FDI enterprises and foreigners investing and doing business in Vietnam often face some difficulties such as complicated administrative procedures, differences in language and culture, market risks, many and complicated taxes and fees,….In order to minimize these difficulties, FDI enterprises and foreigners need to thoroughly understand the legal system and related regulations interested in investment and business in Vietnam, and seek support from consultants.

In order to minimize difficulties when investing and doing business in Vietnam, FDI investors need to thoroughly understand the legal system and regulations related to investment and business in Vietnam, seek support from consultants, invest in human resource training, build relationships with Vietnamese partners,….

To know whether a project intended to invest in Vietnam falls within the scope of permitted investment or not, investors need to determine the following factors:

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

Based on these factors, investors can refer to the provisions of Vietnamese law on investment to determine whether the project falls within the scope of permitted investment or not.

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

1. Determine whether the investment project falls within the scope of permitted investment or not.
2. Prepare documents to apply for an investment license.
3. Submit an application for an investment license to the competent authority.
4. Competent authority reviews and grants investment licenses.
5. Investors receive an Investment Registration Certificate.

Some specific legal issues that investors need to consider before deciding to invest:

• Investment field: Investors need to clearly identify the investment field they are interested in. Each investment sector may have different investment conditions and procedures.
• Investment capital: Investors need to clearly determine the size of their investment capital. Investment capital is one of the important conditions for obtaining an investment license.
• Investment form: Investors need to choose an investment form that suits their needs and purposes.

If the investor needs to rent a factory to produce goods, assemble components, or perform other industrial activities, renting a factory in the industrial park is a reasonable choice. However, if the investor needs to rent a workshop for service business, or perform activities that do not require much in terms of infrastructure and utilities, renting a factory outside the industrial park may be a more suitable option. Investors will be able to save on factory rental costs and have more options in terms of location and factory area.

For investment projects not subject to policy approval, the time for settling administrative procedures for normal investment activities is from 40 to 50 working days from the date the investor fully prepares the dossier as prescribed.

Fees and charges related to applying for investment permits are specified for each type of investment project and for each project level. This level of fees and charges is determined based on factors such as the size of the investment capital, the field of investment,… According to current regulations, the level of fees and charges related to applying for investment permits is not high. These fees and charges only account for a small part of the total investment costs of the enterprise.

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

• The capital ownership ratio of foreign investors is not limited, except for industries and professions specified in Appendix II of the Investment Law.
• The maximum capital ownership ratio of foreign investors is 50% for industries and professions specified in Appendix II of the Investment Law.

According to the provisions of the Investment Law 2020, there are 5 forms of investment and business in Vietnam, including:

• Investing in establishing economic organizations: Investors establish businesses or other economic organizations in accordance with Vietnamese law.
• Investing in capital contribution, buying shares, buying capital contributions: Investors contribute capital, buy shares, buy capital contributions to established economic organizations.
• Implementing investment projects: Investors carry out investment projects according to the provisions of investment law.
• Investment in the form of BCC contract: Investors contribute capital, assets, technology, technical know-how, trademarks, trademarks, other intellectual property rights or other rights to implement an investment project. private.
• New forms of investment and types of economic organizations prescribed by the Government: New forms of investment and types of economic organizations prescribed by the Government.

The law does not stipulate the minimum and maximum capital of an investment project. The amount of capital an investor must put into an investment project depends on many factors, including:

• Investment field: Each investment field has different investment capital requirements. For example, the manufacturing sector often requires larger capital investments than the service sector.
• Project scale: Large-scale investment projects will require more investment capital than small-scale investment projects.
• Investment location: Investment location can affect investment costs, such as land rental costs, construction costs,…
• Other factors: Other factors can affect investment costs, such as raw material costs, labor costs, management costs,…

Investors will need to prepare initial investment capital to perform the following tasks:

• Land or factory rent: This is an important expense in the investment process.
• Factory construction costs, machinery and equipment installation: This is a large cost necessary to implement the project.
• Cost of purchasing raw materials and goods: This is a necessary cost for production and business.
• Salary and insurance costs for employees: This is a necessary cost to maintain business operations.
• Other costs: Includes management, marketing, marketing costs,…

Investors are not allowed to do business in industries prohibited from investment and should pay attention to the capital ownership ratio of foreign investors for conditional business lines.

To check whether an investment project is eligible for investment incentives or not, investors need to determine the following factors:

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

Based on these factors, investors can refer to the provisions of Vietnamese law on investment incentives to determine whether the project is eligible for investment incentives or not.

According to the provisions of the Investment Law 2020, investment projects are eligible for investment incentives when they meet the following conditions:

• Investment projects in fields and industries eligible for investment incentives.
• The investment project has an investment scale that meets the conditions for investment incentives.
• Investment projects are implemented in areas eligible for investment incentives.

Option 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, trades and geographical areas entitled to investment incentives.

Option 2: Consult with consultants

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

Vietnam has many incentives for FDI investors, stipulated in the Investment Law 2020 and guiding documents such as tax incentives, land and financial incentives, and investment policies on compensation, credit, support, resettlement, land lease, water surface lease,…

Tax incentives for FDI investors include:

• Tax exemption and reduction of corporate income tax: FDI investors are entitled to corporate income tax incentives such as tax exemption for 2 years, 50% reduction of payable tax in the next 4 years for new investment projects in the field of production and processing, except for investment projects on natural resource exploitation.
• Import tax exemption: FDI investors are entitled to import tax incentives such as import tax exemption for imported goods to create fixed assets, machinery, equipment, raw materials, materials, components and spare parts for production and business activities of investment projects.
• Personal income tax incentives: FDI investors are entitled to personal income tax incentives such as personal income tax exemption for income from wages and wages of non-resident individuals working in Vietnam for less than 183 days.

According to the provisions of the 2020 Investment Law, the time limit for fully contributing investment capital stated on the Investment Registration Certificate is the maximum time limit for investors to fully contribute investment capital in accordance with the provisions of law.

The Investment Law 2020 allows investors to extend the capital contribution deadline on the Investment Registration Certificate.

For foreign-invested manufacturing factory projects that are not subject to policy approval, the following process must be followed:

Step 1: The investor composes a dossier of applications for an Investment Registration Certificate and prepares the necessary documents.

Step 2: The investor submits 01 dossier of application for an Investment Registration Certificate including the contents prescribed by law to the investment registration agency.

Step 3: The investor amends and supplements information as requested by the competent authority (if any) and receives the Investment Registration Certificate.

Step 4: The investor composes and prepares application documents for an Enterprise Registration Certificate.

Step 5: The investor submits 01 dossier of application for an Enterprise Registration Certificate as prescribed by law to the Business Registration Office where the enterprise is located.

Step 6: The investor amends and supplements information as required by the competent authority (if any) and receives the Enterprise Registration Certificate.

Step 7: Investors buy digital signatures, electronic invoices, declare, pay taxes, open a bank account ,…

According to the provisions of the Enterprise Law 2020, foreign investors may transfer ownership of their contributed capital and shares in the company to other investors, including domestic investors and foreign investors.

According to the provisions of the Investment Law 2020, investors may transfer investment projects to other investors, including domestic and foreign investors.

The transfer of investment projects may affect the company’s investment incentives, specifically as follows:

• Regarding the incentive period: The time limit for enjoying investment incentives of the transferred project will continue to apply to the investor receiving the project transfer, unless the investor receiving the project transfer does not meet the conditions for enjoying investment incentives.
• Regarding the level of incentives: The level of investment incentives of the transferred project will be adjusted according to the provisions of law for the investor receiving the project transfer, unless the investor receiving the project transfer satisfies the conditions to enjoy higher incentives.

Conditions for transferring profits from Vietnam abroad are:

• The investment unit must have profits and no accumulated losses when it has properly completed corporate income tax as prescribed by law.

• Full fulfillment of financial obligations to the state
• The unit/organization must complete the financial statements and financial CIT finalization declaration for the high-level tax administration authority.
•  Have notified the directly managing tax authority about the transfer of profits abroad as prescribed.

The procedure for transferring profits abroad is carried out as follows:

Step 1: Create a record of transferring profits abroad

Step 2: Submit documents for transferring profits abroad to the tax office directly managing the enterprise.

Step 3: Competent agencies to verify dossiers of profit transfer abroad

Step 4: Transfer profits abroad

Investors can transfer profits abroad according to:

• Periodically transfer profits abroad each year

After the financial completion process of one year, foreign investors can transfer their profits divided or collected from direct investment activities when tax completion and financial statements have been completed to the direct tax administration.

• When investment activities in Vietnam are no longer available, investors will be able to transfer capital

Investors will have to fulfill their obligations on financial statements, income tax in accordance with Vietnamese law in order to be able to transfer all previous profits abroad.

Some notes for investors when transferring investment projects:

• Carefully understand the legal provisions for the transfer of investment projects.
• Select the investor to receive the project transfer in accordance with the provisions of the law.
• Clearly agree on the rights and obligations of the parties to the project transfer.
• Comply with legal regulations on investment project transfer.

When hiring services to carry out investment license application procedures, there are benefits such as:

• Ensure the validity of investment license applications: The service has extensive experience and knowledge of Vietnamese law. They will help investors prepare valid and complete investment license applications.
• Help investors save time and costs: The service will carry out administrative procedures at state agencies on behalf of investors. This saves investors time and costs.

• Minimizing legal risks: The service has experience and knowledge of legal regulations related to foreign investment in Vietnam. They will help investors limit legal risks during the procedure.

When selecting a service party to carry out procedures for applying for an investment license, investors should learn about the reputation and experience of the service party, compare the costs of the service parties, request the service party to provide the service contract,…

Foreign investors can handle the procedures for applying for investment licenses and establishing businesses in Vietnam by themselves. However, to ensure the validity and effectiveness of these procedures, the investor should have the assistance of a professional lawyer or law firm.

If investors have knowledge and experience in Vietnamese law, they can handle the procedures for applying for investment licenses themselves. However, if investors do not have knowledge and experience in Vietnamese law, they should hire a service party to ensure the validity and effectiveness of these procedures.

New investors investing in Vietnam often face difficulties such as:

• Information difficulties: New investors often face difficulties in finding and accessing information about the investment environment in Vietnam. This information includes information on investment conditions, investment procedures, markets,…
• Legal difficulties: New investors often face difficulties in understanding and implementing legal regulations related to investment in Vietnam. These legal provisions can be complex and change frequently.
• Language and cultural difficulties: Vietnam is a country with a different culture and language compared to many other countries. New investors often face difficulties in communicating and integrating with the business environment in Vietnam.

• Resource difficulties: New investors often lack experience, resources and networks in Vietnam. This may make it difficult for them to implement their investment projects.

Without prior investment advice, investors may face the following risks and legal consequences:

• Risks of investment conditions: Investors may not meet the investment conditions for the fields and investment areas they are interested in. This may result in the investor’s investment project being denied a license.
• Risks of investment procedures: Investors may perform wrong investment procedures. This may result in the investor’s investment project being delayed or suspended.
• Risks of rights and obligations of investors: Investors may not be familiar with their rights and obligations when investing in Vietnam. This may lead to the investor having their legitimate rights and interests violated.

• Risks of legal disputes: Investors may encounter legal disputes with related parties during the implementation of investment projects. This can lead to economic and reputational damage to the investor.

VPL has a team of lawyers who understand the legal regulations related to investment in Vietnam, have experience and expertise in the field of investment, have good communication and consulting abilities and have a professional attitude to ensure the provision of pre-investment consulting services to customers effectively, quickly, and in accordance with the law.

VPL has advised many domestic and foreign investors on investment-related legal issues in Vietnam. During the consultation process, VPL has worked closely with competent authorities to answer investors’ questions and ensure that investment projects are implemented in accordance with the law.