On 1 July 2006, the investment regime comprised of a unified Enterprise Law, which regulates corporations, and a common Investment Law, which regulates investment, came into effect. The promulgation of these two important legislations is considered a significant watershed for improvement of the legal environment on investment activities and corporate governance in Vietnam.
To do business under the Investment Law and Enterprise Law, foreign investors are required to obtain investment certificates from an appropriate Licensing Authority.
Under the Investment Law, investors may invest in all sectors not prohibited by law. Areas prohibited by law include:
• Investment projects detrimental to national defense, security, and the public interest;
• Investment projects detrimental to historical and cultural traditions and the ethics or customs of Vietnam;
• Investment projects harming people’s health or destroying natural resources and the environment; and
• Investment projects treating toxic waste imported to Vietnam and investment projects manufacturing toxic chemicals banned by international law.
Investors shall follow the licensing and registration steps depending on the size and the sector of the investment project.
Investment Certification Process
Investment Registration: Foreign investment projects with a total invested capital of less than VND 300 billion (US$ 15 million) and not falling in a conditional sector are subject to “investment registration” and foreign investors of such projects shall carry out the procedures for investment registration in order to be granted an investment certificate. The investment certificate also serves as the business registration of the corporate entity.
Enterprises can subsequently register additional investment projects without the need to create a separate entity.
The investor should submit application documents for investment registration to the Licensing Authority. The Licensing Authority shall check the documents and issue the investment certificate to the investors within 15 working days of receiving the valid application.
Investment Evaluation: Any investment project with a total invested capital of VND 300 billion (US$ 15 million) or more or investment projects falling in conditional sectors shall undergo “an investment evaluation” by the Licensing Authority and other relevant authorities. There are two different types of evaluation:
• evaluation for investment projects regardless of total invested capital falling into conditional sectors; and
• evaluation for investment projects with total invested capital of VND300 billion or more that do not fall into conditional sectors.
For the evaluation of investment projects with total invested capital of VND 300 billion or more, along with the application documents, the applicant must also submit an “economic - technical explanation” of the investment project to the Licensing Authority. This covers the economic – technical explanatory statement, objectives, scale, location, investment capital, implementation schedule, land use needs, and technological and environmental solutions of the investment project.
For the evaluation of investment projects falling in conditional sectors, in addition to the application documents, the investor shall also demonstrate compliance with requirements specific to that conditional sector.
When assessing the application documents, the Licensing Authority may liaise with other relevant Ministries and authorities in evaluating the proposed investment project. Items to be evaluated shall comprise:
• compliance with master planning/zoning for technical infrastructure, master planning/zoning for land use, master planning for construction, master planning for utilization of minerals and other natural resources;
• land use requirements;
• project implementation schedule;
• environmental solutions.
The time-limit for evaluation of investment shall not exceed thirty (30) days from the date of receipt of a complete and valid file. In necessary cases, the above time-limit may be extended, but not beyond forty five (45) days.
To-Do List for Investors
3.1 The Board of Management (“BOM”) of industrial zones (“IZs”), export processing zones (“EPZs”), high-tech zones (“HTZs”), and economic zones (“EZs”) are responsible for licensing foreign investments within their zones.
3.2 National important BOT projects and PPP projects are licensed by the Ministry of Planning and Investment (“MPI”). Oil and gas projects, credit institutions, insurance projects and law firms are licensed by Ministry of Trade and Industry, State Bank of Vietnam, Ministry of Finance and Ministry of Justice respectively.
3.3 The Provincial People’s Committee is the authority responsible for all other foreign investments.
Licensing applications shall be submitted to these bodies, who will consult with other relevant governmental authorities (where so required) before issuing final approval.
3.4 The Prime Minister will approve the following investment projects (unless they are not included in the approved master plan):
(a) The following investment projects, irrespective of the source of investment capital and scale of investment:
- construction and commercial operation of airports; air transportation;
- construction and commercial operation of national sea ports;
- exploration, mining and processing of petroleum; exploration and mining of minerals;
- radio and television broadcasting;
- commercial operation of casinos;
- production of cigarettes;
- establishment of university training establishments; and
- establishment of IZs, EPZs, HTZs and EZs.
(b) The following investment projects, irrespective of the source of investment capital but with a total invested capital of VND 1,500 billion or more in the following sectors:
- business in electricity, processing of minerals, metallurgy;
- construction of railway, road and internal waterway infrastructure; and
- production and business of alcohol, beer;
(c) The following projects with foreign-invested capital in the following sectors:
- commercial operation of sea transportation;
- construction of networks for and supply of postal and delivery, telecommunications and internet services, construction of wave transmission networks;
- printing and distributing newspapers and printed matter, publishing; and
- establishment of independent scientific research establishments.
4.Forms of Investment and Enterprise
Under the “Law on Investment” and the “Law on Enterprises” foreign investors may choose the following forms of investment in Viet Nam:
- Invest in business development;
- Establish economic organizations (100% capital of foreign investors or joint- venture);
- Purchase shares or contribute capital to participate in management of investment activities;
- Invest in contractual forms of BBC, BO, BTO, BT, PPP; and
- M&A of enterprises.
While foreign investors are allowed to buy shares in many domestic companies without limitation, there are ownership limitations for certain companies listed on the Vietnam stock exchange and financial sectors. Foreign ownership cannot exceed 49 percent of listed companies and 30 percent of listed companies in the financial sector.
Forms of enterprises:
- Limited liability company (with one member or more than one member);
- Share holding company/Joint stock company;
- Private company/Sole proprietorship;
- Partnership; and
- Corporate group.
5. Investment assistance and Incentives
Incentives to encourage investment in Vietnam come in varying forms, including:
• preferential corporate income tax rates;
• exemption from, or reduction of, corporate income tax;
• import duty exemptions;
• exemption from taxes on royalties;
• exemption from, or reduction of, land use or land rental fees; and
• privileges awarded to BOT, BTO, BT and PPP projects and projects in economic zones or high tech zones.
Investments in geographical areas of Vietnam that face difficult socio-economic conditions are more likely to qualify for some of the above investment incentives.
Investment incentives are available for projects that focus on the following activities:
• Production of new materials or new energy;
• Production of high-tech, bio-technology or info-technology products;
• Production of manufactured mechanical products;
• Cultivation and processing of agricultural, forestry and aquatic products;
• Production of man made strains, new seeds and breeds of animals;
• Use of, or research and development on, high technology or modern technology;
• Protection of ecological environment;
• Employment of large numbers of employees;
• Construction and development on infrastructure or important projects;
• Development of facilities in educational, training, medical, gymnastic and sports sectors; and
• Development of traditional trades.
In addition, Government support is available for investments that deliver the following economic benefits:
• Technology transfer;
• Training support;
• Investment supporting services (i.e. consultancies, training, market research, design and testing centres); and
• Construction of infrastructure outside zones.
Investment guarantees include:
• No nationalization or confiscation of investors’ assets;
• Protection of intellectual property rights;
• Opening markets and investments related to trade;
• Remittance of capital and assets abroad; and
• Investment guarantees in the event of changes in law or policies.
Purchase or use of domestic goods or services
Export requirements of goods or services
Domestic content requirements for intermediate inputs
Self balance of foreign currency
Domestic R&D content requirements
Price rates for goods and fees and charges for services controlled by the State