What is the definition of foreign investors under the law on investment of Vietnam? Are foreign investors prohibited from investment in any business lines?
What is the definition of foreign investors under the law on investment of Vietnam?
According to the provisions of Clause 18, Article 3 of the 2020 Law on Investment of Vietnam on investors, “investor” means an organization or individual that carries out business investment activities. Investors include domestic investors, foreign investors and foreign-invested business entities.
Foreign investor as defined in Clause 19, Article 3 of the 2020 Law on Investment of Vietnam means an individual holding a foreign nationality or an organization established under foreign laws and carrying our business investment activities in Vietnam.
What is the definition of foreign investors under the law on investment of Vietnam? Are foreign investors prohibited from investment in any business lines? (Image from the Internet)
In what forms can foreign investors invest in Vietnam?
Foreign investors who wish to invest in Vietnam must comply with Vietnamese law on investment and invest in the forms specified in Article 21 of the 2020 Law on Investment of Vietnam as follows:
- Investment in establishment of a business entity.
- Investment in the form of capital contribution or purchase of shares or stakes.
- Execution of an investment project.
- Investment in the form of a business cooperation contract.
- New forms of investment and types of business entities prescribed by the Government's regulations.
Where:
- Forms of investment in establishment of a business entity as prescribed in Article 22 of the 2020 Law on Investment of Vietnam are as follows:
+ A foreign investor that establishes a business entity shall satisfy market access conditions applied to foreign investors specified in Article 9 of the 2020 Law on Investment of Vietnam;
+ Before establishing a business entity, the foreign investor must have an investment project and follow the procedures for issuance or adjustment of an investment registration certificate, except for establishment of a small and medium-sized start-up enterprise and a startup investment fund in accordance with regulations of the Law on Small and Medium-sized Enterprises.
+ From the date on which the enterprise registration certificate or an equivalent document is issued, the business entity established by a foreign investor shall be the investor that executes the investment project set out in the investment registration certificate.
- Forms of capital contribution or purchase of shares or stakes as prescribed in Article 25 of the 2020 Law on Investment of Vietnam are as follows:
+ A foreign investor may contribute capital to a business entity in the following forms:
++ Purchase of shares of joint-stock companies through the initial public or additional issuance;
++ Contribution of capital to limited liability companies and partnerships;
++ Contribution of capital to other business entities not mentioned above.
- Investment under business cooperation contracts is specified in Article 27 of the 2020 Law on Investment of Vietnam:
+ Procedures for issuance of investment registration certificates in Article 38 of the 2020 Law on Investment of Vietnam shall apply to business cooperation contracts signed between a domestic investor and a foreign investor, or between foreign investors.
+ Parties to a business cooperation contract shall establish a coordinating board to execute the BCC. Functions, tasks and powers of the coordinating board shall be agreed upon by the parties.
In addition, Clause 1, Article 23 of the 2020 Law on Investment of Vietnam stipulates the percentage of capital contribution when foreign investors make investment in Vietnam as follows:
Conduct of investment activities by foreign-invested business entities
1. When establishing a new business entity, making investment by contributing capital, purchasing shares or stakes of a business entity, or making investment under a BCC contract, a business entity must satisfy the same conditions and follow the same investment procedures as foreign investors if:
a) Over 50% of its charter capital is held by a foreign investor(s) or, in case of a partnership, the majority of its general partners are foreigners;
b) Over 50% of its charter capital is held by a business entity(s) mentioned in Point a of this Clause;
c) Over 50% of its charter capital is held by a foreign investor(s) and a business entity(s) mentioned in Point a of this Clause.
Are foreign investors prohibited from investment in any business lines?
According to the provisions of Article 6 of the 2020 Law on Investment of Vietnam and other legislative documents, the following business lines are prohibited from investment and business activities in Vietnam:
- Business in narcotic substances.
- Business in chemicals and minerals.
- Business in specimens of wild flora and fauna specified in Appendix 1 of Convention on International Trade in Endangered Species of Wild Fauna and Flora; specimens of rare and/or endangered species of wild fauna and flora in Group I;
- Prostitution business;
- Human trafficking; trade in human tissues, corpses, human organs and human fetuses;
- Business activities pertaining to asexual human reproduction;
- Trade in firecrackers.
- Provision of debt collection services.
In addition, foreign investors are not allowed to invest in Vietnam in the Negative List for Market Access as prescribed in Clauses 1 and 2, Article 9 of the 2020 Law on Investment of Vietnam as follows:
Business lines with prohibited and restricted market access and market access conditions applied to foreign investors
1. Market access conditions applied to foreign investors are the same as those applied to domestic investors, except for the case specified in Clause 2 of this Article.
2. Pursuant to Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government and international treaties to which the Socialist Republic of Vietnam is a signatory, the Government shall promulgate a Negative List for Market Access, including:
a) Prohibited business lines;
b) Restricted business lines.
Thus, the Negative List for Market Access are specified in Section A, Appendix 1 to Decree No. 31/2021/ND-CP, including 25 business lines with prohibited market access and 59 business lines with restricted market access:
- Trade in goods and services on the list of goods and services under state monopoly.
- Press activities and collection of news in any shape or form.
- Catching or harvesting marine life.
- Investigation and security services.
- Administrative and judicial services, including judicial assessment services, bailiff services, property auction services, notary services, official receiver’s services.
- Guest worker services.
- Investment in construction of cemeteries for transfer of land use right and infrastructure thereon.
- Direct collection of garbage from households.
- Public survey services.
- Blasting services.
- Manufacture, sale of weapons, explosive materials and combat gears.
- Import, dismantlement of used seagoing ships.
- Public postal services.
- Merchanting trade of goods.
- Temporary import for re-export of goods.
- Collection, purchase, handling of public property at armed force units.
- Industrial property representative services and intellectual property assessment services.
See the full Negative List for Market Access for foreign investors investing in Vietnam in Section A, Appendix 1 enclosed with Decree No. 31/2021/ND-CP.
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