What is the level of guarantee for execution of investment projects under the current regulations in Vietnam?

What is the level of guarantee for execution of investment projects under the current regulations in Vietnam? (Internet image) 

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

1. What are the cases where the investor shall 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, 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 forthe cases mentioned above.

2. What is the level of guarantee for execution of investment projects under the current regulations in Vietnam?

According to Clause 2, Article 43 of the Law on Investment 2020 and Clause 2, Article 26 of Decree 31/2021/ND-CP, the guarantee for execution of investment projects is prescribed 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.

- 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.

The project’s investment capital determined as the basis for calculation of the guarantee rate as prescribed does not include land levy or land rent payable to the State and costs of construction of the investment project’s works (if any) which the investor is obliged to transfer to the State for management after completion. 

If the costs of construction of works to be transferred to the State have yet to be accurately determined at the time of signing the project execution guarantee agreement, the investment registration authority shall determine the guarantee amount according to the cost estimate specified in the project proposal prepared by the investor.

Nguyen Ngoc Que Anh

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