In the near future, the Law on Investment 2020 of Vietnam will come into force, which changes many business investment policies compared to the current ones. Below are 9 featured new points about business investment applicable from January 01, 2021.
Article table of contents
1. Provision of debt collection services is banned
According to Article 6 of the Law on Investment 2020 of Vietnam, the business investment activities below are banned:
- Business in narcotic substances specified in Appendix I hereof;
- Business in chemicals and minerals specified in Appendix II hereof;
- 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 of Appendix III hereof;
- 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 comparison, provision of debt collection services is one of the conditional business lines specified in the Appendix IV enclosed with the Law on Investment 2014 of Vietnam.
Thus, provision of debt collection services will officially be banned from January 01, 2021.
2. Supplementing conditions for making business investment in conditional business lines
According to Article 7 of the Law on Investment 2020 of Vietnam, regulations on business investment conditions shall contain the following:
- Subjects and scope of the business investment conditions;
- Forms of fulfillment of the business investment conditions;
- Contents of the business investment conditions;
- Documentation and administrative procedures for compliance with the business investment conditions (if any);
- Regulatory agencies and agencies that have the power to handle administrative procedures regarding business investment conditions;
- Effective dates of licenses or certificates or other written confirmation or approval (if any).
In particular, business investment conditions to be fulfilled are those specified in:
- Licenses;
- Certificates;
- Credentials;
- Written confirmation or written approval;
- Other requirements that must be satisfied by individuals and business organizations to conduct business investment activities without obtaining written confirmation from a competent authority.
In comparison, Article 7 of the Law on Investment 2014 only stipulates that the conditional business lines and the corresponding conditions shall be posted on the National Business Registration Portal.
Thus, from January 01, 2021, when investing in conditional business lines, investors need to pay more attention to business investment conditions to carry out investment activities in accordance with the law.
3. Reducing 41 conditional business lines
Appendix IV enclosed with the Law on Investment 2020 of Vietnam specifies 227 conditional business lines.
In comparison with Appendix IV enclosed with the Law on Investment 2014 supplemented by Clause 2 Article 3 of the Law on amendments to some articles of Law on Insurance Business and Law on Intellectual Property, there are 268 conditional business lines.
Thus, the Law on Investment 2020 has reduced 41 conditional business lines (from 268 to 227 business lines). Specifically, from January 01, 2021, the following business lines will no longer be on the list of conditional business lines:
- Arbitration services;
- Vocational training;
- Provision of debt collection services;
- Franchising;
- Logistics services;
- Coal trading;
- etc.
4. Business lines with restricted market access shall be announced by the Government
According to Article 9 of the Law on Investment 2020 of Vietnam, market access conditions applied to foreign investors are the same as those applied to domestic investors.
However, 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:
- Prohibited business lines;
- Restricted business lines.
Note: Market access conditions applied to foreign investors specified in the Negative List for Market Access include:
- Holding of charter capital by the foreign investor in a business organization;
- Investment method;
- Scope of investment;
- Capacity of the investor; partners participating in the investment activities;
- Other conditions specified in the 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.
It can be seen that this is a completely new regulation of the Law on Investment 2020. After the Law on Investment 2020 takes effect, the Government will base on this Law and relevant legal provisions to announce the Negative List for Market Access for foreign investors. This new regulation is appropriate in the context of Vietnam's current open economy, creating conditions for better management and control in the activities of foreign investors.
5. Supplementing forms of investment incentives
Specifically, according to Clause 1 Article 15 of the Law on Investment 2020 of Vietnam, there are 04 forms of investment incentives, including:
- 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 Clause 1 Article 15 of the Law on Investment 2014, the Law on Investment 2020 supplements the form “accelerated depreciation, increasing the deductible expenses upon calculation of taxable income” to forms of investment incentives.
Moreover, the Law on Investment 2020 also expands projects eligible for investment incentives, supplements a number of business lines eligible for investment incentives and applies a number of special investment incentives and supports. Customers and Members can view more details at the article 04 notable new points on investment incentives in Vietnam from January 01, 2021.
6. Investors establishing small and medium-sized start-up enterprises are not required an investment registration certificate
According to Article 22 of the Law on Investment 2020 of Vietnam, every investor shall establish a business organization in accordance with the following regulations:
- A domestic investor shall establish a business organization in accordance with regulations of law on enterprises and law corresponding to each type of business organization;
- A foreign investor that establishes a business organization shall satisfy market access conditions applied to foreign investors specified in Article 9 of this Law;
In particular, before establishing a business organization, 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.
Thus in case the foreign investor establishes a small and medium-sized start-up enterprise in accordance with regulations of the Law on Small and Medium-sized Enterprises, the foreign investor is not required to have an investment project and follow the procedures for issuance or adjustment of an investment registration certificate (completely new regulation).
In comparison with the Law on Investment 2014, conditions for establishing economic organizations in the Law on Investment 2020 have been loosened, especially for small and medium-sized enterprises. Concurrently, the Law on Investment 2020 also abolishes the regulation on conditions of the economic organization established by the investor, including: the investor’s charter capital, the form of investment, operating scope.
7. Supplementing conditions for investment in form of capital contribution or purchase of shares or stakes
According to Article 24 of the Law on Investment 2020 of Vietnam, investors are entitled to contribute capital, purchase shares or purchase stakes of business organizations. Foreign investors making investment by contributing capital, purchasing shares and purchasing stakes of business organizations must:
- satisfy market access conditions applied to foreign investors as prescribed by law;
- ensure national defense and security in accordance with this Law;
- comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.
Meanwhile, according to Article 24 of the Law on Investment 2014, foreign investors making investment by contributing capital, buying shares, buying capital contribution of business organizations shall only comply with forms of capital contribution or purchase of shares or stakes and procedures for making investment by contributing capital, purchasing shares or purchasing stakes without any other conditions.
Thus, according to the Law on Investment 2020, in addition to complying with regulations on forms, conditions and procedures, foreign investors making investment by contributing capital, purchasing shares and purchasing stakes of business organizations must also meet particular conditions as prescribed.
8. Changing the place to submit investment project documents
- Investment projects under the National Assembly's investment policy approval authority shall be submitted to the Ministry of Planning and Investment (Article 34 of the Law on Investment 2020).
According to Article 35 of the Law on Investment 2014, the investor shall submit the dossier to the local registry office.
- Investment projects under the Prime Minister's investment policy approval authority shall be submitted to the Ministry of Planning and Investment (Article 35 of the Law on Investment 2020).
According to Article 34 of the Law on Investment 2014, the investor shall submit the project dossier to the local registry office.
- Investment projects under the investment policy approval authority of the provincial People’s Committees shall be submitted to the investment registration authority (Article 36 of the Law on Investment 2020). This regulation is similar to the provisions in Article 33 of the Law on Investment 2014.
Thus, from January 01, 2021, investment projects under the investment policy approval authority of the National Assembly and the Prime Minister shall be submitted to the Ministry of Planning and Investment instead of the local registry office as currently regulated.
9. Annulling 01 case in which the investor must not make guarantee for execution of investment projects
According to Article 43 of the Law on Investment 2020 of Vietnam, the investor shall pay a deposit or have a bank guarantee for investment project execution if the project uses land allocated or leased out by the State or is permitted by the State to repurpose land, except for the following cases:
- The investor is the successful bidder for the right to use a land area that is allocated by the State for land levy or leased out by the State for a lump-sum rent;
- The investor wins bidding for execution of an investment project using land;
- The State allocates or leases out land to the investor on the basis of receipt of an investment project for which a deposit has already been paid or for which the capital has been fully contributed or raised following the schedule specified in the written approval for investment guidelines or the investment registration certificate;
- The State allocates or leases out land to the investor for execution of an investment project on the basis of receipt of the land use right and assets on land from another land user.
In comparison, according to Article 42 of the Law on Investment 2014, guided in Article 27 of Decree No. 118/2015/ND-CP of Vietnam’s Government, in addition to the above-mentioned cases, the investor is a revenue-earning public service agency, a hi-tech zone development company established under a decision of a competent authority to execute investment projects that receive land or lease land from the State to develop infrastructure of industrial parks, export-processing zones, hi-tech zones, specialized areas in economic zones must not make guarantee for execution of investment projects. Therefore, this subject must guarantee for execution of investment projects according to the Law on Investment 2020 of Vietnam.
Le Vy
- Key word:
- Law on Investment 2020
