Investment in Vietnam – How is it guaranteed by law?

One of the biggest concerns for foreign investors when doing business in another country is how the host country has investment guarantees for their investment. Accordingly, Vietnamese law has provided several guarantees for foreign investors when they decide to do business in Vietnam as follows:

1.         Securing property ownership[1].

Lawful assets of foreign investors shall not be nationalized or administratively confiscated[2], except for the cases where the State expropriates or requisitions for reasons of national defense and security or national interests, emergency situations, and natural disaster prevention and control, in such cases investors shall be paid or compensated according to the provisions of the law.[3]

Asset expropriation price is determined on the basis of the prevailing price in the local market of the property of the same type or having the same technical standards, quality, and origin at the time of the decision to expropriate the property[4]. The requisitioned property shall be returned after the expiration of the requisition period according to the asset requisition decision, [5] At the same time, there is compensation for damage caused by the requisition of property[6].

2.         Ensuring business investment activities[7]

The State does not require investors to fulfill the following requirements:

  • Prioritize the purchase and use of domestic goods and services or must purchase and use goods and services from domestic manufacturers or service providers;
  • Exports of goods or services reach a certain percentage; restricting the quantity, value and type of goods and services exported or produced or supplied domestically;
  • Import goods with quantity and value corresponding to the quantity and value of exported goods or must balance foreign currency from export sources to meet import demand;
  • Achieve the localization rate for domestically produced goods;
  • Achieve a certain level or value of research and development in the country;
  • Supply of goods or services at a specific location in the country or abroad;
  • Set up the head office at the location required by the competent state agency.
  • In addition, according to the Agreement between Japan and Vietnam for the Liberalization, Promotion and the Protection of Investments, there are two additional matters that the Sate of  Vietnam does not require Japanese investors to perform;
  • Bind the quantity or value of imports to the quantity or value of exports or foreign currency earnings associated with the investor’s investment;
  • Designate administrators, directors or board members as individuals of any particular nationality;

In addition, based on socioeconomic development conditions and investment attraction needs in each period, the Prime Minister of Vietnam will decide to apply forms of State guarantees to implement investment projects under the authority to approve investment policies of the National Assembly, the Prime Minister, and other important infrastructure development investment projects[8]. Specifically, the State’s guarantee for the implementation of the investment project, in this case, shall be considered and applied in the following forms[9]:

  1. Partial support for foreign currency balance on the basis of foreign exchange management policy and ability to balance foreign currency in each period; and
  2. Other forms of State guarantee decided by the Prime Minister.

3. Guarantee the transfer of foreign investors’ assets abroad[10]

After fully fulfilling financial obligations to the State of Vietnam in accordance with the law, foreign investors may remit the following assets abroad:

  • Investment capital, investment liquidations;
  • Income from business investment activities;
  • Money and other assets are legally owned by the investor.

4. Guarantee of business investment in case of change of law

In case new legislation is promulgated stipulating new investment incentives and higher investment incentives, foreign investors are entitled to investment incentives in accordance with the new legislation for the remaining incentive period of the project, except for special investment incentives for investment projects in the following cases: Investment projects have been granted investment certificates, investment registration certificates or decide on investment policy before the effective date of the Law on Investment 2020 (01 January 2021)[11].

In case the newly promulgated legislation stipulates that investment incentives are lower than the investment incentives previously enjoyed by the investor, the investor may continue to apply the investment incentives under the previous regulations for the remaining incentive period of the investment project[12]. Investment incentives guaranteed under this regulation include[13]:

  1. Investment incentives specified in the Investment License, Business License, Investment Incentive Certificate, Investment Certificate, Investment Registration Certificate, a written decision on investment policies, a decision on approval of investment policies or other documents issued by a competent person or a competent state agency and applied according to the provisions of law;
  2. Investment incentives that investors are entitled to according to the provisions of law, which do not fall into the case specified at point a above.

The foregoing regulation does not apply in case of changing provisions of legislation for reasons of national defense, security, social safety, social ethics, community health, and environmental protection. In this case, the foreign investors shall be settled by one or more of the following measures:[14]

  • Deduct the investor’s actual loss from taxable income;
  • Adjustment of operational objectives of investment projects;
  • Support investors to overcome the damage.

[1] Law on Investment 2020, Article 10

[2] Law on Investment 2020, Article 10.1

[3] Law on Investment 2020, Article 10.2

[4] Law on Expropriation and requisition of property 2008, Article 18.1.(a)

[5] Law on Expropriation and requisition of property 2008, Article 33.1

6 Law on expropriation and requisition of property 2008, Article 34

[7] Law on Investment 2020, Article 11

[8] Law on Investment 2020, Article 11.2

[9] Decree 31/2021/ND-CP, Article 3

[10] Law on Investment 2020, Article 13

[11] Law on Investment 2020, Article 13.1

[12] Law on Investment 2020, Article 13.2

[13] Decree 31/2021/ND-CP, Article 4 (taking effect from March 26, 2021)

[14] Law on Investment 2020, Article 13.4

You May Also Like