(Published on Vietnam Law Magazine). As one of the countries successful in the control of the Covid-19 pandemic, Vietnam is considered one of the safe environments for foreigners to consider their investment. Taking advantage of that opportunity, Vietnam has changed and improved its policies to attract more foreign direct investment (FDI) into the country, typically the 2020 Investment Law, which is one of the most important policies to create more favorable conditions for foreign investors.
To make the contents and provisions of the new Investment Law clearer and more realistic, the Government and Ministry of Planning and Investment issued Decree 31/2021/ND-CP detailing and guiding a number of provisions of the 2020 Investment Law (Decree 31) and Circular 03/2021/TT-BKHDT on the forms of documents and reports related to investment in Vietnam, Vietnam’s offshore investment, and investment promotion (Circular 03). This helps bring a safe, transparent, and more favorable environment for foreign investors.
The outstanding features of Vietnam’s investment law under a new Government decree
One of the outstanding features is that Decree 31 has made more specific provisions on guarantee of investment incentives in the event of a change of law. Accordingly, the decree states: “In the event that an issued legal document contains provisions changing the investment incentives applied to investors before its effective date, investors are entitled to guarantee of investment incentives according to Article 13 of the Investment Law.” Previously, it is not yet impossible to identify specific investment incentives guaranteed. However, Decree 31 (Article 4.2) specifies incentives which investors are entitled to, namely those under investment license, enterprise license, investment incentive certificate, investment certificate, investment registration certificate, decision on investment policy, decision on approval of investment policy, or other documents issued by a competent person or competent state agency, and which will be applied in accordance with law. The guaranteed investment incentives which investors enjoy under law do not belong to the above regulation. In addition, there are two cases in which the law changes the applicable incentives as mentioned below.
Firstly, if a new legal document introduces investment incentives higher than those currently applied to investors, investors may enjoy the higher incentives for the remaining incentive enjoyment period of their projects.
Secondly, if a new legal document introduces investment incentives lower than those currently applied to investors, investors may continue enjoying the previous incentives for the remaining incentive enjoyment period of their projects.
The conditions for grant of investment incentives for new subjects
The Decree also specifies the conditions for grant of investment incentives for new subjects such as social housing investment projects; investment projects employing workers with disabilities in accordance with the Law on People with Disabilities; projects involving the transfer of technologies on the List of technologies promoted for transfer under the Law on Technology Transfer; technology incubators and science and technology enterprise incubators according to the Law on High Technologies and the Law on Science and Technology; and enterprises producing and supplying technologies, equipment, products, and services meeting environmental protection requirements in conformity with the Law on Environmental Protection, etc.
Moreover, the Decree regulates in detail the form of special incentives and support decided by the Government to apply to a number of investment projects with great impacts on socio-economic development. Therefore, this can help the Government make timely policies to attract strong FDI inflows.
Worthy of note, Decree 31 announces the List of sectors and trades in which foreign investors are subject to market access restrictions, covering sectors and trades in which foreign investors are not yet entitled to market access, and sectors and trades in which foreign investors are subject to conditional market access. This is a very important change, because in the precedent time, it took foreign investors a lot of time to identify sectors and trades in which they are restricted from accessing Vietnam’s market. With this List, it is easier for investors to determine what they have to do and what conditions they must satisfy to invest in their desired industries. It also helps improve the state management system in effectively controlling investment activities of foreign investors in the Vietnamese market, thereby, facilitating the full and consistent implementation of the constitutional principles on freedom of business, and compliance with Vietnam’s commitments on market activities under relevant free trade agreements.
Another important new point is that Decree 31 provides for the first time the conditions for access to sectors and trades for which Vietnam has not yet made commitments on market access for foreign investors. Accordingly, if laws and resolutions of the National Assembly, ordinances and resolutions of the Standing Committee of the National Assembly, and decrees of the Government (collectively referred to as Vietnam’s law) do not impose further market access restrictions for these sectors and trades, foreign investors are entitled to access the market like domestic investors. As for the case that Vietnam’s law has provisions on restricting foreign investors’ access to the market for those industries, such provisions shall apply. This helps foreign investors avoid confusedness of investing in uncommitted industries in Vietnam.
Last but not least, for the new provisions of Circular 03, more 100 new documents related to investment activities have been issued, including forms of documents and reports related to investment activities in Vietnam, Vietnam’s offshore investment activities, and investment promotion activities. Thanks to this, investors can easily access official forms of documents for submission of their dossiers to competent state agencies.
Therefore, Decree 31 and Circular 03 are expected to ensure transparency and uniformity in business investment sectors and trades, investment incentives and guarantees, and issuance of investment registration certificates, etc. This serves as a basis to promote the attraction of FDI into Vietnam.
Nguyen Thuy Chung, Partner of ASL LAW