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New investment policies to take effect

Update: February, 04/2015 - 07:53

The Law on Investment 2014 (coming into effect on 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.

1. Forms of investment

Also, multiple investment methods such as BOT, BTO, BT contracts, investing in business developments, and investing in merger and acquisition, were abolished in the Law on Investment 2014, a new form of investment has been supplemented, which involves 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 infrastructure 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 organisation

Before establishing an economic organisation, foreign investors are required to have one investment project, apply for an Investment Registration Certificate ("IRC") and must satisfy certain conditions on ownership rates of charter capital and other conditions prescribed in international treaties, to which the Socialist Republic of Viet Nam is a signatory. Regarding ownership rates of charter capital, in particular, foreign investors are eligible for an indefinite amount of charter capital in economic organisations, except for certain cases restricted by provisions of law on securities and equitisation 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 organisations, and under BCC contracts:

In comparison with the Law on Investment in 2005, the Law on Investment 2014 contains more detailed regulations on investment conditions and procedures, as well as the 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 organisations; 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 Licences or Investment Certificates before July 1st 2015 are permitted to continue executing their investment project, in accordance with the granted Investment Licence 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 concretised, such as: production of clean and renewable energy, production of products with at least 30 per cent value added and energy-saving products, etc.; whereas traditional business sectors are removed from those investment fields eligible for incentives;

ii. Investment projects in which the scale of capital is at least VND6 trillion (US$280.3 million), or at least VND6 trillion is disbursed within 3 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 organisations.

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 taxes, 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, the Law on Investment 2014 has concretised overseas investment forms, such as: establishing an economic organisation under the provisions of law of the country receiving investment; undertaking BCC contracts overseas; or repurchasing part or all of the charter capital of the economic organisation overseas; etc. Furthermore, the competence to decide on policies of investment abroad, as well as the conditions and procedures to grant IRC overseas, have also been clearly regulated in the Investment Law 2014.

PLF – LAWFIRM

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