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IMPORTANT CHANGES TO CURRENT REGULATIONS BY LAW ON INVESTMENT 2020



Law on Investment No. 61/2020/QH14 has been passed and shall take effect on January 01, 2020 (“Law on Investment 2020”). Below is the summary of new provisions and important changes by the Law on Investment 2020 compared to the current law on investment. FOREIGN INVESTOR 1. Law on Investment 2020 supplements the regulations on List of conditional business lines for market access applied to foreign investors on the basis of selective removal. Such list shall be promulgated by the State consisted of (i) Prohibited business lines that foreign investors have not been granted access to their market yet, and (ii) Business lines that foreign investors are granted access conditionally to their market. Aside from this list, foreign investors shall receive the same conditions for market access applied to domestic investors. 2. Foreign investors are not required to establish an investment project and are not required to apply for the Investment Registration Certificate before establishing start-up enterprises or establishing a start-up investment fund. 3. Foreign investors making capital contribution to, purchasing shares, purchasing capital contribution in enterprises having Land Use Right Certificate for the land on island, land in communes, wards at the border; land in coastal communes, wards, towns; land in areas relating to national defense, security must conduct procedures to register such capital contribution, shares purchase, capital contribution purchase with the authorities. 4. Foreign investors making capital contribution to, purchasing shares, purchasing capital contribution in enterprises operating business lines that are conditional for foreign investors, without increasing the ratio of ownership of foreign investors in such enterprises, are no longer required to conduct procedures to register the capital contribution, shares purchase, capital contribution purchase with the authorities. 5. Foreign investors making capital contribution to, purchasing shares, purchasing capital contribution in enterprises, which makes the ratio of charter capital of foreign investors in such enterprises to increase when the foreign investors have already been holding more than 50% of the charter capital before such contribution, purchase (instead of 51% provided by the current law), must conduct procedures to register such capital contribution, shares purchase, capital contribution purchase with the authorities. 6. Enterprises having more than 50% of its charter capital held by foreign investors (instead of 51% provided by the current law) must meet the requirements and conduct investment procedures in accordance with the regulations applied to foreign investors making investments in Vietnam. OUTWARD INVESTMENT 7. Law on Investment 2020 adds on the regulations on business lines prohibited from making outward investment with new prohibitions, including (i) business lines prohibited by law, (ii) business lines utilizing technology and product prohibited from exporting and (iii) business lines prohibited by regulations of law provided by the states receiving the investment. 8. Law on Investment 2020 adds on the regulations on conditional business lines for outward investment with new business lines including banking, insurance, stock, journalism, radio broadcasting, television broadcasting, and real estate business. When operating such business lines for outward investment, investors must obtain the approval of competent state agency for satisfying the requirements of outward investment in accordance with the relevant specialized laws (if any). 9. Law on Investment 2020 narrows the cases required to conduct procedure to amend the Outward Investment Registration Certificate. 10. Law on Investment 2020 elaborates on the use of outward investment profit by the investors as follows, the investors can use such profit to (i) continue making capital contribution in case the contribution has not been made fully; (ii) increase capital; and (iii) carry out new outward investment projects. INVESTMENT INCENTIVE 11. Law on Investment 2020 expands the area of subjects qualified to receive investment incentives by adding (i) technology/enterprise incubators, (ii) enterprises manufacturing and providing technologies, equipment, products and services for environmental preservation purposes, (iii) stat-up projects, and (iv) innovation centers, research and development centers, (v) investment projects employing the disabled. Law on Investment 2020 defines start-up projects as investment projects implementing ideas on the basis of utilizing intellectual property, technologies and new business models capable of rapid growth. 12. Law on Investment 2020 expands the business lines eligible for investment incentives to include (i) research, development and manufacturing of products resulted from implementing science and technology, (ii) higher education, (iii) manufacturing of goods and provision of services for the purpose of creating or participating in value chains, industrial clusters being business lines eligible for investment incentives. 13. Investment incentives will be granted to not only automobiles manufacture projects but also aircrafts and yachts manufacture projects despite them being subject to excise tax. 14. Commercial housing construction projects shall not receive investment incentives. 15. Law on Investment 2020 amends the procedure to apply investment incentives to unify projects granted Investment Registration Certificate and projects not being granted Investment Registration Certificate. 16. The State shall have the right to decide on special investment incentives to encourage the development of a particular business line, area having major influence on the economy – society. 17. Forms of investment incentives shall expand to include accelerated depreciation and increasing the deductible expenses upon calculation of taxable income. LEVELS OF AUTHORITY 18. Some housing, urban area construction projects with special scope shall be subject to the approval for investment policy of the Prime Minister. 19. Golf construction and trading project, cigarettes manufacturing project, trading in prize-winning electronic games for foreigners are no longer subject to the approval for investment policy of the Prime Minister. 20. Golf construction and trading project shall be subject to the approval for investment policy of the provincial People’s Committee. 21. Law on Investment 2020 grants the State the right to add more forms of investment, new forms of business organizations aside from those provided by Law on Investment 2020. PROCESS AND PROCEDURE 22. Law on Investment 2020 amends, supplements and revokes some contents of the Dossier submitted to obtain approval for investment policy provided by the current law. 23. Law on Investment 2020 amends the process of inspecting investment projects subject to approval for investment policy of the National Assembly with the purpose to simplify the procedure to seek inspecting opinion of relevant Ministry, agency, and to cancel the repeated procedure of 02 steps seeking opinion. 24. The content of the Investment Registration Certificate no longer includes the address of investors. 25. Law on Investment 2020 elaborates on, providing more detail and clarification of the cases required to obtain approval for amending investment policy. 26. The annual report of investment activity in Vietnam shall be revoked. 27. Law on Investment 2020 amends and unifies the term “decision on investment policy” to become “approval for investment policy” to reflect the true nature and purpose for State’s management of this procedure. TERM OF OPERATION 28. The State’s agencies could suspend, put a halt to, or end the investment business activities if such activities cause harm to or threaten the national defense, security of the State. 29. Law on Investment 2020 expands the scope of basis for investment registration agency to end the investment project or end part of the investment project by adding the following cases, (i) land retrieval due to failure to utilize land, delay in utilizing land, (ii) the investor fails to pay a deposit or fails to have a bank guarantee, and (iii) the investors conduct investment activities on the basis of a sham civil transaction. 30. Law on Investment 2020 elaborates that a part of the operation, not necessarily the whole of operation, of the investment project can be ended. 31. Law on Investment 2020 elaborates that when the investment project’s operation term ended and the investor wants to continue carrying out the project, the project shall be considered for operation term extension but it shall not exceed the maximum period provided by law. 32. Law on Investment 2020 provides that the investors shall not amend the pace of implementing for the investment project more than 24 months compared to the initial pace of implementing provided in the document of approval for investment policy, except a few particular cases. 33. Investment projects utilizing outdated technology, threatening environmental pollution, exhausting natural resources, investment projects belonging to the cases required to transfer assets without refund to the State of Vietnam or the Vietnamese side shall not be considered for operation term extension. BUSINESS LINES 34. Debt collection services provision, firecrackers trading, human fetuses trading and human corpses trading are added to the prohibited business lines. 35. Law on Investment 2020 elaborates on the forms of implementing conditions for operating business lines to be the following: a) License; b) Certificate; c) Certification; d) Document of confirmation, approval; and dd) Other requirements that individuals, enterprises must satisfy in order to operate business activity without being granted a document from the competent agency. *the addition of this regulation is meant to increase the efficiency in implementing the principle to ensure the right to freedom of investment of individuals and enterprises in business lines that the law does not prohibited or provided with conditions. 36. The following business lines shall no longer be conditional business lines: Commercial arbitration service; Debt trading service; Manufacturing, repairing of liquefied petroleum gas cylinder (LGP cylinder); Franchising; Logistic service; Training, improving knowledge service for real estate brokerage practice; Training, improving knowledge service for apartment management and operation skills; Urban planning development service provided by foreign individuals, organizations; Trading of foods under the specialized management of Ministry of Health; Manufacturing helmets for motorbikes riders, motor scooters riders; Introducing advertised goods to the public service; Export and import of electricity; Shipping agency service; Film production. 37. The following business lines are added to conditional business lines: Architectural service; Data center service; Electronic identification and authentication service; Imported newspaper distribution service; Fishing vessel registration; Training and retraining crew members of fishing vessels; Insurance auxiliary service; Smoking cessation service, HIV/AIDS treatment service, care service for elderly, people with disabilities and children; Breeding and raising normal wild animals; Import, export, re-export, transit and introduction from the sea of natural specimens or species of endangered, precious and rare forest plants and animal species and aquatic species; Import, export and re-export of bred, reared or artificially propagated specimens of species in lists of endangered, precious and rare forest plant and animal species and aquatic species; Processing, trading, transporting, advertising displaying and storing specimens of plant and animal species in lists of endangered, precious and rare forest plant and animal species and aquatic species; Testing biological preparations, microorganism, chemicals, environmental remediation agents serving husbandry; Provision of payment service without payment accounts of customers; Clean water (domestic water) trading. OTHER REGULATIONS 38. Law on Investment 2020 elaborates on the principle, conditions to apply each following form of selection of investors: (i) holding land use right auction; (ii) bidding to select an investor; (iii) approving an investor in some special cases. 39. Aside from paying deposit, the investors can use bank guarantee to ensure the implementation of projects requiring the State to hand over land, rent land, approve for change of land use purpose. 40. Regarding investment projects requiring the State to allocate land, lease land, approve for change of land use purpose, the investors are not required to conduct guarantee measures in the following cases: (i) the investor wins the auction for the right to use land for an amount of land use fee, or by renting land from the State for a lump-sum rent, (ii) the investor wins bidding, (iii) 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, and (iv) 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. 41. Law on Investment 2020 supplements regulations on assessment of value of investment capital when necessary to determine basis for tax calculation, helping restricting transfer pricing, tax invading. 42. The subjects under Law on Investment 2020’s regulation is expanded to include agencies relating to investment activities together with the investors, organizations and individuals.

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