INVESTMENT REGULATIONS

 

 

 

The promulgation of the investment regime on July 1st, 2006 is a significant improvement of the legal environment in regards to investment activities and corporate governance in Vietnam. It consists of two important legislations: (1) A unified Enterprise Law to regulate corporations, and (2) a common Investment Law to regulates investment.

 

1.     Overview
Investors may only invest accordingly under these two legislations. Under the Investment Law, the sectors permitted for investment are:

 

Conditional (Permitted) sectors are:
• Broadcast and television
• Cultural products production, publication and distribution
• Minerals exploration and procurement
• Infrastructure establishment for telecommunications network; Internet and telecommunications services transmission and provision

• Public postal network establishment and postal services and express services provision
• River ports, seaports, terminal and airports construction and operation
• Railway, airway, roadway and sea and inland waterways transportation (of goods and passengers)
• Aquaculture

• Tobacco Production
• Real estate
• Importation, exportation and distribution
• Education and training

• Hospitals and clinics
• Other investment sectors in international treaties of which Vietnam is a member and which restrict the opening of the market to foreign investors

 

Prohibited sectors are: Investments projects that are…
• Detrimental to national defense, security, and the public interest;
• Detrimental to historical and cultural traditions and the ethics or customs of Vietnam;
• Detrimental to the people’s health or the environment and its natural resources
• Prohibited by international law in the manufacturing of toxic chemicals and treatment of toxic waste, imported to Vietnam.

 

2. Licensing
Foreign investors are first and foremost, required to obtain investment certificates from an appropriate licensing authority in order to conduct business. The investment certificate serves as the business registration of the corporate entity.
 

Investment Certification Process – Flow Chart

Investment Evaluation

If investment projects DO fall in the conditional sectors and the investment capital is GREATER than VND300 billion (US$15 million), then foreign investors must carry out the Investment Evaluation Procedures, in order to granted an investment certificate.

To begin the Investment Evaluation procedure, the investor must submit application documents to the Licensing Authority to be verified. If approved, the investment certificate will be issued to the investors within 24-40 business days.

            Two different types of evaluation:

1.     For investment projects that fall into conditional sectors with a disregard to the total amount of invested capital.

 

The applicant must, in addition, demonstrate compliance with requirements specific to that conditional sector.

 

2.     For investment projects that do not fall into conditional sectors and has a total invested capital of more than VND300 billion.

The applicant must submit, in addition, an “economic – technical explanation” of the investment project to the Licensing Authority. This will cover the economic – technical explanatory statement, objectives, scale, location, investment capital, implementation schedule, land use needs, and technological and environmental solutions of the investment project.

In the assessment of all application documents, the Licensing Authority may communicate with other relevant Ministries and authorities to efficiently evaluate the proposed investment project. 

Elements for Evaluation:

-        Compliance with master planning/zoning for

o    Technical infrastructure

o    Land use

o    Construction

o    Utilization of minerals and other natural resources

-        Land utilization requirements

-        Schedule of project implementation

-        Environmental solutions

The total duration for evaluation shall not exceed thirty (30) days from the received date of the completed and valid application documents. In necessary cases, the duration may be extended, but not beyond forty-five (45) days.

 

Investment Registration

If the investment projects DO NOT fall in the conditional sectors and the investment capital is LESS than VND300 billion (US$15 million), then foreign investors must carry out the Investment Registration Procedure, in order to granted an investment certificate.

To begin the Investment Registration procedure, the investor must submit application documents to the Licensing Authority to be verified. If approved, the investment certificate will be issued to the investors within 15 business days.

Enterprises can subsequently register additional investment projects without the need to create a separate entity.
 

Checklist for Investors


3. Structure of the Licensing Authority

 

The Board of Management (BOM)

They are responsible for licensing foreign investments within:

-        Industrial zones (“IZs”)

-        Export processing zones (“EPZs”)

-        High-tech zones (“HTZs”)

-        Economic zones (“EZs”)

 

Ministry of Planning and Investment (MPI) and Line Ministries

MPI are responsible for licensing:

-        National important BOT projects

-        PPP projects

Line Ministries:

-        Ministry of Trade and Industry are responsible for licensing oil and gas projects

-        State Bank of Vietnam are responsible for licensing credit institutions

-        Ministry of Finance are responsible for licensing insurance projects

-        Ministry of Justice are responsible for licensing law firms

 

Provincial People’s Committee

They are responsible for all other foreign investments

 

All licensing applications shall be submitted to these respected bodies, which will consult with other relevant governmental authorities (where so required) before issuing final approval.

 

Prime Minister

He will approve the following types of investment projects (unless not included in the approved master plan)

1.     Investment projects that disregard BOTH the source of investment capital and the scale of investment, in the following sector

o    Construction and commercial operation of airports; air transportation

o    Construction and commercial operation of national sea ports

o    Exploration, mining, processing of petroleum and minerals

o    Radio and television broadcasting

o    Commercial operation of casinos

o    Cigarette production

o    Establishment of university training

o    Establishment of Industrial zones (“IZs”), export processing zones (“EPZs”), high-tech zones (“HTZs”), economic zones (“EZs”)

 

2.     Investment projects that disregard the source of investment capital but the scale of investment must total VND 1,500 billion or more in the following sector:

o    Electricity, mineral processing, metallurgy

o    Railway, road, and internal waterway infrastructure construction

o    Alcohol production

 

3.     Investment projects with foreign-invested capital in the following sectors:

o    Commercial operation of sea transportation

o    Networks and supply of postal delivery construction

o    Telecommunications and internet services

o    Wave transmission networks construction

o    Publication and distribution of newspaper or other printed matters

o    Independent scientific research establishment.

 

 

4. Forms of Investment and Enterprise

Under the two legislations, foreign investors may choose the following forms of investment:

-        Business development investment

-        Economic organizations establishment

o    Ex: 100% foreign capital or joint-venture

-        Capital contribution or shares acquisition for the participation in the management of investment activities

-        Contractual forms of BBC, BO, BTO, BT, PPP, and M&A of enterprises investment

 

There are few restrictions in the purchase of shares in domestic companies, but there are certain companies listed on the Vietnam stock exchange and financial sectors have ownership limitations. The foreign ownership of these companies cannot exceed 49% or 30% if in the financial sector.

Acceptable Forms of Enterprises:

-        Limited liability company (with one or more members)

-        Share holding company/Joint stock company

-        Private company/Sole proprietorship

-        Partnership

-        Corporate Group

 

 

5. Investment Assistance
In order to encourage investment in Vietnam, there are opportunities for investment assistance:

-        Preferential corporate income tax rates

-        Corporate income tax exemption or reduction

-        Import duty exemptions

-        Taxes on royalties exemption

-        Land utilization or land rental fees exemption or reduction

-        Special privileges offered for BOT, BTO, BT, and PPP projects and projects in economic zones or high tech zones

 

Investments in underdeveloped socio-economic areas are more likely to qualify for the above-mentioned assistance.

 

Investment assistance are given to the following investment activities:

-        New materials energy production

-        High-tech, bio-technology or info-technology production

-        Mechanical product manufacturing

-        Agriculture cultivation and processing

-        Forestry and aquatic products

-        Man made strains production

-        New seeds and breeds of animals

-        High/modern technology usage, or research and development

-        Ecological environment protection

-        Mass employment

-        Infrastructure construction or development

-        Educational, training, medical, gymnastic, sports facilities development

-        Traditional trades development

Government support is available for investments that deliver the following economic benefits:

-        Technology transfer

-        Training support

-        Support services investment (Ex: Consultancies, training, market research, design and testing centers)

-        Construction of infrastructure outside zones

 

Investment guarantees include:

-        No nationalization or confiscation of investors’ assets

-        Intellectual property rights protection

-        Opening markets and investments related to trade

-        Remittance of capital and assets abroad

-        Changes in law or policies

 

Performance Requirements

Requirement

Purchase or use of domestic goods or services

None

Export requirements of goods or services

None

Domestic content requirements for intermediate inputs

None

Self balance of foreign currency

None

Domestic R&D content requirements

None

Price rates for goods; fees/charges for services controlled by the State

Uniform application