From January 01, 2021, Law on Investment 2020 officially takes effect. This Law has many new policies to remove difficulties for investors, specifically as follows:
Article table of contents
1. Specify the scope of application to avoid overlapping of regulations
According to Article 4 of the Law on Investment 2020 of Vietnam, application of the Law on Investment and relevant laws are prescribed as follows:
First, business investment activities made within Vietnam’s territory must comply with this Law and relevant laws.
Second, where regulations on banned business lines or conditional business lines in this Law and other laws are inconsistent, regulations of this Law shall apply. Regulations on names of banned business lines and conditional business lines in other laws must be consistent with those set out in Article 6 and Appendices to the Law on Investment.
Third, where regulations on procedures for making business investment or on investment assurance in this Law and other laws are inconsistent and have been promulgated before the effective date of this Law, regulations of this Law shall apply, except for the following cases:
- Investment in, management and use of state capital invested in enterprises, which are prescribed in the Law on Management and Use of State Capital Invested in Manufacturing and Business Activities of Enterprises;
- Power and procedures for making public investment and management and use of public investment capital, which are prescribed in the Law on Public Investment of Vietnam;
- Power and procedures for making investment and executing projects; law governing project contracts; investment assurance, mechanisms for management of state capital applied to PPP projects, which are prescribed in the Law on Public Private Partnership Investment Form;
- Execution of construction, housing and urban area projects in compliance with the Law on Construction, Law on Housing and Law on Real Estate Business after a competent authority grants approval for the investment guidelines or adjustment to the investment guidelines in accordance with regulations of the Law on Investment;
- Power, procedures and conditions for making business investment, which are prescribed in the Law on Credit Institutions, Law on Insurance Business and Law on Petroleum of Vietnam;
- Power, procedures and conditions for making business investment, carrying out securities activities and operating in the securities market of Vietnam, which are prescribed in the Law on Securities.
Fourth, where a law promulgated after January 01, 2021 contains regulations on investment contradicting regulations of this Law, the former is required to specify the cases to which its regulations apply and the cases to which this Law applies.
Fifth, with regard to any contract to which at least a party is a foreign investor or a business organization defined in Clause 1 Article 23 of this Law, the parties may reach an agreement on whether to apply foreign laws or international practice if such agreement does not contravene Vietnam’s laws.
It can be seen that, in order to overcome the inadequacies and overlaps between the laws related to business investment and ensure the consistency and synchronization of the legal system, the Law on Investment 2020 has clearly defined the scope of application of the Law on Investment 2020 and laws related to business investment activities.
2. Cut down 41 conditional business lines
Appendix IV issued together with the Law on Investment 2020 of Vietnam, the List of conditional business lines includes 227 business lines.
According to the Appendix IV issued together with the Law on Investment 2014 of Vietnam, amended by Clause 2 Article 3 of the Law on Insurance Business, the Law on Intellectual Property amended in 2019, there are 268 conditional business lines.
Thus, the Law on Investment 2020 of Vietnam has reduced 41 conditional business lines (from 268 to 227). According to this Law, a number of specific industries as follows from January 1, 2021 will no longer be on the List of conditional business lines:
- Arbitration services;
- Vocational training;
- Debt collection services;
- Franchising;
- Logistics services;
- Coal trading;
- …
It can be seen that the Law on Investment 2020 of Vietnam has continued to cut a number of conditional business lines with unnecessary and unreasonable conditions, hindering the market entry process of people and enterprises.
3. Supplementing form of investment incentives
Specifically, according to Clause 1 Article 15 of the Law on Investment 2020 of Vietnam, 04 forms of investment incentives include:
- Corporate income tax incentives, including application of a lower rate of corporate income tax for a certain period of time or throughout the investment project execution; exemption from and reduction of tax and other incentives prescribed by the Law on Corporate Income Tax.
- Exemption from import tax on goods imported to form fixed assets; raw materials, supplies and components for manufacturing purposes in accordance with regulations of law on import and export tax;
- Exemption from and reduction of land levy and land rents;
- Accelerated depreciation, increasing the deductible expenses upon calculation of taxable income.
In comparison with the provision of Clause 1 Article 15 of the Law on Investment 2014, the Law on Investment 2020 has supplemented the form “accelerated depreciation, increasing the deductible expenses upon calculation of taxable income” of investment incentives.
Moreover, the Law on Investment 2020 of Vietnam also expands more projects entitled to investment incentives, adds a number of business lines eligible for investment incentives and applies a number of special investment incentives and supports.
4. Extension is not applied for investment projects using obsolete, environment threatening
Article 24 of the Law on Investment 2020 of Vietnam has completed and supplemented necessary tools to improve the effectiveness and efficiency of State management of investment, ensuring national security and defense in the direction of considering national security and defense conditions in case foreign investors invest in the form of establishing an enterprise, contributing capital, purchasing shares or purchasing capital contributions in enterprises located on islands or border or coastal communes or other security and defense sensitive areas.
In particular, according to Clause 4 Article 44 of the Law on Investment 2020 of Vietnam, extension is not applied for investment projects using obsolete, environment threatening or resource-intensive technologies and investment projects in which the investor must transfer assets without reimbursement.
Moreover, Clause 2 Article 48 of the Law on Investment 2020 of Vietnam also adds the provision on terminating the investment project in case the investor conducted the investment activities on the basis of a sham civil transaction of capital in order to create a legal basis to handle cases of hidden investment. Concurrently, Article 45 of the Law on Investment 2020 of Vietnam also stipulates determination of the value of investment capital; valuation of investment capital; the assessment of machinery, equipment and technological lines has supplemented regulations on investment capital assessment when necessary to determine tax bases, contributing to limiting transfer pricing and tax evasion.
Le Vy
