This article summarizes the necessary information to help foreign investors understand the regulations on investment forms, investor rights, and Investment Registration Certificate (IRC) issuance procedures following the latest Vietnam Investment Law.
Regulations on investment conditions
The Investment Law in Vietnam has applied in 2023, essentially the Investment Law 2020 passed by the Vietnamese National Assembly on June 17, 2020, and effective from January 1, 2021.
Forms of investment
Foreign investors can make indirect or direct investments in Vietnam. Forms of investment according to foreign investment regulations include:
– Investing in establishing economic organizations.
– Investing in capital contribution, buying shares, purchasing capital contributions.
– Implementing investment projects.
– Investing in the form of a BCC contract.
– Forms of investment and types of new economic organizations according to Vietnamese regulations.
Regulations on the scope of investment activities
Investors are allowed to invest and do business in all fields, except for industries banned by the Investment Law 2020 including trading in narcotic substances, chemicals and minerals, and specimens of wild fauna and flora; prostitution; buying and selling human body parts; business related to asexual reproduction; firecrackers or debt collection services.
List of prohibited business investment sectors in the Law on Investment 2020.
Regulations on ownership of charter capital
Foreign investors are not restricted in ownership of charter capital in economic organizations, except for the following cases:
- Foreign investors invest in companies, business organizations, and securities funds.
- Foreign investors invest in equitized state-owned enterprises.
- Except for these two cases, it shall comply with relevant laws and international treaties of which Vietnam is a member.
Rights and interests of foreign investors
Land ownership and land use rights
When investors invest in Vietnam, their enterprises will receive land use rights through the following forms:
– Receive capital contribution in the form of land use rights.
– Receive land use rights through leasing land from the government.
Foreign-invested enterprises that want to receive land use rights from households or individuals must request the competent authority and reach an agreement with those households and individuals so that the state can proceed with the collection and compensation. The state will then lease or allocate land to businesses according to the provisions of the law.
Rights of foreign investors with leasing land
Investors’ rights to leased land according to the Investment Law 2020
Investors have the right to use leased land as follows:
– Annual rental payment.
– One-time payment of rent during the rental term.
– Having the rights to transfer land use rights and assets attached to leased land.
– Having the rights to sublease land and assets attached to leased land.
– Having the rights to contribute land use rights and assets attached to land.
– Having the rights to mortgage land use rights and assets to credit institutions in Vietnam during the term of the lease contract.
Investment tax incentives
Investment tax incentives exclusively for foreign investors
When investing in Vietnam, foreign investors will enjoy many tax incentives policies, making it more convenient to invest in business:
– Corporate income tax exemption and reduction: apply the tax rate of 10% for a term of up to 15 years and 20% for a term of up to 10 years. Tax exemption and reduction for a maximum period of up to 9 years and allows businesses to carry forward losses when calculating taxable revenue within 5 years.
– Import tax exemption: investors are exempt from import tax on imported goods to create fixed assets, raw materials, supplies, and imported components for production according to the provisions of law.
– Exemption or reduction of land rent, land use, and land use tax according to legal regulations.
– Fast depreciation, increasing deductible expenses when calculating taxable income.
Investment Registration Certificate (IRC) issuance procedures in Vietnam
Foreign investors need to apply for an investment certificate (also known as investment license, investment registration certificate – IRC) in Vietnam, including the following documents:
- Proposal document
- Certificate of Legal capacity
- Proposing investment project
- Financial proofing document
- Proposing the need of land use
- Explanation of technology use
Foreign investors must have an investment project and carry out procedures for granting an Investment Registration Certificate before establishing an economic organization. Cases of creative startups and establishment of small and medium enterprises will comply with the provisions of law on supporting small and medium enterprises.
Adjustment and resolution in investment disputes
The Investment Law 2020 has regulated particularly on dispute resolution in business and investment activities:
– Disputes in business investment activities in Vietnam are resolved through negotiation and conciliation. If negotiation or conciliation cannot be achieved, it will be resolved according to the provisions of Clauses 2, 3 and 4, Article 14 of the Investment Law 2020.
– Disputes among investors with at least one party being a foreign investor shall be resolved at one of the following agencies: Vietnamese Court, Vietnamese Arbitration, International Arbitration, Foreign Arbitration or Arbitration which is established by agreement between the disputing parties.
– Disputes between foreign investors and the government are resolved byVietnamese Courts or by Vietnamese Arbitration.
Ensure benefits for foreign investors
Foreign investors are guaranteed business investment in the case of changes of the law in Vietnam:
– If a new legal document stipulates higher investment incentives, investors will enjoy incentives according to the new regulations for the remaining incentive period. Except for special incentives for investment projects specified in Point a, Clause 5, Article 20 of the Investment Law 2020.
– If the new legal document has lower incentives, the investor can continue to apply the previous incentives for the remaining incentive period of the project.
Guaranteed investment incentives include incentives specified in investment licenses, investment registration certificates, and documents issued by the government according to the provisions of law.
The above incentives do not apply to changes because of national defense and security, social order and safety, public health and environmental protection.
Investors who cannot continue to enjoy investment incentives according to the provisions of Clause 3, Article 13 of the Investment Law 2020 will be resolved by deducting the loss from their taxable income, adjusting their operating goals of the project, and supporting the recovery of damages suffered by investors.
Once all financial liabilities have been fulfilled, foreign investors are allowed to transfer assets abroad including: Capital and investment liquidation, income from investment activities, money and other legal assets.
Conference of FDI enterprises on October 16, 2023
To attract foreign investors to choose Vietnam as an investment destination. The government has many preferential policies specifically for foreign investors to ensure the best benefits.
In the conference with FDI enterprises on October 16, 2023, Prime Minister Pham Minh Chinh affirmed that three important commitments of Vietnam with foreign investors: Protecting the legal rights of investors in all cases, accompanying and supporting foreign investors when they operate long-term in Vietnam regularly and finally do not criminalize economic and civil relations, creating a healthy and sustainable manufacturing and business environment.
These above regulations of foreign investment are stipulated clearly in the Investment Law 2020 that foreign investors need to know when investing in Vietnam.
Source: Investment Law 2020, Consolidated Document 28/VBHN-VPQH, Ministry of Justice
See more: Foreign investment in Vietnam FAQs – updated 2023.
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