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Vietnam amended Investment Laws: what you need to know

Vietnam amended Investment Laws: what you need to know

Monday 13, 07 2020
The amended Investment Law recently passed by the National Assembly has a series changes in conditional business lines, investment incentives and supports, investment procedures, etc. Below are the changes in the Law, summarized by VietnamCredit, that investors need to pay serious attention to.

1. Prohibited business lines

According to the newly-adopted Law, the following investment activities will be prohibited, including

  • Debt collection service business (new regulation);

  • Narcotic substance business listed in Appendix I;

  • Business of chemicals and minerals listed in Appendix II;

  • Business of naturally-occurring specimens of species of wild fauna and flora listed in the Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora; naturally-occurring specimens of category-I endangered, precious and rare forest fauna, flora and fish listed in the Appendix III in this Law;

  • Prostitution business;

  • Purchase and sale of humans, human tissues, corpses and bodily parts, fetuses (regulations on prohibition of purchase and sale of human corpses and fetuses are added);

  • Business activities related to asexual human reproduction;

  • Firecracker business

2. Conditional business lines

22 conditional business lines have been cut to eliminate barriers in business activities and guarantee the right to business freedom of people and enterprises in industries and business activities not prohibited by law.

The list of sectors and industries with conditional market access for foreign investors is regulated on the basis of opt-out approach in order to institutionalize Resolution No. 50 of the Politburo, contributing to improving transparency and feasibility in the application of Vietnam's commitment to open markets under new-generation free trade agreements.

3. Investment incentives and support

Vietnam amended Investment Laws: what you need to know

The Law amended and supplemented sectors and business lines eligible for investment incentives in order to ensure selective and quality foreign investment in accordance with the Politburo's Resolution No. 50, and at the same time ensure uniformity in the implementation of preferential policies and investment support under the provisions of the Investment Law, the Tax Laws and related laws:

  • Adding a number of industries eligible for investment incentives (such as innovation activities; goods production or service provision participating in value chains and industry clusters).

  • Adding more provisions on principles and conditions for application of investment incentives to ensure the effectiveness and quality of the policy (such as: application of time-limited incentives, according to actual results, at the present time, investors must meet the preferential conditions during the incentive period as prescribed by law).

  • The Prime Minister is allowed to apply special incentives to create mechanisms and policies that are attractive enough to FDI inflows that are moving quickly in the current context (application of maximum discount of 50% compared to the highest level prescribed by the current Law).

4. Uniformity and synchronization of the legal system

The amended Investment Law has partly resolved the drawbacks in the business environment such as overlapping and lack of clarity among laws related to investment and trade. Accordingly, the Law amended 10 groups of regulations to ensure consistency with the relevant laws, and amended 5 related laws including Housing Law, Construction Law, Real Estate Business Law, Corporate Income Tax Law, and Motion Picture Law to synchronize with the provisions of the Investment Law.

The law clarifies the principles and conditions to apply forms of selecting investors to implement projects using land, including: (i) auction of land use rights; (ii) bidding for selecting investors; (iii) approval of investors and investment policies under the Investment Law.

5. Investment procedures reform

Administrative procedures have been reformed: abolishing unnecessary administrative procedures (such as the procedure of approving investment policies for a number of investment projects of individuals, households; abolishing the regulations that Prime Minister's approval is needed for projects with capital from VND 5,000 billion).

Provincial People's Committees are decentralized to approve investment policies (such as golf course projects).

Investment project implementation procedures are simplified, and the investor's autonomy is expanded (such as the right to divide, separate, merge, and transfer projects).

6. State management, security and national defense

The law has completed and supplemented necessary tools to improve the effectiveness and efficiency of state management in investment, and ensure national defense and security by:

  • Considering security and defense conditions in case foreign investors invest in the form of establishing enterprises, contributing capital, purchasing shares at enterprises in islands, border towns, coastal areas or areas sensitive to security and defense.

  • Supplementing regulations on investment capital appraisal in case of necessity to determine tax calculation bases, contributing to limiting price transfer and tax evasion.

  • Supplementing the regulations not to extend the duration of investment projects for projects using outdated technology, potentially causing environmental pollution, resource-intensive projects and projects subject to transfer without compensation.

  • Supplementing regulations on termination of investment projects in case investors make investment activities on the basis of artificial capital transactions to create a legal basis for handling hidden investment.


Compiled by VietnamCredit


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