What are cases where investors have to pay a deposit or have a bank guarantee for investment project execution in Vietnam?

What are cases where investors have to pay a deposit or have a bank guarantee for investment project execution in Vietnam? (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What are cases where investors have to pay a deposit or have a bank guarantee for investment project execution in Vietnam?

Article 43 of the Law on Investment 2020 stipulates guarantee for execution of investment projects as follows:

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.

Based on the scale, nature and execution schedule of each investment project, the deposit for assurance of project execution is 01% - 03% of the investment capital of the project.

If a project comprises multiple investment phases, the amount of deposit shall be paid and returned in each phase of execution of the investment project, except for the case in which the deposit is not returned.

Thus, for projects using land allocated or leased out by the State or being permitted by the State to repurpose land, investors must pay a deposit, except for the cases mentioned above.

2. Duration of investment projects in Vietnam

Duration of investment projects in Vietnam according to Article 44 of the Law on Investment 2020 is as follows:

- The duration of an investment project inside an economic zone shall not exceed 70 years.

- The duration of an investment project outside an economic zone shall not exceed 50 years. The duration of an investment project in a disadvantaged area or extremely disadvantaged area or a project with large investment capital but with slow rate of capital recovery may be longer but shall not exceed 70 years.

- If an investment project uses land allocated or leased out by the State, but the transfer of land is delayed, the delay shall not be included in the project duration or execution schedule.

- Upon expiry of the duration of an investment project, if the investor wishes to keep executing the investment project and satisfies the conditions as prescribed by law, the duration of the investment project may be extended but shall not exceed the maximum prescribed in Clauses 1 and 2 of this Article, except for the following investment projects:

+ Investment projects using obsolete, environment threatening or resource-intensive technologies;

+ Investment projects in which the investor must transfer assets without reimbursement to the State of Vietnam or the Vietnamese side.

3. What are the cases where the investor is entitled to a reduction of the guarantee amount in Vietnam?

Pursuant to Clause 4 of Article 26 of Decree 31/2021/ND-CP, except for the projects not eligible for investment incentives as prescribed in Clause 5 Article 15 of the Law on Investment, the investor is entitled to a reduction of the guarantee amount in the following cases:

- A 25% reduction of the guarantee amount for investment projects in business lines eligible for investment incentives specified in the Appendix II of Decree 31/2021/ND-CP;

Investment projects in disadvantaged areas specified in the Appendix III of Decree 31/2021/ND-CP;

- A 50% reduction of the guarantee amount for investment projects in business lines eligible for special investment incentives specified in the Appendix II of Decree 31/2021/ND-CP;

Investment projects in extremely disadvantaged areas specified in the Appendix III of Decree 31/2021/ND-CP;

Investment projects in business lines eligible for investment incentives executed in disadvantaged areas.

Nguyen Ngoc Que Anh

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