THE NEW POINTS OF THE LAW ON INVESTMENT 2020
On June 17, 2020, the National Assembly officially adopted the 2020 Investment Law to replace the 2014 Investment Law and will take effect on January 1, 2021.
1. Definition of business investment
The Law on Investment 2020 changes the concept of “Business investment”, specifically Clause 8, Article 3 “Business investment” is defined as capital investment to do business by an investor.1
2. Relationship between Law on investment and related laws
The Law on Investment 2020 additionally provides for Point d, Clause 3, Article 4, which stipulates the applicable cases under the Construction Law, the Housing Law and the Law on Real Estate Business in case there is a conflict between the Law on Investment and laws.2
3. For banned business lines
The Law on Investment 2020 officially adds “Provision of debt collection services ” to the list of prohibited business investment activities prescribed in Article 6 of the Law on Investment.3
4. Lines of business investment with conditions4
❖ Repealing
The Law on Investment 2020 has abolished many conditional business investment sectors in the service industry5 and other industries such as franchising, waste treatment, production and repair of liquefied petroleum gas cylinders, medical services6 according to the Appendix IV of the Law on Investment 2020.
The abolition some lines of business investment with conditions in the Law on Investment 2014 aims at improving the regulation of investment business lines with conditions while cutting some unnecessary, illegal and unreasonable lines to continue to ensure the full and consistent implementation of the right to business freedom of people and enterprises in the industries not banned or conditionally required by the Law.
❖ Amending
This law also amended lines of service industries and some other groups of industries such as brokerage, trading, agriculture, import-export, transportation, construction, and domain names.7
❖ Addition
In addition, the new Law also adds a number of industries in groups service lines, water, registry of fishing vessels, training and retraining of fishing vessel crew members,…8 in Appendix IV of the Law on Investment 2020.
5. Business lines eligible for investment incentives
Compared with the provisions of the Law on Investment 2014, the Law on Investment 2020 added some lines, such as higher education, manufacturing of products, goods, equipment, service providers, drug storage, production in the list of industrial products supported to prioritize for development prescribed in Clause 1, Article 16 of the Law on Investment 2020.9
6. Entities eligible for investment incentives
Accordance with Article 15 of the Investment Law in 202010 added some objects are updated preferential matching perspective, orientation, development policies of sectors and geographical areas of the Party and State.
7. Guarantee for execution of investment projects not required
The Law on Investment 2020 has added 4 cases not guaranteeing for execution of investment projects for groups of investors winning the auction of land use rights; the investor wins the bid to execute an investment project using land and the investor is assigned a specific land by the State in accordance with Article 43 of the Investment Law 202011
8. Investment conditions for foreign investors
The Investment Law of 2020 will issue a list of industries that are restricted to foreign investors, namely: The list of industries that have not yet accessed the market.12
9. Investment activities of foreign-invested economic organizations
Provisions on changes in charter capital holding rates of foreign investors in economic organizations conducting investment activities.13
10. Contributing capital, buying shares, buying capital contributions
Supplementing regulations and conditions when foreign investors contribute capital, buy shares, buy capital contributions of economic organizations14
11. Investor selection
The Law on Investment 2020 has added a new provision regulating the selection of investors to implement investment projects through auctions of land use rights, bidding and approving the specific provisions in Clause 1, Article 29 of the 2020 Investment Law.15
12. Adjustment of investment projects
In the Law on Investment 2020, there is a clear concept and more specific guidance on the case that an investor can adjust an investment project as stipulated in Clause 1, Article 41 of the Law on Investment 202016 . For an adjustment to the implementation schedule of an investment project, this Law only limits the time for progress adjustment to no more than 24 months compared to the implementation schedule of an investment project approved for the first time for the first project. Investment approves the investment policy, at the same time supplementing the cases in which adjustments to investment projects are not permitted under Clause 4, Article 41 of the Investment Law 2020.17
13. Term of investment project activities
The completely new supplement that the Law on Investment 2014 is not specified is as the expiration operational investment projects shall be considered to extend the time limit for the operation of investment projects provided for in Clause 4 of Article 44 Law investment 2020.18
14. Termination of investment projects
Supplementing the cases in which the investor may terminate or partially terminate an investment project as prescribed in Clause 2, Article 48 of the 2020 Investment Law.19
15. Investment Procedures
Specifying the cases in which the procedures for registration of capital contribution, share purchase, capital contributions purchase of economic organizations must be followed, supplementing the case of capital contribution, share purchase, or capital contribution purchase of business organizations having a land use right certificate in border islands, communes, wards or towns; coastal communes, wards and towns; other areas that affect national defense and security.20
16. New point about the place to file investment project dossiers
Changing of the filing place for investment projects subject to investment policy approval competence of the National Assembly and the Prime Minister.21
17. Conditions for the grant of investment registration certificates, for investment projects that are not subject to investment policy approval
Supplementing conditions for investment projects that are not subject to investment policy approval22
18. Supplementing business lines banned from outward investment and business lines subject to conditional outward investment
Promulgating new regulations on business lines banned from outward investment and business lines subject to conditional outward investment.23
1Clause 8 Article 3 the Law on Investment 2020:
“8. “business investment” means an investor investing capital to do business.”
2Article 4. Application of the Law on Investment and relevant laws
“3. Where regulations on procedures for making business investment or on investment assurance in this Law and other laws are inconsistent and have been promulgated before the effective date of this Law, regulations of this Law shall apply, except for the following cases:
a) Investment in, management and use of state capital invested in enterprises, which are prescribed in the Law on Management and Use of State Capital Invested in Manufacturing and Business Activities of Enterprises;
b) Competence and procedures for making public investment and management and use of public investment capital, which are prescribed in the Law on Public Investment;
c) Competence and procedures for making investment and executing projects; law governing project contracts; investment assurance, mechanisms for management of state capital applied to PPP projects, which are prescribed in the Law on Public Private Partnership Investment Form;
d) Execution of construction, housing and urban area projects in compliance with the Law on Construction, Law on Housing and Law on Real Estate Business after a competent authority grants approval for investment guidelines or adjusted investment guidelines in accordance with regulations of the Law on Investment;
dd) Competence, procedures and conditions for making business investment, which are prescribed in the Law on Credit Institutions, Law on Insurance Business and Law on Petroleum;
e) Competence, procedures and conditions for making business investment, carrying out securities activities and operating in the securities market of Vietnam, which are prescribed in the Law on Securities.”
3Clause 1 Article 6 the Law on Investment 2020:
“1. The business investment activities below are banned:
a) Trade in the narcotic substances specified in Appendix I hereof;
b) Trade in the chemicals and minerals specified in Appendix II hereof;
c) Trade 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;
d) Prostitution;
dd) Human trafficking; trade in human tissues, corpses, human organs and human fetuses;
e) Business activities pertaining to asexual human reproduction;
g) Trade in firecrackers.
h) Provision of debt collection services.”
4Precribed in Appendix IV of the Law on Investment 2020
5Pursuant to Appendix IV of the 2020 Investment Law, the conditional business lines of the service industry include:
Provision of debt collection services
Commercial arbitration service activities
Debt trade services
Logistic service business
Training and fostering knowledge on real estate brokerage and real estate transaction management service business
Training, fostering professional knowledge, management and operation skills of apartment buildings service business
Urban planning consultancy service business by foreign organizations and individuals.
HIV testing service business
Business tissue banking service business
Reproductive support, sperm storage, embryo storage service business
Testing microorganisms causing infectious diseases service business
Vaccination service business
Substitution medicine for opioid addiction treatment service business
Surrogacy technique performing service business
Medical equipment inspection service business
Advertising products to the public service business
6Pursuant to Appendix IV of the Law on Investment 2020, the conditional business lines belong to other group of industries, including:
Trading food belonging to the specialized management field of the Ministry of Health
Operation of medical equipment-classifying establishments
Manufacturing helmets for motorcyclists and motorbike riders
Bio-products in waste treatment business
Producing and repairing liquefied petroleum gas cylinders (LPG bottles)
Franchising
7Pursuant to Appendix IV of the 2020 Investment Law, the business lines are amended including:
“Insurance, ancillary activities” brokerage
Goods trading activities and activities directly related to goods trading activities of foreign service providers in Vietnam
Voluntary drug addiction and smoking cessation, HIV/AIDS treatment, care for the elderly, people with disabilities, and children service business
Sea transport business
Construction inspection service business
Domain name registration and maintenance service business
Raising and planting wild flora and fauna species in Appendices of CITES and the list of endangered, precious and rare forest plants, animals and aquatic animals
Conventional forest animals rearing
Export, import, re-export, transit and import from the sea of wild specimens of species included in Appendices to CITES and the list of endangered, precious and rare forest flora, fauna and aquatic animals
Export, import, re-export of specimens of animals raised or artificial cultivated species included in Appendices to CITES and the list of endangered precious and rare forest flora, fauna and aquatic animals
Farm animals business
Intellectual property rights representative services (including industrial property representation services and plant variety rights representative services)
Film distribution and dissemination service business
Providing payment intermediary services, providing payment services without going through the customer’s checking account.
8Pursuant to Appendix IV of the 2020 Investment Law, the business lines are added including:
Smoking cessation, HIV/AIDS treatment, care for the elderly, people with disabilities, and children service business;
Clean water business;
Architectural services business;
Fishing vessel registry;
Training, fostering of crew members for fishing ships …
9Clause 1 Article 16 the Law on Investment 2020:
Higher education;
Producing products from the results of science and technology on science and technology;
Products on the List of prioritized supporting products;
Preserving of drugs, manufacturing of medical equipment;
Manufacturing of goods and provision of services for the purposes of creating or participating in value chains and industrial clusters.
10Article 15 the Law on Investment 2020:
Investment projects in business lines eligible for investment incentives specified in Clause 1 Article 16 of this Law;
Investment projects located in the areas eligible for investment incentives specified in Clause 2 Article 16 of this Law;
Any investment project whose capital is at least VND 6,000 billion of which at least VND 6,000 billion of is disbursed within 03 years from the issuance date of the investment registration certificate or the approval for investment guidelines and which satisfies any of the following criteria: the total revenue is at least VND 10,000 billion per year within 03 years from the year in which the revenue is earned or the project has more than 3,000 employees;
Social housing construction projects; investment projects located in rural areas and employing at least 500 employees; investment projects that employ persons with disabilities in accordance with regulations of law on persons with disabilities;
Hi-technology enterprises, science and technology enterprises and science and technology organizations; projects involving transfer of technologies on the List of technologies the transfer of which is encouraged in accordance with regulations of the Law on Technology Transfer, science and technology enterprise incubators prescribed by the Law on High Technologies and Law on Science and Technology; enterprises manufacturing and providing technologies, equipment, products and services with a view to satisfaction of environment protection requirements prescribed by the Law on Environment Protection;
Start-up projects, national innovation centers and research and development centers;
Business investment in small and medium-sized enterprises’ product distribution chain; business investment in technical establishments supporting small and medium-sized enterprises, small and medium-sized enterprise incubators; business investment in coworking spaces serving small and medium-sized enterprises and startups prescribed by the Law on Small and Medium-Sized Enterprises.
11Article 43 the Law on Investment 2020:
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.
12Article 9. Business lines allowed in market with conditions and market access conditions applied to foreign investors
“1. Market access conditions applied to foreign investors are the same as those applied to domestic investors, except for the case specified in Clause 2 of this Article.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 agreements to which the Socialist Republic of Vietnam is a signatory, the Government shall promulgate a List of business lines restricted to foreign investors, including:
a) Business lines not allowed in market access;
b) Business lines allowed in market with conditions.”
13Article 23. Conduct of investment activities by foreign-invested business entities
“1. When establishing a business entity, when making investment by contributing capital, purchasing shares or purchasing stakes of a business entity or when making investment under a business cooperation contract in one of the following cases, the foreign investor must satisfy the conditions and follow investment procedures applied to foreign investors:
a) Over 50% of its charter capital or more is held by a foreign investor(s) or the majority of the general partners are foreigners if the business entity is a partnership;
b) Over 50% of its charter capital or more is held by a business entity(ies) mentioned in Point a of this Clause;
c) Over 50% of its charter capital or more is held by a foreign investor(s) and a business entity(ies) mentioned in Point a of this Clause.”
14Article 24. Making investment by contributing capital, purchasing shares or purchasing capital contributions
“1. Investors are entitled to contribute capital, purchase shares or purchase stakes of business entities.
2. Foreign investors making investment by contributing capital, purchasing shares and purchasing stakes of business entities must:
a) satisfy market access conditions applied to foreign investors as prescribed in Article 9 of this Law;
b) ensure national defense and security in accordance with this Law;
c) 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.”
15Clause 1 Article 29 the Law on Investment 2020
“Article 29. Selecting investors to execute investment projects
1. The investor selection shall be carried out by:
a) holding land use right auction in accordance with regulations of law on land; or
b) bidding to select an investor in accordance with regulations of law on bidding; or
c) approving an investor as prescribed in Clauses 3 and 4 of this Article.”
16Clause 1 Article 41 the Law on Investment 2020
“Article 41. Adjusting the investment project.
1. During execution of an investment project, the investor is entitled to adjust its objectives, transfer the project in part or in full, merge projects or fully divide or partially divide a project into multiple projects or use the land use rights or assets on land which is part of the investment project to contribute capital to establish an enterprise, carry out business cooperation or carry out other activities, and the aforementioned activities shall comply with regulations of law.”
17Clause 4 Article 41 the Law on Investment 2020
“4. With respect to the investment project whose investment guidelines are approved, the investor is not allowed to extend the investment execution schedule by more than 24 months compared to that stated in the first approval for investment guidelines, except for one of the following cases:
a) It is necessary to remedy the consequences of an event of force majeure in accordance with the civil law and the land law;
b) The project execution schedule is adjusted because the State delays allocating or leasing out land to the investor or allowing the investor to repurpose land.
c) The project execution schedule is adjusted at the request of a regulatory agency or the regulatory agency delays in performing administrative procedures;
d) The investment project is adjusted because the regulatory agency changes the planning;
dd) Any objective specified in the written approval for investment guidelines is changed; any objective that is subject to approval for investment guidelines is added;
e) The total investment capital is increased by 20% or more, thereby changing the scale of the investment project.”
18Clause 4 Article 44 the Law on Investment 2020
“4. 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:
a) Investment projects using obsolete technology, potentially causing environmental pollution or natural-resource intensive projects;
b) Investment projects in which the investor must transfer assets without refund to the State of Vietnam or the Vietnamese side.”
19 Clause 2 Article 48 the Law on Investment 2020
“2. The investment registration authority shall terminate an investment project in part or in full in the following cases:
a) The investor fails to overcome the difficulties that lead to project suspension in the cases mentioned in Clause 2 and Clause 3 Article 47 of this Law;
b) The investor is no longer permitted to keep using the investment location and fails to complete the procedures for change of investment location within 06 months from the date on which the investor is no longer permitted to use the investment location, except for the case specified in Point d of this Clause;
c) The investment registration authority cannot contact the investor or the investor’s legal representative after 12 months from the date of suspension of the project;
d) Land reserved for the investment project is expropriated by the State for the reason that the land is not used or the land use is delayed in accordance with the law on land;
dd) The investor fails to pay the deposit or obtain a bank guarantee as prescribed by law if project execution security is required;
e) The investor conducted the investment activities on the basis of a sham civil transaction in accordance with the civil law;
g) Pursuant to a judgment or decision of a court or an arbitral award.”
20Article 26. Procedures for making investment by contributing capital, purchasing shares or purchasing stakes
“1. Upon contributing capital, purchasing shares or purchasing stakes of a business entity, the investor shall satisfy conditions and follow procedures for change of members or shareholders in accordance with regulations of law applicable to each type of business entity.
2. A foreign investor shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business entity prior to change of members or shareholders in one of the following cases:
a) The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business entity conducting business in the business lines allowed in market with conditions applied to foreign investors;
b) The capital contribution or purchase of shares or stakes results in a foreign investor or business entity specified in Points a, b and c Clause 1 Article 23 of this Law holding over 50% of the charter capital of the economic organization in the following cases: The charter capital ownership ratio by the foreign investor is increased from less than or equal to 50% to over 50%; the charter capital ownership by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business entity.
c) The foreign investor that contributes capital, purchases shares or stakes of a business entity has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security.”
21Article 34. Procedures for investment guideline approval by the National Assembly
“1. The application specified in Clauses 1 and 2 Article 33 of this Law shall be submitted to the Ministry of Planning and Investment.”
Article 35. Procedures for investment guideline approval by the Prime Minister
“1. The application specified in Clauses 1 and 2 Article 33 of this Law shall be submitted to the Ministry of Planning and Investment.”
22Article 38. Procedures for issuance of the investment registration certificate
“2. If the investment project is not subject to approval for its investment guidelines as prescribed in Article 30, Article 31 and Article 32 of this Law, the investor shall be issued with the investment registration certificate if the following conditions are met:
a) The investment project does not involve any banned business line;
b) There is a location for execution of the investment project;
c) The investment project is conformable with the planning specified in Point a Clause 3 Article 33 of this Law;
d) The investment per m2 (or investment per employee) is not smaller than the minimum requirement.
dd) Market access conditions applied to foreign investors are satisfied.”
23Article 53. Business lines banned from outward investment
“1. Business lines specified in Article 6 of this Law and relevant international agreements.
2. Business lines with technologies and products banned from export in accordance with the law on foreign trade management.
3. Business lines banned from business investment in accordance with laws of the host countries.”
Article 54. Business lines subject to conditional outward investment
“1. Business lines subject to conditional outward investment include:
a) Banking;
b) Insurance;
c) Securities;
d) Press, radio and television;
dd) Real estate business.”
