Written By PLF Law Firm

Law on Investment 2014 (coming into effect from July 1st, 2015) shall contain significant changes in comparison with existing provisions, specifically in investment forms, new regulations on Investment Registration Certificate, and projects entitled for investment incentives, etc.

1. Forms of investment

As multiple investment methods such as BOT, BTO, BT contracts; investing in business development; and investing in merger and acquisition were abolished in the Law on Investment 2014, a new form of investment has been supplemented, which is investing under a Public-Private Partnership (“PPP”) contract.

Accordingly, investors and project management companies shall enter into PPP contracts with competent authorities in order to execute investment projects to implement new construction investment projects, to improve, upgrade, expand, manage, and operate infrastructural works, or to provide public services. In addition, there are significant modifications in the remaining investment methods, specifically as follows:

Investment in the establishment of economic organization

Before establishing an economic organization, foreign investors are required to have one investment project, apply for an Investment Registration Certificate (“IRC”) and must satisfy certain conditions on ownership rate of charter capital and other conditions prescribed in international treaties to which the Socialist Republic of Viet Nam is a signatory. Regarding ownership rate of charter capital in particular, foreign investors are eligible for an indefinite amount of charter capital in economic organizations, except for certain cases restricted by provisions of law on securities and equitization and conversion of state-owned companies, and international treaties to which the Socialist Republic of Viet Nam is a contracting party.

Investment in the forms of capital contribution, purchase of shares or capital contributed into economic organizations, and under BCC contracts:

In comparison with Law on Investment in 2005, Law on Investment 2014 contains more detailed regulations on investment conditions and procedures, as well as primary contents of BCC contracts.

2. Grant of IRC

In the Investment Law 2014, cases in which IRC procedures are not compulsory have been expanded, including: investment projects of domestic investors; investment made by contributing capital, purchasing shares or capital contributions from economic organizations; etc. In addition, any investor wishing to obtain an IRC is entitled to request competent authorities to implement the procedures. Furthermore, the provision in Law on Investment 2005 stating that “Investment Registration Certificate also acts as a Business Registration Certificate” has also been abolished from the Investment Law 2014. More importantly, investors who were granted Investment License or Investment Certificate before July 01st 2015 are permitted to continue executing their investment project in accordance with the granted Investment License or Investment Certificate (which can be replaced with an IRC by the investment registration authorities if requested by the investors).

3. More projects eligible to enjoy investment incentives

The following projects eligible for investment incentives have been supplemented into the Investment Law 2014:

i.  Several business sectors given investment incentives are concretized, such as: production of clean and renewable energy, production of products with at least 30% value added and energy-saving products, etc.; whereas traditional business sectors are removed from investment fields eligible for incentives;

ii.  Investment projects in which the scale of capital is at least VND 6,000 billion, or at least VND 6,000 billion is disbursed within 03 years from the date of issuance of the IRC or decision on investment policies;

iii.  Investment projects in rural areas that employ 500 workers and more;

iv.  High-tech companies, scientific and technological companies, and scientific and technological organizations.

It is essential to note that the projects mentioned in points iii and iv above cannot enjoy investment incentives for mineral extraction activity; manufacture/sale of goods/services subject to special excise tax, except for car manufacturing.

4. Overseas investment

While Investment Law 2005 did not contain regulations on the forms in which domestic investors may invest in foreign countries, Law on Investment 2014 has concretized overseas investment forms, such as: establishing an economic organization under the provisions of law of the country receiving investment; undertaking BCC contracts overseas; or repurchasing part or all of charter capital of the economic organization overseas; etc. Furthermore, the competence to decide on policies of abroad investment, as well as the conditions and procedures to grant IRC overseas have also been clearly regulated in the Investment Law 2014.

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