Assurance of Business Investment

Vietnamese Government recognizes and protects foreign investors' asset ownership and freedom of business  in Vietnam. Some main points are as follows:

• Lawful assets of investors shall not be nationalized or confiscated using administrative measures.
• Not required to  use domestic goods/services or reach a certain rate of import substitution; No restriction in value and export/import ratio.
• Permitted to transfer the capital, income and other assets overseas after the their fulfillment of all financial obligations to Vietnamese Government.
• Can choose to enjoy the applying investment incentives or enjoy new incentives, whichever more favorable, where a new law is promulgated. In the event that the investor is no longer eligible for the appyling investment incentives due to the change of law for national defense and security, social order and security, social ethics, public health, or environmental protection purposes, they shall receive compensation from the Government

Investment incentives

• Vietnamese Government grants incentives and support for investment projects which:
  • relate to high-tech activities, information technology, clean energy, renewable energy, agricultural - forestry - aquacultural activities, education, healthcare, , etc.;
  • in disadvantaged area or extremely disadvantaged areas; in industrial parks, export-processing zones, hi-tech zones, economic zones; in a rural area that employ at least 500 workers;
  • have capital investment of at least 6,000 billion VND.
• Forms of incentives
  • Exemption, reduction or lower rate of corporate income tax.
  • Exemption of import duties on goods, machinery, equipment used for the project.
  • Exemption or reduction of land lease, property tax, land using fees.

Pursuant to: Article 10 – Article 13, Law on Investment 2020; Article 19-20 Decree 31/2021/NĐ-CP.

• Establishment of new legal entity in Vietnam: This is the most common way that foreign investors use when investing in Vietnam.
  • Disadvantages: More complex and investment procedure. It takes much longer time than the methods of Capital contribution, Purchase of shares/capital contribution portion in existing Vietnamese company.
  • Advantages: Clear and transparent. Foreign investors participate in the ownership and management of the company right at the beginning.
• Capital contribution, Purchase of shares/capital contribution portion in enterprises operating in Vietnam (existing Vietnamese company).
  • Advantages: Simple investment procedure, much faster than “establishment of new legal entity”; be able to utilize licenses, land, property, workforce, market share, etc. of existing Vietnamese company.
  • Disadvantages: Require time and effort to do research, evaluation, appraisal of Target Company.
• Investment under Business Cooperation Contract (BCC): Investors sign BCC contract to do business collaboration. Products and profit are shared among investors without the establishment of new legal entity.
• Investment under Public-Private Partnership Contract (PPP): Pursuant to Law on PPP 2020

Pursuant to: Article 22 – 28 Law on Investment 2020; Law on PPP 2020.

• Single member limited liability company (LLC): Enterprises whose ownership consists of only one (1) organization/individual. The owner has full authority in making decisions regarding the operation of the company; and is liable for debts and other liabilities up to the value of charter capital.
• Multi-member LLC: Members are liable for debts and other liabilities up to the value of capital they have contributed to the business. Members can be either organization or individual, minimum of two (02) and maximum of (fifty) 50 members.
• Joint-stock Company (JSC):  Companies that have the following features:
  • Charter capital is split into multiple units of equal value called shares;
  • Minimum of three (3) shareholders, maximum is not restricted. Shareholders are liable for debts and other liabilities up to the value of capital they have contributed to the company. Shareholders are entitled to transfer their shares to others; except for Founding Shareholders are restricted within the first 3 years from the issuance date of the Certificate of Business registration: (1) only able to transfer their shares to other founding shareholders, (2) able to transfer to others only if it is approved by the General Meeting of Shareholders.
  • JSC can issue more shares to increase charter capital.
• Partnership: Companies that have the following features
  • At least two (02) partners are co-owners of the company who run business together in a common name (hereinafter referred to as unlimited liability partners. Unlimited liability partners are individuals who are responsible for the company’s obligations with all of their property.
  • Beside unlimited liability partners, a partnership may have limited liability partners. Limited liability partners are only liable for the company’s debts and other liabilities up to the value of capital they contributed to the company.​

Pursuant to: Law on Enterprises 2020

• Scenario (1): Investment projects in which foreign investor(s) establish new legal entity in Vietnam or invest under a BBC contract.
• Scenario (2): Investment projects (establishment of new legal entity in Vietnam, or investment under BBC) of foreign-invested enterprises where:
  • At least 50% of charter capital is held by foreign investors, or the majority of Unlimited Liability Partners is/are foreigner(s) (F1 Enterprise); or
  • At least 50% of charter capital is held by F1 Enterprise (F2 Enterprise); or
  • At least 50% of charter capital is held by foreign investors and F1 Enterprise (F2 Enterprise).

According to Law on Investment 2020, generally there are 2 processes of registration for IRC: (i) Obtaining In-Principle Approval for Investment (IPA) and (ii) Obtaining IRC.

• Procedure to obtain an In-Principle Approval for Investment (IPA)
  • IPA Issuer: Depending on the importance of investment project, the authority to issue Investment In-Principle Approval is:
    • The National Assembly: Projects that have or potentially have significant effects on the environment such as nuclear power plants, project using land of national park, requiring the relocation of at least 20,000 people in highlands, or 50,000 people in other areas.
    • The Provincial People’s Committees: Projects using land allocated or leased by the State without auction or bidding; projects that require change of land purposes; projects that use technologies on the list of technologies restricted to transfer.
    • The Prime Minister: Important projects such as seaports, airports, petroleum exploitation, refinery, etc. or other projects whose investment capital is from 5.000 billion VND.
  • Licensing Authority: Provincial Department of Planning and Investment (Provincial DPI – for projects outside industrial parks, export processing zones, hi-tech zones, and economic zones) or Management Board of industrial parks, export-processing zones, hi-tech zones, economic zones.
  • Statutory timeframe:
    • IPA by the Provincial People’s Committees: Within 35 days from the date of receipt of project dossier, Licensing Authority shall notify the investor of the result.
    • IPA by the Prime Minister: Within 60 days from the date of submission, project dossier shall be appraised by Licensing Authority, relevant local authorities, Provincial People’s Committee and Ministry of Planning and Investment and then submitted for the Prime Minister’s IPA.
    • IPA by the National Assembly: Usually takes long time because of complex procedure. Ministry of Planning and Investment shall send a report and proposal of establishment of an Appraisal Council to the Prime Minister. The Appraisal Council shall appraise the project dossier and report to the Government, the Government shall then submit for approval of the National Assembly.
  • Application for IRC: Within 05 working days from the date of receipt of Investment In-Principle Approval, Licensing Authority shall issue IRC.
• Procedure to obtain IRC: For projects that are not required to acquire investment polices approval (mentioned above):
  • Statutory timeframe: 15 days from the date of receipt of project dossier.
  • Licensing Authority: Provincial DPI or Management Board of industrial parks, export-processing zones, hi-tech zones, economic zones where the company’s HQ locates.

Pursuant to: Law on Investment 2020

a) The foreign investors shall follow the procedure to register capital contribution or purchase of shares/capital contribution portion in the following cases:

• The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization conducting business in the restricted business lines;
• The capital contribution or purchase of shares or stakes results in a foreign investor or business organization specified in Points a, b and c Clause 1 Article 23 of Law on Investment 2020 holding over 50% of the charter capital of the business organization in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.
• The foreign investor contributes capital, purchases shares or stakes of a business organization that holds a certificate of rights to use land on an island or in a border or coastal commune, or in another area that affects national defense and security.
• Procedures:
  • Step 1: Register to contribute capital, buy shares/capital contribution portion
    • Competent Authority: Provincial DPI or Management Board of industrial parks, export-processing zones, hi-tech zones, economic zones where the company’s HQ locates
    • Statutory timeframe: 15 days from the date of receipt of project dossier.
  • Step 2: Amend Business Registration:
    • After obtaining approval from competent authority, foreign investors and Vietnamese company shall follow the procedure to amend ERC.
      • Competent Authority: Provincial DPI or Management Board of industrial parks, export-processing zones, hi-tech zones, economic zones where the company’s HQ locates.
      • Statutory timeframe: Within 3 working days from the date of obtaining the competent authority’s approval.

b) Foreign investors other than those mentioned in Paragraph (a) only need to do the procedure to amend the ERC.

Pursuant to: Article 23.1 and Arrticle 26 Law on Investment 2020, Article 65.3 and 65.4 Decree 31/2021/ND-CP

• Generally, there are 4 major types that apply for most business and investment activities in Vietnam:
  • Corporate Income Tax (CIT)
  • VAT
  • Personal Income Tax (PIT)
  • Withholding Tax (consists of corporate income tax and VAT for all foreign entities with or without permanent establishment in Vietnam).
• Besides, depending on specific business, other taxes may apply such as:
  • Special consumption Tax;
  • Natural Resources Tax;
  • Import Duty;
  • Export Duty;
  • Environment Protection Tax.

• From Jan 1st 2016, the standard Corporate Income Tax rate in Vietnam is 20%.
• The CIT rate applicable to petroleum prospecting, exploration and exploitation in Vietnam is between 32% and 50%. The CIT rate applicable to the prospecting, exploration and extraction of precious and rare natural resources (i.e. platinum, gold, silver, tin, tungsten, antimony, gemstones and rare earth other than petroleum) is 50%

Pursuant to: Article 10 Decree 218/2013/ND-CP; Article 11 Circular 78/2014/TT-BTC