The new Law on Investment took effect on 1 January 2021 (“Investment Law”) has been praised to play an important role in attracting foreign capital as it sets out clearly the rights and obligations of investors, reduce administrative procedures as well as sets forth more investment incentives compared to its precedents. Recently, at the end of March 2021, the Government’s issuance of Decree No. 31/2021/ND-CP guiding the implementation of Investment Law has been an event of interest (“Decree 31”). With its emphasis on transparent Market Access conditions for foreign investors, Decree 31 can be seen as an effort by Vietnam in implementing its commitments under international agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Vietnam Free Trade Agreement (EVFTA).
Important provisions foreign investors should note
1/ Business investment conditions will be published on the National Business Registration Portal.
At the date of writing, the Ministry of Planning and Investment is working on the review and collection of conditions for publication on the Portal. Conditions for business investment to be announced include:
– The sectors and business lines that are subject to conditional business investment;
– The basis for application of business investment conditions; and
– Specific requirements that entities must fulfill in order to conduct business activities.
Before this, there has been no centralized system where investors could learn the requirements for conducting business activities in Vietnam. The publication of such conditions will help investors save time and costs, and is a sign of the Vietnamese Government going digital.
2/ Market access principles take into account Vietnam’s commitment under international agreements.
– Foreign investors belonging to countries or territories that are not WTO members conducting investment activities in Vietnam are entitled to the same market access conditions prescribed for investors from WTO member countries, unless otherwise provided for by Vietnamese law or international treaties between Vietnam and that country or territory.
– A foreign investor subject to an international treaty on investment that provides more favorable market access conditions compared to Vietnam laws can apply the market access conditions under that treaty.
– A foreign investor subject to the application of numerous international treaties on investment with different provisions on market access conditions may pick and choose a treaty applicable to themselves and exercise their rights and obligations in accordance with the entire treaty, even if the treaty is newly signed or amended or supplemented after the date of entry into force.
3/ Restrictions on foreign investors’ ownership ratio are in par with international treaties on investment.
– Where various foreign investors contribute capital, buy shares, buy capital contributions to economic organizations and are subject to application of one or more international treaties on investment, the total ownership ratio of all foreign investors in that economic organization must not exceed the maximum rate provided for by an international treaty that provides for the ownership ratio of foreign investors for a specific sector or for such investors
– In case an economic organization has many business lines that are subject to different provisions under international on the foreign investor’s ownership rate, the foreign investor’s ownership rate of such economic organizations must not exceed the lowest foreign ownership limit of all treaties.
4/ Decree 31 introduces new projects allowed for investment incentives.
Projects with investment capital of VND 6,000 billion or more can apply for investment incentives when the following conditions are fully satisfied:
a) Make a minimum disbursement of VND 6,000 billion within 3 years from the date of issuance of the Investment Registration Certificate, Decision on approval of investment policy and Decision on approval of investor (for projects not subject to issuance of Investment Registration Certificate); and
b) Having minimum total revenue of VND 10,000 billion per year within 03 years since the year of first revenue or employing 3,000 regular employees on average annually within 03 years from the year of first revenue.
For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.