Comprehensive Legal Solutions for Investors

FDI enterprises and foreign investors often encounter several challenges in Vietnam, such as complex administrative procedures, language and cultural differences, market risks, as well as complicated taxes and fees. To mitigate these difficulties, FDI enterprises and foreign investors should thoroughly research Vietnam’s legal system and investment-related regulations while seeking support from professional consultants.

To minimize challenges when investing and doing business in Vietnam, FDI investors need to thoroughly research the legal system and regulations related to investment and business in Vietnam, seek support from professional consultants, invest in workforce training, build relationships with Vietnamese partners, and so on.

To determine whether a project intended for investment in Vietnam falls within the permissible scope of investment, investors need to identify the following factors:

• Field of investment: What is the project’s field?
• Scale of investment: What is the scale of the investment?
• Location of investment: Where will the project be implemented?

Based on these factors, investors can refer to Vietnam’s legal regulations on investment to determine whether the project is within the permissible scope of investment.

The procedure for obtaining an investment license includes the following steps:

1. Determine whether the investment project falls within the permissible scope of investment.
2. Prepare the application dossier for the investment license.
3. Submit the application dossier to the competent authority.
4. The competent authority reviews and issues the investment license.
5. The investor receives the Investment Registration Certificate.

Investors should carefully consider the following legal issues before making an investment decision:

• Field of investment: Investors need to clearly identify the field they are interested in. Each field may have different investment conditions and procedures.
• Investment location: Investors should determine the specific location of interest. Each location may have distinct legal regulations regarding investment.
• Investment capital: Investors must clearly define the scale of their investment capital, as it is one of the key conditions for obtaining an investment license.
• Form of investment: Investors should choose a form of investment that aligns with their needs and objectives.

If investors need to lease factories for manufacturing goods, assembling components, or carrying out other industrial activities, leasing factories in industrial zones is a reasonable option. However, if investors intend to lease factories for service businesses or activities that do not require extensive infrastructure and utilities, leasing factories outside industrial zones might be a more suitable choice. This allows investors to save on rental costs and provides more options in terms of location and factory size.

For investment projects not subject to investment policy approval, the processing time for administrative procedures related to investment activities typically ranges from 40 to 50 working days from the date the investor submits a complete dossier as required.

The fees and charges for obtaining an investment license are specifically regulated based on the type and scale of the investment project. These fees are determined by factors such as the scale of investment capital and the field of investment. Under current regulations, the fees and charges for obtaining an investment license are not high, accounting for only a small portion of the total investment costs of the enterprises.

According to the Investment Law 2020, the foreign investor capital ratio when investing in Vietnam is regulated as follows:

• The foreign investor’s ownership ratio is not limited, except for the industries and sectors specified in Appendix II of the Investment Law.
• The foreign investor’s ownership ratio is capped at 50% for industries and sectors specified in Appendix II of the Investment Law.

According to the Investment Law 2020, there are five forms of investment and business in Vietnam, including:

• Establishing an economic organization: Investors establish a business or other economic organization in accordance with Vietnamese law.
• Capital contribution, share purchase, or equity purchase: Investors contribute capital, purchase shares, purchase of capital contributions to established economic organizations.
• Implementing an investment project: Investors implement an investment project in accordance with investment laws.
• Investment under a BCC contract: Investors jointly contribute capital, assets, technology, trade secrets, brand names, trademarks, intellectual property rights, or other rights to carry out an investment project.
• Other investment forms and new types of economic organizations as prescribed by the Government: Investment forms and types of economic organizations as prescribed by the Government.

The law does not specify the minimum or maximum capital required for an investment project. The amount of capital an investor must contribute depends on several factors, including:

• Field of investment: Each investment field has different capital requirements. For example, the manufacturing sector generally requires more capital than the service sector.
• Project scale: Larger investment projects will require more capital than smaller ones.
• Investment location: The location of the investment can affect investment costs, such as land lease costs, construction costs, etc.
• Other factors: Other factors that may influence investment costs include raw material costs, labor costs, management costs, etc.

Investors need to prepare initial capital for the following expenses:

• Land lease or factory lease: This is an important cost in the investment process.
• Construction costs for factories and installation of machinery and equipment: This is a significant expense required to implement the project.
• Cost of purchasing raw materials and goods: This is necessary for production and business operations.
• Labor and insurance costs for employees: This is essential for maintaining business operations.
• Other costs: This includes management, marketing, and advertising expenses, among others.

Investors are prohibited from engaging in businesses that are banned from investment and must be mindful of the foreign investor capital ownership ratio in industries with conditional business regulations.

To check if an investment project is eligible for investment incentives, investors need to determine the following factors:

• Investment field: Which field does the investment project belong to?
• Investment scale: What is the scale of the investment project?
• Investment location: Where will the project be implemented?

Based on these factors, investors can refer to the relevant provisions of Vietnamese law regarding investment incentives to determine if their project qualifies for such incentives.

According to the Investment Law 2020, an investment project is eligible for investment incentives if it meets the following conditions:

• The project belongs to a field or industry that is eligible for investment incentives.
• The project has an investment scale that meets the requirements for receiving investment incentives.
• The project is located in an area that is eligible for investment incentives.

There are two ways to check if an investment project is eligible for investment incentives:

Method 1: Check directly on the website of the Ministry of Planning and Investment

Investors can visit the website of the Ministry of Planning and Investment to check the list of industries, sectors, and areas eligible for investment incentives.

Method 2: Consult with experts

Investors can seek assistance from consultants for advice on legal regulations, administrative procedures, and other issues related to investment in Vietnam.

Vietnam offers various incentives to FDI investors, as outlined in the Investment Law 2020 and its guiding documents. These incentives include tax benefits, land and property incentives, financial incentives, policies related to compensation, credit, support, resettlement, land leasing, water surface leasing, and more.

FDI investors are entitled to the following tax incentives:

• Corporate income tax exemptions and reductions: FDI investors can enjoy exemptions from corporate income tax for 2 years and a 50% reduction on the tax payable for the following 4 years for new investment projects in manufacturing and processing, except for natural resource exploitation projects.
• Import tax exemptions: FDI investors are granted exemptions from import taxes on goods imported for creating fixed assets, machinery, equipment, raw materials, materials, components, and spare parts needed for the production and business activities of the investment project.
• Personal income tax incentives: FDI investors enjoy personal income tax incentives such as exemption from personal income tax on income from salaries and wages of non-resident individuals working in Vietnam for less than 183 days.

According to the Investment Law 2020, the deadline for contributing the full investment capital specified in the Investment Registration Certificate is the maximum period for the investor to complete the capital contribution in accordance with legal requirements. If the Investment Registration Certificate does not specify the deadline for capital contribution, the investor must contribute the full investment capital within 3 years from the date the certificate is issued.

The Investment Law 2020 allows investors to extend the deadline for capital contribution specified in the Investment Registration Certificate.

For a foreign-invested manufacturing project that does not require approval of investment policy, the procedure is as follows:

Step 1: The investor prepares the investment registration application and necessary documents.

Step 2: The investor submits one set of documents to the investment registration authority, including all required contents by law.

Step 3: The investor revises and supplements information according to the authority’s requests (if any) and receives the Investment Registration Certificate.

Step 4: The investor prepares the business registration application.

Step 5: The investor submits one set of documents to the Business Registration Office where the business headquarters is located, as required by law.

Step 6: The investor revises and supplements information according to the authority’s requests (if any) and receives the Enterprise Registration Certificate.

Step 7: The investor purchases a digital signature, electronic invoices, files taxes, opens bank accounts, etc.

According to the provisions of the 2020 Enterprise Law, foreign investors are allowed to transfer their ownership rights (capital contributions or shares) in a company to another investor, including both domestic and foreign investors.

According to the provisions of the 2020 Investment Law, investors are allowed to transfer an investment project to another investor, including both domestic and foreign investors.

The transfer of an investment project can affect the investment incentives of the company, as follows:

• Regarding the duration of incentives: The duration of the investment incentives for the transferred project will continue to apply to the investor who acquires the project, unless the new investor does not meet the conditions to qualify for the incentives.

• Regarding the level of incentives: The level of investment incentives for the transferred project will be adjusted according to the legal provisions for the investor acquiring the project, unless the new investor meets the conditions to qualify for higher incentives.

The conditions for transferring profits from Vietnam abroad are:

• The investment entity must have profits, not accumulated losses, and have completed the payment of corporate income tax as required by law.

• Fulfillment of all financial obligations to the state.

• The entity/organization must complete financial statements and corporate income tax finalization forms for the relevant tax authority.

• The entity must have notified the direct tax authority about the transfer of profits abroad as required.

The procedure for transferring profits abroad is as follows:

• Step 1: Prepare the documents for transferring profits abroad.

• Step 2: Submit the documents for transferring profits abroad to the tax authority managing the enterprise.

• Step 3: The competent authority reviews the documents for transferring profits abroad.

• Step 4: Transfer the profits abroad.

Investors can transfer profits abroad in the following cases:

• Annually: After the end of the financial year, foreign investors can transfer their profits earned from direct investment activities, provided that taxes and financial reports have been submitted to the tax authority.

• When the investment activity in Vietnam ceases: Investors can transfer their capital abroad after fulfilling all obligations related to financial reporting and income tax according to Vietnamese laws.

Some important considerations for investors when transferring an investment project:

• Thoroughly research legal regulations on project transfer.

• Choose a suitable investor to receive the project transfer in accordance with the law.

• Clearly agree on the rights and obligations of the parties involved in the project transfer.

• Comply with legal regulations regarding the transfer of investment projects.

When hiring a service provider to carry out investment licensing procedures, the benefits include:

• Ensuring the validity of the investment licensing application: The service provider has experience and in-depth knowledge of Vietnamese law. They will help the investor prepare a valid and complete application for investment licensing.
• Saving time and costs for the investor: The service provider will handle administrative procedures with the relevant authorities on behalf of the investor. This helps the investor save time and costs.

• Minimizing legal risks: The service provider has expertise in the legal regulations related to foreign investment in Vietnam. They will assist the investor in minimizing legal risks during the procedure.

When choosing a service provider to handle investment licensing procedures, investors should research the service provider’s reputation and experience, compare costs among different service providers, and request a service contract from the provider.

Foreign investors can handle investment licensing and business establishment procedures in Vietnam on their own. However, to ensure the legality and effectiveness of these procedures, investors should seek support from a lawyer or a professional law firm.

If the investor has knowledge and experience with Vietnamese law, they may handle the investment licensing procedures on their own. However, if the investor lacks knowledge and experience with Vietnamese law, they should hire a service provider to ensure the legality and efficiency of the procedures.

The difficulties when new investors invest in Vietnam are:

• Information challenges: New investors often face difficulties in searching for and accessing information about the investment environment in Vietnam. This includes information about investment conditions, procedures, markets, etc.

• Legal challenges: New investors often struggle with understanding and complying with legal regulations related to investment in Vietnam. These legal regulations can be complex and change frequently.

• Language and cultural challenges: Vietnam is a country with a culture and language that differ from many other countries. New investors often face difficulties in communication and integrating into the business environment in Vietnam.

• Resource challenges: New investors often lack experience, resources, and networks in Vietnam. This can make it difficult for them to carry out their investment projects.

When not receiving pre-investment consultation, investors may face the following risks and legal consequences:

• Risk regarding investment conditions: The investor may fail to meet the required investment conditions for the sector and location they are interested in. This could result in their investment project being denied approval.

• Risk regarding investment procedures: The investor may incorrectly follow investment procedures, which could lead to delays or suspension of the investment project.

• Risk regarding the investor’s rights and obligations: The investor may not fully understand their rights and obligations when investing in Vietnam. This can result in violations of their legal rights and interests.

• Risk regarding legal disputes: The investor may encounter legal disputes with relevant parties during the execution of their investment project. This could result in economic losses and damage to the investor’s reputation.

VPL has a team of lawyers who are knowledgeable about the investment laws in Vietnam, with significant experience and expertise in the field of investment. The team is skilled in communication and provides professional advice, ensuring that pre-investment consultation services are delivered efficiently, swiftly, and in full compliance with the law.

VPL has provided legal advice to many local and foreign investors on investment-related issues in Vietnam. During this process, VPL has closely collaborated with the competent authorities to address investor queries and ensure that investment projects are implemented in accordance with legal regulations.