1. Types of direct investment in Vietnam
The Investment Law notes the following types of direct investment: investment to establish 100% foreign businesses or joint-ventures between domestic and foreign investors; investment under BCC, BOT, BTO, BT contracts; investment for business development; and capital contribution, share buying in economic organizations, integrating and purchasing and indirect investments.
For foreign investors, direct investments under the new Investment Law are more open compared to guidance set forth in the Law on Foreign Investment. Hence, besides the type of limited companies (joint-venture companies, 100% foreign companies), investors can establish joint stock, associate companies under the Enterprise Law; contribute capital to, buy shares from Vietnamese enterprises in certain sectors, businesses under the government’s regulations; and buy, integrate branches of companies under the law on competition and relevant laws.
Documentation filing, procedural order, formalities, investment and business registration content for the first-time foreign investor will be implemented pursuant to provisions of the Commercial Law and Investment Law. The investment certificate also serves as a business registration certificate.
2. Procedures for investors to apply for investment licenses
Investment projects and procedures are classified into three types:
+ Investment registration projects: Including domestic investment projects with capital under 15 billion VND except projects in conditional investment sectors. Investors only make their registration under the forms at provincial state investment management authorities for their investment but are not required to certify their investment.
+ Investment certification projects: Including domestic investment projects with capital of 15 billion VND to less than 300 VND billion and foreign investment funded projects with capital of under 300 billion VND except projects in conditional investment sectors. Investors make their registration under the forms at provincial state investment management authorities for their investment to certify investment registration contents in certificates of business registration. The investment certification shall be made within 15 business days from the date of receipt of eligible files. The certificate of investment issued to foreign investors is also the certificate of business registration of the enterprise. A file for investment registration applicable to foreign investors consists of:
a, Documents on investment registration contents, including: legal status of investor; purposes, scale of operations, and location of investment project; investment funds, progress of project performance; demands for land use and commitments to environmental protection; and recommendations of preferential investments (if any);
b, Reports on financial capacity of investors; and
c, Joint-venture or BCC contracts, charter (if any).
+ Investment investigation projects: Consisting of projects valued 300 billion VND upward or projects under the List of Conditional Investment. Investors submit their files to state investment management authorities to have certificates of business–investment registration certified. The investigation to certify investments shall be made within 30 business days from the date of receipt of full and eligible files. A file consists of: Application for a certificate of investment; documents certifying legal status of investors; report on financial capacity of investors; and a feasibility study with contents, purposes, location of their investment, needs for using lands, investment scale, investment capital, project implementation progress, technology and environmental solutions. For foreign investors, a file also requires joint venture or BCC contracts, charters (if any).
- Foreign investors making their first investment in Vietnam shall have investment projects to establish foreign investment funded economic organizations in Vietnam. In the event of establishment of domestic and foreign enterprises attached to investment projects, procedures of enterprise establishment and procedures of investment project performance are carried out at the same time for the issuance of certificates of business–investment registration. The draft law does not stipulate the business period of enterprises. The period of an investment project shall conform to project contents and shall not exceed the period of land rental.
3 Organizations responsible for issuance of investment licenses
- Projects of which the Prime Minister approves investment policies:
a) Investment projects without distinction of scale, investment funds in some sectors such as: airport construction and business; air transport; seaport, national highway construction and business, sea transport in case of foreign investment funded projects; exploration and exploitation of oil and gas and valuable and rare natural resources; broadcasting, television, press, publication; investment and business related to casinos, high-award games in case of foreign investment projects; production and processing of cigarettes in cases of foreign investment projects; establishment of colleges, universities, post-graduation programs and equivalent levels; and investment and establishment of industrial zones, export processing zones, high technology zones and economic zones.
b) Investment projects not in the set forth sectors but valued at 1,500 billion VND upwards in sectors of: energy, mineral exploitation and processing, metallurgy; building railways, roads, interior waterways and related infrastructure; and production and business involving wine, beer.
c) Foreign investment funded projects in the sea transport business; establishing networks and supplying postal operations and delivery, telecommunication and internet services; establishing wave transmission networks; printing and publishing newspapers; publishing; and establishing independent units for science research.
For the set forth investment projects which have been in the planning approved by the Prime Minister or under the Prime Minister’s authorization and met conditions under the laws and international treaties of which Vietnam is a signatory, authorities responsible for issuing certificates of investment prepare the issuance of certificates of investment without submission to the Prime Minister for decisions on investment policies.
Provincial People’s Committees carry out investment registration and issue certificates of investment when:
- Investment projects are outside industrial zones, export processing zones, high technology zones, and economic zones, including investment projects of which the Prime Minister, as set forth above, has approved investment policies.
Investment projects for developing the infrastructure of industrial zones, export processing zones, high technology zones in localities in which management units of such zones have not been established.
Projects of which certificates of investment are issued by management units of industrial zones, export processing zones, high technology zones, economic zones
Management units of industrial zones, export processing zones, high technology zones, and economic zones register investments and issue certificates of investment to investment projects in industrial zones, export processing zones, high technology zones, economic zones, including investment projects of which investment policies have been approved by the Prime Minister.
4 Organizations receiving files of investment projects
- Departments of Planning and Investment receive project files in cases whereby provincial People’s Committees have issued certificates of investment.
- Management Units of industrial zones, export-processing zones, high technology zones, economic zones receive project files in cases whereby certificates of investment are issued in the areas of localities.
- For investment projects in the areas not under administration management of provinces, central cities or are carried out in many provinces or central cities, their files are submitted to Departments of Planning and Investment where investors place or intend to place their head offices or branches or operating offices to perform such investment projects.
5 Documents required in a registration file for certificates of investment
- Investment registration form;
- Contract of business cooperation in cases of investment under a contract of business cooperation; and
- Report on financial capacity of the investor (prepared by and under responsibility of the investor).
For investment projects attached to the establishment of economic organizations, besides the above set forth documents, investors shall submit the following:
- A file for business registration corresponding to each kind of enterprise under the Enterprise Law and relevant laws; and
- Joint-venture contract in cases of investment to establish a joint-venture business organization between domestic and foreign investors.
6 Areas and locations received investment incentives
The Investment Law issued in 2005 encourages investments in producing new materials, new energies, biotechnology, and computer science; raising and processing agricultural, forestry, and sea products; using high technology, modern technology, protecting the ecologic environment, and investing in developmental research; building and developing the following both directly and their associated infrastructure: important industrial projects, traditional vocations, education, health, cultural and sport development, and labor-intensive projects. It also encourages investments in areas with socio-economic difficulties, industrial zones, export processing zones, high-technology zones, economic zones, and vocational villages.
Investment projects in priority sectors and areas will receive tax preferences (including exemption of import duties applicable to equipment, materials, transport means; enjoying tax preference applicable to income from capital contribution, shares; and exemption of income tax for technology transfer…); loss transfer (transferring losses to the succeeding year; these losses are deductible to taxable income …); depreciation of fixed assets (applying fast depreciation for fixed assets…); and land use privilege (exemption and reduction of land tax, land rentals; period of land use may be extended to 70 years …).