VIETNAM Law and Practice Contributed by: Chuyen Hong Huu Le, Tan Nhat Truong Phan and Tu Anh Tran, Tilleke & Gibbins
2.1.4 Exchange Controls Rent payments under a lease or repatriation of reali - sation proceeds between a domestic lessee and an offshore lessor can generally be freely conducted. 2.1.5 Taxes/Duties Payable for Physical Execution of a Lease An aircraft lease is exempt from VAT and special con - sumption tax but is subject to import duty at the rate of 0%. A lessor will be considered to have income derived in Vietnam through leasing an aircraft to a domestic lessee. The lessor is therefore liable to pay foreign contractor tax in relation to any payment made by the lessee, which includes VAT and income tax. 2.1.6 Licensing/Qualification of Lessors Vietnamese law does not specify any requirements in terms of licences and qualifications for a lessor to lease an aircraft from abroad to a lessee in Vietnam. In addition, under Vietnam’s Commitments on the Accession to the WTO in the field of Services, there is no restriction on cross-border aircraft leasing (CPC 83104) conducted by an offshore entity from WTO members. 2.2 Lease Terms 2.2.1 Mandatory Terms for Leases Governed by English or New York Law There are no compulsory requirements when it comes to specific terms of aircraft leases governed by Eng - lish or New York law. Regardless, before granting approval for aircraft leas - ing (which is different from approval of a lease agree - ment), CAAV will consider the: • form of lease; • legal status of the parties to the aircraft lease con - tract; • lease term; • quantity, type and age of the aircraft; • nationality of the aircraft; • certificates related to the aircraft; • agreement on purchase of civil liability insurance for passengers, baggage and cargo and for third parties on the ground; and
• the organisation responsible for operating and maintaining the aircraft according to the aircraft operator certificate (AOC). It is therefore advisable to ensure that the lease con - tract/agreement and/or its ancillary documents sub - mitted to CAAV contain clear information on these matters whenever possible. 2.2.2 Tax and Withholding Gross-Up Provisions Provided that tax and other withholding gross-up pro - visions do not conflict with the fundamental princi - ples of Vietnamese law, the parties involved may freely agree to have these provisions, which would be both valid and enforceable under Vietnamese law. 2.2.3 Parts Installed or Replaced After a Lease’s Execution A lease can cover parts that are installed or replaced on an aircraft or engine after its execution, provided that they are reflected or included in the lease agree - ment, its ancillary documents or a separate agreement (ie, for wet lease arrangements). It is also possible to cover the aircraft and its engine and parts (whether or not any of them may be subse - quently installed or replaced on the airframe or on any other airframe) as the lease object. 2.2.4 Risk of Title Annexation While Vietnamese law is silent on the registration of ownership rights for standalone aircraft engines, Arti - cle XIV(3) of the Protocol to the Cape Town Conven - tion, which Vietnam is a contracting party to, provides that ownership or any other right or interest in an air - craft engine should not be affected by its installation or removal from an aircraft. However, the direct appli - cation of Article XIV(3) of the Protocol has yet to be tested in practice. 2.2.5 Recognition of the Concepts of Trust/Trustee Vietnamese law does not recognise the concept of a trust or the role of an owner trustee under a lease.
580 CHAMBERS.COM
Powered by FlippingBook