho Chi Minh City expressed their particular concern about difficulties in fundraising for operations. The CSOs were observed to be in poor conditions of material and technical basis and lack of equipment and facilities for operation.

Difficulties in fundraising for CSO operations were addressed in the workshop and forum dated 4th September 2015 by VACD and 4th November 2015 by VUSTA.

Of the two interviewed associations, only the association for protection of the disabled and orphans in Ho Chi Minh City received assistance from the Government. Notably, both associations have been collaborating with several enterprises and got financial support from them, however, the amounts were not considerable.

Out of 7 science and technology institutions in this survey, only one has received ODA and two have launched public events for fundraising purpose.

Two charity funds were raised by mobilizing resources from individuals inside and outside Vietnam and from member’s fees with the revenue collection accounting for 45% total resource.

Interviews of 2 non-state CSOs revealed that these organizations have been financially supported by six different donors, including individuals, INGOs, Vietnamese enterprises, foreign companies, local science and technology institutions and especially, they are self-financed by production and sales. Up to date, they have not received any financial assistance from the Government. “Mai Am Thien An” – a typical social protection center taking care of children with poor eyesight has been producing a large number of products like blind walking stick or braille for self-demand and also sell them to the market for –covering operational expenses.

v Information sharing, enhancing knowledge of CSOs about corporate sectors and capacity improvements for CSOs’management, communication and other professional skills are essentially needed.

A quick assessment conducted by the Center for Community Empowerment (CECEM) in 2014 revealed that very few Vietnamese NGOs had received financial aids and co-operation from domestic enterprises18. It must be acknowledged that partnership with enterprises is very difficult for CSOs due to two reasons: (i) it is not easy to find out an opportunity for partnership with enterprises; (ii) CSOs find themselves hard to meet conditions for CSO–enterprises cooperation. This judgement is in line with the review results of enterprises and requirements of enterprises for the partnership with CSOs as the above-mentioned argument.

All of 17 CSOs had demand for support in order to corporate with enterprises. Among those, 6 CSOs had demand for approaching domestic enterprises; 5 were in need of training on fundraising skills, 4 sought information sources of corporate sector and 3 need support for building a strategy for mobilizing resources.

v Lack of guiding documents, information and training on taxation policies, financial management, bookkeeping and accounting for NGOs

Transparency in financial management is primary condition for trust-building between the corporate sector and civil society sector. In general, all of domestic NGOs are committed to abiding the taxation law and financial policies. However, the professional levels and knowledge of taxation, financial policy, accounting standard of the majority of companies are still limited.

18 Handbook on strategic partnership with the corporate sector, CECEM 2014,


“Our company did not understand the tax incentive policy for charity activities. We paid tax levied on charity donation because that tax department asked to pay. It is better to pay otherwise we may cope with obstacles in doing business” - Confessed by the CED director.

The CISDOMA director complained that “tax officers pretend not to know about tax deductible income policy for CSOs. They did try to collect tax revenue as much as they could. We did not have time and patience to explain to them so we decided to pay tax for charitable expenses as we find it would be better to do so.”

A forum on “Improving the policy environment to encourage enterprises and to co-operate with CSOs and support the communities” held by the research team and VACD dated 9th September 2015. Various comments and recommendations from participants implied that in fact enterprises and CSOs did not know much about tax deductible income for charitable works. Tax officers are still limited in providing guidelines and assist CSOs in tax declaration. It was recalled that CSOs and enterprises need to be updated with knowledge in taxation policies, tax incentives Government and financial management of NGOs.

vDifficulties in implementation of related legal documents for CSOs

Licensing procedures CSOs are complicated, cumbersome, prolonged and even arbitrarily processed. This problem has been raised in a number of discussions at VUSTA over the past years.

With the present procedures, it usually takes at least two years to obtain the license for a nationwide professional association (VACD is a case). Other CSOs also face with similar problems. Below are some examples noted in the study:

• Case study on the establishment of the “Fund for community” in Ha Noi

In June 2013, the fund founders submitted the relevant establishment documents to Ha Noi Department of Home Affairs. After numerous supplements and adjustment to the documents, the founders received, in June 2015, a correspondence from this Department that refused the permission for the establishment of the fund with the mentioned reason “the authorization for operating status of the fund is not necessary and not relevant at this moment”.

During those past 2 years, the founders have had to deposit more than VND one billions at the bank account and pay almost VND 4 million a month for rental of the head office.

• Case study on the establishment of the “Fund for poor children in mountainous areas”

The application for establishment started in May 2011. After many times of examination, the decision on the authorization for operating status was made in January 2014. The fund was officially recognized “enough conditions to begin operating” in May of the same year.

Wording in the legal documents is ambiguous in some cases, resulting in different interpretations of the concepts by the Government authorities and causing difficulties for social protection units to obtain operating licenses. For example, Article 1, Decree 68, defines “Social protection organizations take care of and nurture…”. According to the understanding of the Department of Labor, Invalids and Social Affairs, this statement should be interpreted that nurturing the protected should stay at the centers full days. In other words, if an organization is only proving the protected with meals and study in daytime and beneficiaries return home in the evening, then it is not acknowledged as a social protection unit because it is absent of nurturing function.

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“Our organization is a social protection center indeed and established and operated in 2009. We provided meals and training to the protected persons in daytime and return them home in the evening. The Department of Labor, Invalids and Social Affairs of HoChiMinh City (DOLISA) reasoned that we do the caring of the protected only but not nuturing them because the protected do not stay overnight at our organization. Therefore, the DOLISA did not approve our center to be established as a social protection basis by the law. Until 2014, we forced to shift our center to be a branch for children protection of Hoc Mon ditrict under umbrella of the Association of the Needed Children Protection of Ho Chi Minh City. Currently we continue applying for the operating license of a protection center as that in line with our functions and field of operations. We recommend the Government to review and make a change in Article 1 of the Decree 68. Instead of wording in the document that “a social protection basis takes care, nurture...,” the revised article should be “a social protection basis takes care or/and nurture....”. This makes it easier for the competent agencies to make decisions on establishment, said Ms. Hong To Hue Lan, Director of the Children protection center of Hoc Mon District of Ho Chi Minh City.

vSome legal provisions on the operational conditions of CSOs are not relevant to the reality

• Some conditions regulating the establishment and operation of a charity fund and requirements of a social protection facilities.

Current Decree sets requirement of legal capital of VND 5 billion for a charity fund operating nationwide and VND 1 billion for one operating within the province.

According to Mr. Phan Van Doan, Chairman of the charity fund for community development, “Requirement for legal capital of VND 5 billion seems to be unfeasible. We engage in charity activity but we do not have sufficient resources to meet a required legal capital for a charity fund. We recommend to reduce the figure to the level of 100 million VND for a fund operating in provincial scope. This will help to encourage individuals and organizations to establish funds, and the contribution to the funds in compliance with laws will come true”.

Mr. Le Van Chinh, a co-founder of a charity fund in Ho Chi Minh City told that his fund has opened 5 restaurants selling cheap reals for VND 2,000 only. The charity fund wishes to expand activities into several other provinces such as Nha Trang, Khanh Hoa. However, according to current regulation, in each province he must establish another fund registered with provincial authority. Such requirement is impossible.

Current financial rule set 5% of the charity fund used for the fund operation. It is not financially sufficient to ensure professional operations.

“Our fund established in 2007. Over nearly 10 years of operation, we have realized that the financial regulation set only 5% of the resources for the fund management. It is not financially sufficient to cover operating costs. Our fund is able to pay salary for only one executive, the fund director works without pay and working office must use private house. We propose that the rule should set aside 20-25% revenue for activity management”. Commented by Ms. Huynh Xuan Thao, Vice Chairman and Executive Director, Fund of Huynh Tan Phat.


Regarding the material and technical basis for operation of a social protection unit (SPU), current regulation requires that an SPU must ensure land surface of 30m2 per head if it is in rural area, 10m2 in urban city. Furthermore, dwelling place must be large enough to guarantee 6m2 per head. In case the room used for the protected who need caring of 24 hours, dwelling area per head must be 8m2.

Mr. Nguyen Quoc Phong, Director of the “Thien An Warm House” said “Legal requirements for material and technical basis of a social protection basis are ideal for the protected. However, it is appropriate for the State owned basis rather than the Non-state protection ones. We are in lack of ground surface land we call for assistance from the Government in terms of providing ground surface for working and living houses.”

• Legal Status for Community-Based Organizations (CBOs)

The Ha Noi Medical University’s research “Actual situation, roles and challenges of CSOs in the prevention and fight against HIV” in June 2015 reported that 61.2% among 277 interviewed CSOs on their upcoming difficulties confirmed that they have no legal status.

According to the research “Assessment on the needs for legal registration of the organizations that participate in HIV/AIDS prevention”19, there were 4 main reasons that explained the willingness of legal status registration of those organizations, including: for easier fundraising, for sustainable organizational development, for better people gathering, and for being more recognized and supported by the society.

At the workshop “Contribution to the Law on Association from CBOs” held by VUSTA dated November 4, 2015, Ms. Dang Thi Hong Nhung, head of a team actively fighting HIV, told in tears that she got unfriendly treatment from some offices. “A company from Australia wanted to give cash to her team’s activities. However, her team did not have a legal status to receive this grant. When asking for registration procedures to have a legal status, she was advised by local authority to go to the tax department for help. While tax office is not functioned for this issue”.

A large number of CBOs have been recently established and working in many areas that are closely associated with people and all aspects of cultural, and socio-economic life. The majority of CBO members are young people who are active, knowledgeable and having a sense of fellowship and willing to help the community. Such CBOs are, thus, in need of particular attention from the Government to support for development.

5.2.4. Recommendations from the surveyed CSOs

v Wording in legal documents should be clear and easily understandable in order to avoid any misunderstanding and mis-interpretation of the officials. For example, a general phrase such as “a region is sensitive to national security and defense” written in the legal documents (laws, decrees, etc.) is vague for the enforcement of law in practice. It is advised to specify what locations are truly ‘sensitive” to national defense so that the science and technology institutions know where to select the project area for development projects.

19 Assessment on the needs for legal registration of the organizations that participate in HIV/AIDS prevention, Ha Noi Medical University

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v The requirement of legal capital for a charity fund should be revised. It would be appropriate if legal capital of VND 100 million for a fund operating within a province and VND 500 million for a fund operating nationwide. In addition, the fund is allowed to use up more than 5% as applied at present for operation expenses.

v The concepts of Non-state social protection basis/unit should be clearly elaborated in the legal documents that include both caring facilities (studying, day-time boarding) and caring and nurturing ones (full time boarding).

v It is recommended to prepare a plan of networking for social protection bases, particularly encourage the development of nuturing and caring activities in non-state social protection units. The local governments should have priority policies on office spaces to enable these centers to fulfil the conditions of material facilities.

v The Government should recognize the role and contributions of CBOs through official documents for the recognition, decisions on establishment, organization and operation as the other CSOs.

v There should be networks established for CSOs with similar profession and field of operations for experience sharing and funds mobilizations.

v CSOs are in need of supports in capacity building to ensure improvement in professional skills, working approach and skills in funding mobilization, particularly strategic partnership with corporate sector and transparent financial management.

v There should be more in-depth study on the roles of CSOs, including social organizations financed by the State, in the mobilization and use of financial resources for the purpose of development; the roles of State management agencies in the planning and development of related policies. Challenges, effectiveness and sustainability of resources should also be assessed under the viewpoints of the direct beneficiaries, etc.


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VICONCLUSIONS AND

RECOMMENDATIONS


As reviewed and analyzed in the above sections, the promotion of corporate philanthropy and strategic partnership between the CSO and corporate sectors is the key to social development in general and the sustainable development of the CSOs in particular. The achievement of this objective is a difficult process that requires the active involvement of three sectors including the the State, Enterprise and CSO. Legal and policy environment should be completed to encourage corporate philanthropy and ensure legal and transparent operations of the civil society. Public and corporate knowledge and awareness of the civil society’s nature, roles and contributions should be enhanced. Capacity building for the CSOs should be strengthened in response to diversified development of the society. Mutual trust based on transparency and effectiveness should be built up between the three sectors. Technical and financial assistance from international donors still plays a key role.

Findings from this study as well as from our experience show that there have been a number of initiatives in corporate philanthropy and good models of partnership between corporates and CSOs in humanitarian and development programs. Studies, assessments and documentation of these initiatives and models are still limited and they have not been well publicized yet. Lessons learnt, especially experiences in addressing difficulties and challenges in corporate-CSO partnership (due to policy gaps, difference in views and governance stands between the two sectors, etc.) should be documented and disseminated to stimulate discussion and improve corporate philanthropy and effective partnership between these two sectors.

Hence, the following policy recommendations are not only limited to legal matters but rather a consortium of solutions in order to establish a good partnership between the State, Enterprise and Civil Society and then a greater environment for CSO development.

6.1. Enhance knowledge and awareness of the society, especially government agencies and the corporate sector, on the roles, responsibilities and activities of the civil society organizations:

• State administrative agencies at all levels should have a more comprehensive and compatible views on the CSOs. Their contributions to community development should be acknowledged and regarded. The State management-related requirements should be made public and transparent (for a specific period, if necessary) to ease any unwillingness from the CSO side and enable them to diversify their activities.

• CSOs should be supported or take action on their own by designing and implementing various communication campaigns to improve their image and enhance public knowledge and awareness on their roles, responsibilities and contributions.

• Both CSOs and corporates should organize forums or events that connect closely with interests of both sectors in order to enhance knowledge and share information, then build up trust and cooperation (for example, an event such as “keeping the environment clean” would attract more interest from environmental protection equipment distributors; and “Care about children’s health” would attract more interest from baby food providers.

• International non-governmental organizations (INGOs) are advised to play an important role in engaging relevant government bodies to organize annual forums for CSOs (similarly to Vietnam Development Partnership Forum of donors), in which relevant government agencies, INGOs, CSOs, and business associations will have an opportunity to share experiences and challenges, and discuss about strategies for partnership..

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6.2. Supplement, amend and complete relevant legal documents to promote more corporate philanthropy and community support; Enhance the propaganda and popularization of these legal documents among the corporates.

• Policy makers should supplement, amend and complete relevant legal provisions and policies to promote corporate philanthropy. Specifically:

§ Amend and supplement several regulations in the Law on Enterprise Income Tax on deductible expenses from taxable income in a way to regulate “charitable” and “corporate philanthropic” acts, rather than listing detailed deductible expenses, because the Law cannot cover all circumstances of the real world.

§ Eliminate the requirement that some expenses should be prescribed through “government agencies who are eligible for fundraising”. Instead, any individuals or organizations who have a clear legal status should be allowed to act as direct beneficiaries or intermediaries of receiving the funding in order to address social issues. Procedures and paperwork when balancing the expenses should be simplified. Intermediate certificates for intermediate organizations (who play a role as recipients) in payment procedures should be eliminated.

§ Provide more guidelines on required financial and accounting procedures for expenses on scientific research funding.

§ Supplement the regulations on honoring and awarding enterprises and entrepreneurs with a greater priority given to the enterprises that have philanthropy activities and contributions to community development. It is recommended to formulate national, provincial and municipal prizes to honor corporates with best philanthropy activities for the community.

• State administrative agencies (Department of Enterprise Development – MPI, MoIT, MARD, etc), central and local tax departments, VCCI and business associations should develop large-scale communication and propaganda programs to widely disseminate current policies and laws. For example, a specific feature on legal information and updates on corporate philanthropy should be put on the website of these government bodies, or a manual or handbook on tax incentives on corporate philanthropy should be prepared and distributed widely to the enterprises and CSOs.

6.3. Continue capacity building (e.g organizational development, governance, professional capacity, fundraising…) of CSOs.

• INGOs should support CSOs to conduct “assessments of training and capacity building needs” on capacity building in the new development period, not only focusing on local NGOs but also other types of CSOs (e.g. associations and CBOs). Local NGOs which have received support from INGOs and become qualified and experienced enough should take the leading role in building capacity for other CSOs. These local NGOs should be encouraged to establish and facilitate CSOs’ network which aims at sharing experiences and building capacity among CSOs.

• Enterprises, universities and other educational facilities should pay attention to CSOs’ staff and reduce the tuition fees for them, especially for the training courses on organizational management, financial management and project management. There is a need to establish a training fund which will allow CSOs to send their staff to attend professional courses related to organizational development.

• The transformation of social protection centers and social/charity funds into social enterprises should be encouraged and supported in accordance with the Law on Enterprises 2014 and the Decree 96/2015/ND-CP. Development of a project to provide consultative, technical and financial support to facilitate this process of transformation should be considered. Support should be provided in the initial stage of this transformation for lessons learnt and improvements for replication.


6.4. Complete the legal framework to ensure that all types of CSOs operate legally, transparently and equally.

• National Assembly and relevant Government bodies should speed finalization and promulgation of the Law on Associations which constitute the key legal framework for CSOs’ establishment and operation. The CSOs are advised to actively participate in advocacy process of Law on Association to promote the process of finalization and promulgation of this Law.

• While working on the Law on Association, the Government is recommended to review, adjust and supplement the following four Decrees that regulate 4 types of CSOs as below:

§ Associations: The Decree 45/2010/ND-CP and Decree 33/2012/ND-CP that amends and supplements a number of articles of the Decree 45 should be revised to simplify the procedures for establishing associations. It is advised to remove the regulation that requires “the relevant line sectoral management agency” to approve “the registered preparatory board for association establishment”. In addition, the duration for approval of association establishment, internal regulations and position of a chairman of the association should be shortened. There should be a common guiding document for associations on transaction record, accounting and financial management.

§ Science and technology organizations/institutions: The Decree 08/2014/ND-CP should make clear the not-for-profit nature of these organizations and provide specific guidelines on financial management, accounting, tax and auditing policy for these organizations.

§ Social/charity funds: The Decree 30/2012/ND-CP should be reconsidered with an aim to reduce regulations on asset contributions to fund establishment and increase the proportion of fund management costs.

§ Centers for social protection: The Decree 68/2008/ND-CP and Decree 81/2012/ND-CP that amends and supplement a number of articles of the Decree 68 should make it clear the definition of social protection centers, which also include caring facilities (studying, day-time boarding) and those (full-time boarding). Local governments should have priority policies on office spaces to enable these centers to fulfil the conditions of material facilities.

For CBOs specifically, it is recommended to continue the policy advocacy efforts so that the Government would soon issue a decree to enable these organizations to register for operation, have legal status and ensure their activities in accordance with the law.

6.5. Further research.

• Agencies and organizations which take the roles of facilitating corporate philanthropy and cooperation with the civil society sector should have more in-depth and comprehensive researches on: i) the actual situation and the trends of philanthropic giving of different types of enterprises, included big state companies and corporations, ii) the roles of CSOs, including state CSOs, in mobilizing and using development resouces, iii) the roles of state management bodies in both policy making and enforcement, and iv) the methods, effiency and sustainability of resources that should be also evaluated by their own beneficiaries.

• Assessments and reviews of the existing practices and models of collaboration between CSOs and enterprises in community development programs to draw lessons and best practices for sharing with enterprises, CSOs, community and policy makers to improve legal frameworks and promote application of the best and effective practices for the cooperation between the two sectors.

63

REFERENCES

1. Assessment on the needs for legal registration of the organizations that participate in HIV/AIDS prevention, Ha Noi Medical University

2. Civil society organizations – Basic guidelines on partnership with the CSOs, ADB, 2009

3. Civil Society in Vietnam: A comparative study of CSOs in Ha Noi and HCMC, Wiliam Taylor et al., 12/2012

4. Corporate philanthropy and corporate perceptions of local NGOs in Vietnam, The Asia Foundation, CECODES and VCCI, October 2013

5. Development Finance for Sustainable Development Goals in low middle income Vietnam, UN-EU-MPI, 2011

6. EU Roadmap for Engagement with Civil Society in Viet Nam, EU, 2014

7. Image of the CSOs in the printing press and the internet, ISEE, 12/2011

8. Government paper on law on association, 2015

9. Handbook on Strategic partnership in corporate philanthropy and community development, CED, 2015

10. Handbook on strategic partnership with the corporate sector, CECEM, 2014

11. Prelimilary report on 6-year implementation of the Governmental Resolution 30A/2008/NQ-CP dated 27/12/2008 on Sustainable Poverty Reduction Programs in the needed districts, MOLISA, 4/2015

12. Situation and challenges of CSOs in HIV/AIDs prevention, Ha Noi Medical University, 2015

13. Social services for human development, UNDP, 2011

14. Summary report on CSOs in Vietnam, ADB, January 2012

15. Situation of CSOs in Ha Noi, DOST of Ha Noi, 2015

16. The cooperation between Non-Governmental organizations and the States in Viet Nam, the Prospect of Restructure? Pham Bich San, Annual Conference of Non-Government organizations in Viet Nam, 2011

17. Vietnamese Civil Society Organizations, Nguyen Ngoc Lam, MSD

18. Rights to association establishment – Why be afraid of?, Vietnamet, dated on May 29, 2015


65

ANNEX


ANNEX I:

LIST OF RELATED LEGAL DOCUMENTS

I. Legal framework for philanthropy and humanity in general in Vietnam

1. Resolution No. 18/2008 /QH12 dated June 3, 2008 of the National Assembly on intensifying the implementation of socialization policies in order to improve the quality of people’s health;

2. Ordinance No. 21/2004/PL-UBTVQH11 dated June 18, 2004 regarding religious belief and religion;

3. Instruction Circular No. 35/2011/TT-BLĐTBXH dated November 28, 2011 on emulation;

4. Decree No. 33/2012/NĐ-CP (amendment and supplement of Decree No. 45)

5. Law on Enterprise No. 68/2014/QH13 (became effective on July 1, 2015)

§ Decree No. 96/2015/NĐ-CP

II. Legal framework for sponsorship and charity activities of enterprises

1. Law on Corporate income tax No. 14/2008/QH12

2. Law on Corporate income tax No. 32/2013/QH13 (amended)


§ Circular No. 78/2014/TT-BTC

3. Law No. 71/2014/QH13, supplementing and amending a number of taxation laws



4. Law on Value-added Tax No. 13/2008/QH12 dated June 3, 2008

5. Law on Import tax and export tax No. 45/2005/QH11 dated June 14, 2005

6. Consolidated document 19/VBHN-VPQH, 2014

7. Law on Personal Income Tax No. 04/2007/QH12 dated November 21, 2007



67

III. The legal framework for professional associations, Science and Technology organizations, Social and Charity Funds, Social Protection units and Community based groups

1. Resource mobilization


§ Circular No. 07/2010/TT-KHCN

2. Tax policies

§ Consolidated document 16/VBHN-VPQH on consolidation of the Law on Value-added tax

§ Decree No. 75/2002/NĐ-CP on adjusting business-license tax levels

§ Circular No. 42/2003/TT-BTC supplement and amendment of Circular No. 96/2002/TT-BTC dated 24th October, 2002 of the Ministry of Finance guiding the implementation of the Government’s Decree No. 75/2002/NĐ-CP

3. Establishment, organization and activities

3.1. Professional associations

§ Decree No. 33/2012 NĐ-CP (supplement and amendment of Decree No. 45)


3.2. Science and Technology Organizations

§ Law on Science and Technology No. 29/2013/QH13

§ Decree No. 08/2014/ NĐ-CP

3.3. Social and charity Funds

§ Decree No. 30/2012/ NĐ-CP

3.4. Centers for Social Protection

§ Decree No. 81/2012/ NĐ-CP, supplement and amendment of Decree No. 68



ANNEX II:

KEY REGULATIONS FOR PROMOTING CORPORATE PHILANTHROPY

Legal Documents Key contents

1. Law on Enterprise 2014

Article 10. Criteria for and rights and obligations of social enterprises

1. A social enterprise must meet the following criteria:

a/ Being registered for establishment in accordance with this Law;

b/ Operating for the purpose of solving social and environmental issues in the interest of the community;

c/ Using at least 51 percent of its annual total profit for reinvestment to achieve the registered social and environmental objectives.

2. In addition to the rights and obligations of enterprises prescribed in this Law, social enterprises have the following rights and obligations:

a/ To maintain their objectives and conditions prescribed at Points b and c, Clause 1 of this Article throughout the course of operation; an operating enterprise that wishes to transform into a social enterprise or a social enterprise that wishes to abandon its social and environmental objectives and not to use profits for reinvestment shall notify a competent state agency in order to carry out the procedures in accordance with law;

b/ Owners and managers of social enterprises shall be considered, provided with favorable conditions and supported in the grant of related licenses and certificates in accordance with law;

c/ To mobilize and receive financial assistance in various forms from Vietnamese and foreign individuals, enterprises, non-Governmental organizations and other organizations to cover their management expenses and operation expenses;

d/ Not to use mobilized funds for objectives other than covering management and operation expenses to solve social and environmental issues already registered by themselves;

e/ Social enterprises that receive incentives and supports shall annually report on their operations to competent agencies.

69

1.1. Decree 96/2015/NĐ-CP

3. The State shall adopt policies to encourage, support and promote the development of social enterprises.

Item 1 and 2, Article 2: The State encourages and facilities by law and policy the establishment of social enterprises by organizations and individuals

1. The State stimulates and facilitates the establishment of social enterprises by any organization and individual for the purposes of solving socio-environmental issues for community benefits.

2. Social enterprises will benefit from investment incentives and supports as prescribed by law.

Item 1 and 2, Article 3: Allowing social enterprises to receive financial aid from national and international organizations and individuals

1. Social enterprises receive financial aid and support from INGOs to accomplish the objectives of solving social and environmental issues as prescribed by relevant laws on recenption of non-Governmental aid.

2. Except financial supports stipulated by the item 1 of this article, social enterprises are also eligible to receive supports in form of assets, finance or technique from domestic organizations and foreign institutions legally registered in Vietnam for socio-environmental purposes.

Item 3, Article 3: Procedures to receive financial support or aid are stipulated in Item 2 and Article 3:

a. Aid reception should be documented on paper. The reception document should include the following contents: information on individual or organization of donation, type of asset, value of asset or amount of financial support, duration of implementation, requirements on beneficiary enterprises, name and signature of authorized representatives of the parties.

b. Within 5 working days from the date of the signed reception document, the beneficiary enterprise has to inform of this aid reception to the Departement of Planning and Investment or aid management agency of Provincial/Municipal People’s Committee of the province where the enterprise’s head office is located in. The announcement must enclose the copy of the reception document.

a. In case of any change to Point a, Item 3 of this Article, the social enterprise has to officially inform of that change to the DPI or aid management agency of PPC of the province where the enterprise’s head office is located.

Article 7: Allowance of conversion of centers for social protection, charity funds and social funds into social enterprises


2. Laws on Taxes2.1. Law on Corporate income Tax 2008

Article 4. Tax-exempt incomes

1. Income from production and sales of goods and services of organizations to be used for the disabled, detoxified, and HIV infected people;

Income from vocational training for the ethnic minorities, the disabled, needed children and social evils; Income from education, scientific research, cultural, artistic, charitable, humanitarian and other social activities in Vietnam.

Article 13. Tax rate incentives

1. Newly set up enterprises under investment projects in geographical areas with extreme socio-economic difficulties, economic zones or hi-tech parks; newly set up enterprises under investment projects in the domains of high technological development, development of the State’s infrastructure works of special importance, or manufacture of software products are entitled to the tax rate of 10% for fifteen years.

2. Enterprises operating in education-training, vocational training, healthcare, cultural, sports and environmental domains are entitled to the tax rate of 10%.

3. Newly set up enterprises under investment projects in geographical areas with socio-economic difficulties are entitled to the tax rate of 20% for ten years.

4. Agricultural service cooperatives and people’s credit funds are entitled to the tax rate of 20%.

5. For large-scale and hi-tech projects in which investment should be particularly attracted, the duration for application of tax rate incentives may be extended but must not exceed the duration specified in Clause 1 of this Article.

6. The duration for application of tax rate incentives specified in this Article is counted from the first year an enterprise earns income.

Article 14. Tax exemption and reduction duration incentives

1. Newly set up enterprises under investment projects in geographical areas with extreme socio-economic difficulties, economic zones or hi-tech parks; newly set up enterprises under investment projects in the domains of high technology, scientific research and technological development, development of the State’s infrastructure works of special importance or manufacture of software products; newly set up enterprises operating in education-training, vocational training, healthcare, cultural, sports and environmental domains are entitled to tax exemption for no more than four years and a 50% reduction of payable tax amounts for no more than nine subsequent years.

2. Newly set up enterprises under investment projects in geographical areas with socio-economic difficulties are entitled to tax exemption for no more than two years and a 50% reduction of payable tax amounts for no more than four subsequent years.

3. The tax exemption or reduction duration specified in this Article is counted from the first year an enterprise has taxable income; in case an enterprise has no taxable income for the first three years, exemption or reduction duration is counted from the fourth year.

Article 15. Other cases eligible for tax reduction1. Production, construction or transport enterprises which employ many female laborers are entitled to reduction of corporate income tax amounts equal to additional expenses for female laborers.

2. Enterprises which employ many ethnic minority laborers are entitled to reduction of corporate income tax amounts equal to additional expenses for ethnic minority laborers.

71

2.2. Law on the amendments to the law on corporate income Tax 2013

Item 3, Article 1: Supplements to Item 4, Article 4 of Law on corporate income tax 2008:

“Income from goods and services production and business activities of the enterprises that have 30% and more of disabled, detoxified and HIV-infected employment and the average of 20 employees per annum, not including the enterprises operating in the fields of finance and real estate”.

2.3. Law on the amendments to the Law on Taxes 2014

Item 3, Article 1: Supplements to Point a, Item 1, Article 9 of the Law on corporate income tax 2008

“Expenses for enterprises’ production and business activities; expenses for vocational training; expenses for enterprises’ defense and security activities as prescribed by law”.

2.3.1. Guiding Circulars No. 96/2015/TT-BTC and No. 78/2014/TT-BTC

Defining deductible expenses from taxable income and relevant procedures

Deductible expenses when determin-ing taxable income

Relevant procedures or documents

1- Expenses for education funding

(including funding for official education system and vocational education)

- Funding physical foundations to serve teaching, learning and school activities;

- Funding regular school activities;

- Funding scholarships for students of (which are directly granted to students or through agencies and organizations with fundraising function as prescribed by law);

- Funding contests on subjects taught at school among students;

- Funding the creation of education promotion funds in accordance with the education law.

- Documents to prove education funding including the written certification of funding signed by representatives of the funding enterprise, lawful education institutions as the beneficiary, and students (or agency and organization with the fundraising function) who are beneficiaries (made according to form No. 03/TNDN issued together with Circular No. 78/2014/TT-BTC);

- Enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding).

2- Expenses for health care funding (for healthcare facilities established by law)

- Funding for medical equipment, medical instruments and medicines;

- Funding for regular activities of hospitals and healthcare centers;

- Funding in cash for patients through agencies and organizations with the fundraising function as prescribed by law.

Documents to prove health care funding including the written certification of funding signed by representatives of the funding enterprise and beneficiary (or agency and organization with the fundraising function) made according to the form 04/TNDN issued together with Circular No. 78/2014/TT-BTC;



3- Expenses for funding the remediation of consequences of natural calamities

Funding in cash or in kind to overcome consequences of natural calamities provided directly to lawfully established and operating organizations and victims of natural disasters through agencies and organizations with the fundraising function as prescribed by law.

- Documents to prove funding for the remediation of consequences of natural calamities including the written certification of funding signed by representatives of the funding enterprise and beneficiary which is affected by natural disaster (or agency and organization with the fundraising function) made according to the form 04/TNDN issued together with Circular No. 78/2014/TT-BTC;


4- Expenses for funding the building of houses for the poor or houses of great solidarity

- Of this funding, beneficiaries are poor households as prescribed by the Prime Minister. Funding includes funding in cash or in kind to build houses for the poor directly or through an agency or organization with the fundraising function as prescribed by law.

- Documents to prove funding for building houses for the poor including the written certification of funding signed by representatives of the funding enterprise and beneficiary (or agency and organization with the fundraising function) made according to the form 04/TNDN issued together with Circular No. 78/2014/TT-BTC;

- Written certification of poor households issued by the local administration (for funding for the building of houses for the poor);

- Enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding)

If the beneficiary is an agency or organization with the fundraising function, documents include the written certification of funding signed by representative of the funding enterprise and the beneficiary being the agency or organization with the fundraising function;

- nvoices and documnets for good purchase (for in-kind funding) or payment documents (for cash funding).

73

5-Expenses for funding under the State program

State program means a program determined by the Government and implemented in geographical areas with extremely difficult socio-economic conditions (including funding for the building of new bridges in geographical areas with extremely difficult socio-economic conditions under a project approved by a competent authority).

- Documents to prove funding under the state program for localities in geographical with extremely difficult socio-economic conditions including the written certification of funding signed by representatives of the funding enterprise, the beneficiary (or agency and organization with the fundraising function) who are beneficiaries (made according to form No. 07/TNDN issued together with Circular No. 78/2014/TT-BTC);

- Enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding)

6- Expenses for policy beneficiaries

Expenses for funding policies expenses must comply with relevant laws

7- Expenses for funding scientific research

Scientific research and procedures and dossiers for funding scientific research must comply with the Law on Science and Technology and relevant guiding legal documents

2.4. Law on Value-Added Tax 2008

Items 12, 13, 15, 19, 24 and 25, Article 5: Tax deductible expenses:

• Renovation, repair and construction of cultural, artistic, public service and infrastructure works and residential houses for social policy beneficiaries, which are funded with people’s contributions or humanitarian aid.

• Teaching and vocational training as provided for by law.

• Goods imported as humanitarian aid or non-refundable aid; gifts for state agencies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations or people’s armed forces units; donations or gift for Vietnamese individuals within the Government-prescribed quotas; belongings of foreign organizations and individuals within diplomatic immunity quotas; and personal effects within duty-free luggage quotas.

• Publication, import and distribution of newspapers, journals, specialized bulletins, political books, textbooks, teaching materials, law books, scientific-technical books, books printed in ethnic minority languages as well as propaganda postcards, pictures and posters, including those in the form of audio or visual tapes or discs or electronic data; money printing.

• Artificial products used for the substitution of diseased people’s organs, crutches, wheelchairs and other tools used exclusively for the disabled.

• Goods and services of individuals doing business, who have a monthly income lower than the common minimum salary level applicable to domestic organizations and enterprises.

2.5. Law on Import-Export Tax 2005

Item 2, Article 3: Subjects exempt from import-export tax:

Humanitarian aid goods, non-refundable aid goods


2.6. Personal Income Tax 2007

Item 1 and 2, Artcle 20: Deductible charitable and philanthropic contributions

1. Charity or humanitarian donations are deductible from pre-tax income from business, salary or wage of a resident taxpayer, including:

a/ Donations to organizations or establishments that care for or nurture children in special plights, disabled people and helpless elderly people.

b/ Donations to charity funds, humanitarian funds or study promotion funds.

2. Organizations, establishments and funds specified at Points a and b, Item 1 of this Article must be those licensed or recognized by competent State agencies and operating for charity, humanitarian, study promotion or non-profit purposes.

2.6.1. Circular No. 111/2013/TT-BTC

Item 3, Article 9: Deduction for charity, humanitarian or study promotion donationsa/ Charity, humanitarian or study promotion donations are deductible pre-tax calculation from taxable income of taxpayers who are resident individuals and earn incomes from business activities, salaries or wages include:a.1/ Contributions to organizations or establishments that care for or nurture specially disadvantaged children, persons with disabilities and helpless elderly people.These organizations or establishments must be established and operate under the Government’s Decree No. 68/2008/ND-CP of May 31,2008, on conditions and procedures for the establishment, organization, operation and dissolution of social protection establishments, and Decree No. 81/2012/ND-CP dated October 8, 2012 on adjustment and supplement to Decree No. 68/2008/ND-CP dated May 30, 2008 specifying conditions and procedures for the establishment, organization, operation and dissolution of the social protection center and Decree No.109/2002/ND-CP of December 27, 2002, amending and supplementing a number of articles of Decree No.195/CP of December 31,1994, detailing and guiding a number of Articles of the Labor Code regarding working time and rest time.Documents evidencing contributions to organizations or establishments that care for or nurture specially disadvantaged children, persons with disabilities and helpless elderly people are lawful receipts of those organizations or establishments.a.2/ Contributions to charity funds, humanitarian funds or study promotion funds established and operating under the Government’s Decree No. 30/2012/ND-CP of April 12, 2012, on organization and operation of not-for-profit social funds and charity funds operating for charity, humanitarian or study promotion purposes, and other relevant documents on management and use of donations.Documents evidencing charity, humanitarian or study promotion donations are lawful receipts issued by Central or provincial-level organizations or funds.b/ Charity, humanitarian or study promotion donations made in a year will be deducted from taxable income of that year. In case these donations are not fully deducted in a year, they may not be carried forward for deduction from taxable incomes of the subsequent taxable year. The maximum deduction must not exceed taxable income from salaries or wages and income from business activities of the taxable year in which charity, humanitarian or study promotion donations are made.

75

ANNEX III:

MAPPING OF DECREE 93/2009/ND-CP

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