Law on Encouraging Domestic Investment (Amended) No. 03/1998/QH10

LAW

Encouraging Domestic Investment (Amended)

To effectively mobilize and utilize all sources of capital, resources, labor, and other potentials of the country to contribute to economic and social development, for the prosperity of the people and the strength of the nation, a just and civilized society;

Based on the Constitution of the Socialist Republic of Vietnam in 1992;

This Law stipulates on encouraging domestic investment,

PART I
GENERAL PROVISIONS

Article 1

The State protects, encourages, treats equally, and creates favorable conditions for organizations and individuals to invest in various fields of the economy and society within the territory of Vietnam in accordance with Vietnamese law.

Article 2

In this Law, the following terms shall be understood as follows:

1. "Domestic investment" means the use of capital for production and business activities in Vietnam by organizations and individuals as prescribed in Article 5 of this Law.

2. "Investor" means organizations and individuals using capital to carry out investment as prescribed in Article 4 of this Law.

3. "Build-Operate-Transfer Contract" (BOT) is a document signed between the competent state authority and the investor to construct, operate infrastructure projects for a certain period agreed upon by both parties; at the end of the period, the investor transfers the project无偿地给 the State.

4. "Build-Transfer-Operate Contract" (BTO) is a document signed between the competent state authority and the investor to construct infrastructure projects; after completion, the investor transfers the project to the State. The competent state authority signing the contract grants the investor the right to operate the project for a certain period agreed upon by both parties.

5. "Build-Transfer Contract" (BT) is a document signed between the competent state authority and the investor to construct infrastructure projects; after completion, the investor transfers the project to the State. The competent state authority signing the contract facilitates the investor to implement another project to recover investment capital and earn profits.

6. "Overseas Vietnamese" refers to Vietnamese citizens and overseas Vietnamese residing, working, and living long-term abroad.

7. "Foreign residents in Vietnam" refers to foreign citizens and stateless persons residing, working, and living long-term in Vietnam.

8. "Economically and socially disadvantaged areas" refer to areas inhabited by ethnic minorities; mountainous regions; areas with underdeveloped infrastructure; areas with unfavorable natural conditions.

9. "Economically and socially extremely disadvantaged areas" refer to areas inhabited by ethnic minorities in highland regions; islands; areas with weak infrastructure; areas with very unfavorable natural conditions.

Article 3

Investors may use the following capital forms to invest in Vietnam:

1. Vietnamese currency, foreign currency;

2. Gold, transferable securities;

3. Factories, construction works, equipment, machinery, other production and business facilities;

4. Value of land use rights as prescribed by laws on land;

5. Value of intellectual property rights, technical secrets, technological processes;

6. Other lawful assets - Amounts withdrawn by credit institutions.

Article 4

The scope of application of this Law includes the following investment activities:

1. Establishing production and business establishments belonging to different economic sectors;

2. Investing in building production lines, expanding scale, modernizing technology, improving ecological environment, relocating production facilities out of urban areas, enhancing production and business capacity, restructuring production, diversifying industries and products;

3. Purchasing shares of enterprises, contributing capital to enterprises belonging to different economic sectors;

4. Investing through Build-Operate-Transfer contracts; investing through Build-Transfer-Operate contracts; investing through Build-Transfer contracts.

Article 5

1. The objects subject to this Law include:

a) The investor is a Vietnamese organization or individual;

b) The investor is an overseas Vietnamese;

c) The investor is a foreign resident in Vietnam.

2. The Prime Minister decides specific cases allowing foreign investors to contribute capital or purchase shares of Vietnamese enterprises up to a maximum of 30% of the charter capital of the enterprise.

PART II
ENSURING AND SUPPORTING INVESTMENT

Article 6

1. The State recognizes and protects the ownership rights, investment capital, income, and other lawful rights and interests of investors.

2. The lawful assets and investment capital of investors shall not be nationalized or confiscated by administrative measures.

In case of necessity due to reasons of national defense, security, and national interest, the State decides to compulsorily purchase or requisition the assets of investors, then the investors shall be compensated or indemnified according to market prices at the time of announcement of the compulsory purchase or requisition decision and shall be facilitated to invest in appropriate fields or areas.

3. In case changes in legal regulations cause damage to the interests of investors, the State allows investors to continue enjoying the incentives already provided for the remaining period or the State resolves the rights and interests of investors satisfactorily.

, Clause 1, Clause 2 Article 7a of this Regulation.

The State implements the following measures to facilitate investors to obtain or expand production and business premises:

1. Granting or leasing land in accordance with laws on land and civil laws;

2. Publicly announcing approved land use plans and unused land reserves, land available for allocation and lease in each locality;

3. The Government submits to the Standing Committee of the National Assembly specific regulations on cases where investors are granted the right to convert, the right to transfer, the right to sublease, the right to mortgage, and the right of inheritance over allocated land and leased land.

Article 8

The State supports and creates favorable conditions for investors regarding infrastructure as follows:

1. Constructing industrial zones with medium and small scales in economically and socially disadvantaged areas and extremely disadvantaged areas to provide investors with production and business premises with preferential conditions;

2. Constructing infrastructure outside the boundaries of industrial zones and export processing zones to facilitate investment activities and production and business operations;

3. Encouraging and creating favorable conditions for investors to establish production and business establishments in industrial zones, export processing zones, and special economic zones.

Article 9

The State contributes capital to production and business establishments belonging to various economic sectors located in areas with difficult socio-economic conditions and particularly difficult socio-economic conditions through state-owned enterprises and state credit organizations.

Article 10

The State establishes and encourages the establishment of investment support funds and export support funds from the state budget, contributions from credit organizations, businesses, domestic and foreign organizations and individuals. Investment support funds provide medium-term and long-term loans at preferential interest rates, subsidize part of the interest rate for preferentially supported projects, and guarantee investment credit. Export support funds provide credit at preferential interest rates to assist businesses in developing export goods production, export trade, expanding export markets, and guaranteeing export credit.

The operation of investment support funds and export support funds shall be carried out in accordance with the Law on Credit Organizations.

Article 11

1. The State encourages the dissemination and transfer of technology; creates favorable conditions for investors to use technologies created from the state budget at preferential fees.

2. The State establishes a science and technology development support fund from the state budget, contributions from credit organizations, businesses, domestic and foreign organizations and individuals to support investors in borrowing under favorable conditions and at preferential interest rates for research, application of technical progress, technology transfer, and technological innovation.

The regulations on the organization and operation of the science and technology development support fund shall be prescribed by the Government.

Article 12

The State encourages the following investment support activities:

1. Legal, investment, business, and corporate management consulting;

2. Vocational training, technical staff training; enhancing professional knowledge and economic management;

3. Providing market, science and technology, and technology information; protecting intellectual property rights and transferring technology;

4. Marketing and trade promotion;

5. Establishing industry associations for production and business, export associations.

Article 13

Investment projects of investors specified in Article 5 of this Law shall be subject to the same price for goods and services priced by the State, bear the same tax rate, and enjoy the same investment incentives.

Article 14

In cases where domestic experts and skilled workers cannot meet the requirements of expertise and vocational skills, investors may hire experts, skilled workers who are foreigners, overseas Vietnamese, or foreigners permanently residing in Vietnam according to production and business needs.

Foreign experts and skilled workers, overseas Vietnamese, and foreigners permanently residing in Vietnam working for domestic production and business establishments may transfer abroad their income after paying taxes in accordance with Vietnamese law.

CHAPTER III
INVESTMENT INCENTIVES

Article 15

Investment projects in the following fields shall be entitled to incentives:

1. Reforestation, regeneration of forest reserves; planting perennial crops on degraded land, barren hills and mountains; land reclamation; salt production; aquaculture in unexploited waters;

2. Construction of infrastructure, development of public transport; development of education, training, health care, and ethnic culture;

3. Production and trading of export goods;

4. Fishing in distant sea areas; processing agricultural, forestry, and aquatic products; technical services directly serving agricultural, forestry, and fisheries production;

5. Research and development of science and technology, scientific and technological services; legal, investment, business, and corporate management consulting; protection of intellectual property rights and technology transfer;; vocational training, training of technical staff, and enhancement of business management knowledge;

6. Investment in building production lines, expanding scale, technological innovation; improving ecology and environment, urban hygiene; relocating production facilities out of cities; diversifying industries and products; investing in labor-intensive industries, primarily local labor;

7. Industries and trades that need priority development during each period of socio-economic development.

Article 16

Investment projects in the following areas shall be entitled to incentives:

1. Areas with difficult socio-economic conditions;

2. Areas with particularly difficult socio-economic conditions.

Article 17

1. Investors with investment projects specified in Article 15 of this Law shall be granted a 50% reduction in land use fees when they are allocated land for which they must pay land use fees.

2. Investors with investment projects in areas with difficult socio-economic conditions shall be granted a 75% reduction in land use fees when they are allocated land for which they must pay land use fees.

3. Investors with investment projects in areas with particularly difficult socio-economic conditions or with investment projects specified in Article 15 of this Law in areas with difficult socio-economic conditions shall be exempted from land use fees when they are allocated land for which they must pay land use fees.

Article 18

1. Investors with investment projects specified in Article 15 of this Law shall be exempted from land rental fees for three to six years, starting from the date of signing the land lease contract.

2. Investors with investment projects in areas with difficult socio-economic conditions shall be exempted from land rental fees for seven to ten years, starting from the date of signing the land lease contract.

Investors with investment projects specified in Article 15 of this Law in areas with difficult socio-economic conditions shall be exempted from land rental fees for eleven to fifteen years, starting from the date of signing the land lease contract.

3. Investors with investment projects in areas with particularly difficult socio-economic conditions shall be exempted from land rental fees for eleven to fifteen years, starting from the date of signing the land lease contract.

Investors with investment projects specified in Article 15 of this Law in areas with particularly difficult socio-economic conditions shall be exempted from land rental fees throughout the implementation period of the project.

Article 19

1. Investors with investment projects specified in Clause 1 of Article 15 of this Law shall be exempted from land use tax when they are allocated land.

Investors with investment projects specified in Clause 2 of Article 15 of this Law shall be granted a 50% reduction in land use tax for seven to ten years, starting from the date of allocation of land.

2. An investor with a project located in an area with difficult economic and social conditions shall be exempted from land use tax for seven to ten years, starting from the date of being allocated land.

An investor with a project invested in the fields specified in Article 15 of this Law in an area with difficult economic and social conditions shall be exempted from land use tax for eleven to fifteen years, starting from the date of being allocated land.

3. An investor with a project located in an area with particularly difficult economic and social conditions shall be exempted from land use tax for eleven to fifteen years, starting from the date of being allocated land.

An investor with a project specified in Article 15 of this Law in an area with particularly difficult economic and social conditions shall be exempted from land use tax throughout the implementation period of the project.

Article 20

Investors with projects specified in Articles 15 and 16 of this Law shall enjoy corporate income tax rates as follows:

1. Investing in the fields specified in Article 15 of this Law or investing in areas with difficult economic and social conditions shall enjoy a tax rate of 25%.

2. Investing in areas with particularly difficult economic and social conditions or investing in the fields specified in Article 15 of this Law in areas with difficult economic and social conditions shall enjoy a tax rate of 20%.

3. Investing in the fields specified in Article 15 of this Law in areas with particularly difficult economic and social conditions shall enjoy a tax rate of 15%.

Article 21

1. Investors with projects establishing production and business establishments in the fields specified in Article 15 of this Law shall be exempted from, or have their corporate income tax reduced according to point b, Clause 1, Article 17 of the Corporate Income Tax Law.

2. Investors with projects establishing production and business establishments in areas specified in Article 16 of this Law or investing under Build-Operate-Transfer (BOT) or Build-Transfer-Operate (BTO) contracts shall be exempted from, or have their corporate income tax reduced at the highest level prescribed in point b, Clause 1, Article 17 of the Corporate Income Tax Law.

Article 22

Investors with investment projects specified in Clause 6, Article 15 of this Law, in addition to the exemptions and reductions on corporate income tax prescribed in Article 18 of the Corporate Income Tax Law, shall also enjoy additional incentives as follows:

1. A reduction of 50% of the corporate income tax payable in the two subsequent years for additional income generated by the investment.

2. Exemption of two years of corporate income tax and a reduction of 50% of the corporate income tax payable in the three subsequent years for additional income generated by the investment for production and business establishments located in areas with difficult economic and social conditions;

3. Exemption of three years of corporate income tax and a reduction of 50% of the corporate income tax payable in the five subsequent years for additional income generated by the investment for production and business establishments located in areas with particularly difficult economic and social conditions.

Article 23

Investors with projects specified in Article 15 or Article 16 of this Law shall not pay additional corporate income tax as prescribed in Clause 1, Article 10 of the Corporate Income Tax Law.

"d) Within no more than one working day from the date of receiving the dossier submitted for administrative procedures by the specialized agency assigned by the Provincial People's Committee, the Chairman of the Provincial People's Committee shall issue a notification of the result of the inspection of plant-based food exports or a certificate at the request of the importing country."

1. Individual investors shall be exempted from income tax on income derived from capital contributions or purchasing shares of enterprises within five years from the time when the investor has the obligation to pay taxes according to the law on personal income tax.

2. Individual investors shall be exempted from income tax on income derived from capital contributions or purchasing shares of enterprises in areas specified in Article 16 of this Law within ten years from the time when the investor has the obligation to pay taxes according to the law on personal income tax.

3. Investors contributing capital through intellectual property rights, technical secrets, or technological processes shall be exempted from income tax derived from such contributions.

Article 25

Investors with projects specified in Article 15 or Article 16 of this Law shall be exempted from import tax on goods that are not produced domestically or cannot meet requirements as follows:

1. Specialized equipment, machinery, and transportation means included in production lines to form fixed assets of enterprises or to expand investment scale, and update technology;

2. Transportation means used to transport workers.

Article 26

In addition to the incentives on corporate income tax prescribed in this Law, investors producing and trading export goods shall also enjoy additional incentives on corporate income tax as follows:

1. A reduction of 50% of the corporate income tax payable for income derived from exports in the fiscal year for first-time exporters, new export products, or exports to new markets;

2. A reduction of 50% of the corporate income tax payable for additional income derived from exports in the fiscal year for exporters whose export revenue increases each year;

3. A reduction of 20% of the corporate income tax payable for income derived from exports in the fiscal year for exporters whose export revenue accounts for more than 50% of total revenue or have a stable export market for three consecutive years;

4. Export producers and traders who enjoy corporate income tax incentives prescribed in Clauses 1, 2, or 3 of this Article, if implementing projects in areas with difficult economic and social conditions, shall have an additional reduction of 25% of the corporate income tax payable for income derived from exports in the fiscal year; if implementing projects in areas with particularly difficult economic and social conditions, they shall be exempted from the corporate income tax payable for income derived from exports in the fiscal year.

Article 27

When transferring income abroad, overseas Vietnamese residents, foreign residents in Vietnam, or foreigners contributing capital or purchasing shares according to this Law shall pay a tax amounting to 5% of the income transferred abroad.

Article 28

1. Investors with projects specified in Article 15 or Article 16 of this Law shall be considered for medium-term and long-term credit loans or interest subsidies for loans from financial institutions by the State Investment Support Fund.

2. Investors with projects that relocate production facilities out of urban areas, improve ecology, environment, and urban sanitation shall be considered for credit loans with preferential interest rates by the Investment Support Fund, covering up to 70% of the investment capital. provide medium-term and long-term loans with preferential interest rates covering up to 70% of the investment capital.

3. Investors with projects located in areas with difficult socio-economic conditions shall be prioritized for consideration of medium-term and long-term credit loans with preferential interest rates by the State's Investment Support Fund, covering up to 50% of the investment capital. or be considered for guarantees up to 70% of the loan amount amount for investment.

4. Investors with projects located in areas with particularly difficult socio-economic conditions shall be prioritized for consideration of medium-term and long-term credit loans with preferential interest rates by the State's Investment Support Fund, covering up to 70% of the investment capital, or be considered for guarantees up to 80% of the loan amount consider guaranteeing up to 80% of the amount for investment.

5. Investors with production and business projects for export goods, in addition to the investment credit preferences stipulated in Clauses 1 and 2 of this Article, shall also be supported by the Export Promotion Fund. 5. Investors with production and business projects exporting goods, in addition to the investment credit preferences stipulated in Clauses 1 and 2 of this Article, shall also be considered for export credit loans with preferential interest rates by the Export Support Fund, covering up to 80% of the export credit based on signed export contracts, or be considered for guarantees up to 80% of the export credit.

Article 29

Based on the national economic and social development plans for each period, the Government shall specify the list of industries and professions eligible for investment incentives; the list of areas eligible for investment incentives; the standards for technological level; the scale of labor use to qualify for investment incentives; specific levels of investment incentives as provided in Chapter III of this Law.

PART IV
RIGHTS AND OBLIGATIONS OF FOREIGN INVESTORS

Article 30.

Investors have the following rights:

1. To choose industries and professions and locations for investment within the territory of Vietnam;

2. To choose forms of investment; to change or transfer investment projects according to the provisions of the law;

3. To register forms of incentives and levels of benefits in accordance with the provisions of this Law;

4. To independently decide on activities related to investment and production and business operations registered;

5. To hire unlimited numbers of workers; to pay wages based on agreements with workers in accordance with the Labor Law;

6. To directly import and export products registered, except for prohibited or restricted items;

7. To travel abroad and enter the country to implement investment projects;

8. To lodge complaints, file reports, or initiate lawsuits against state agencies, officials, or civil servants who violate the law according to the law.

Article 31

Investors have the following obligations:

1. To produce and operate in accordance with registration, comply fully with accounting and statistical regulations; to bear legal responsibility for the truthfulness and accuracy of registering forms of incentives and levels of benefits;

2. To pay taxes and fulfill other financial obligations as prescribed by law;

3. To comply with laws on national defense, security, public order, and social safety;

4. To comply with laws on political organizations and political-social organizations at enterprises, creating favorable conditions for their activities;

5. To fully comply with labor laws;

6. To comply with laws on environmental protection, preservation of historical, cultural, and scenic sites.

Article 32

In cases where there is a change in investors during the period of enjoying incentives, and the new investor continues to implement the investment project, the new investor shall enjoy the incentives and be responsible for fulfilling all obligations to enjoy the incentives for the remaining period of the registered investment project.

Article 33

In cases where investors implementing investment projects no longer meet the conditions to continue enjoying incentives under this Law, the competent state agency shall consider adjusting each to partially or wholly revoke the approved incentives.

Article 34

A Vietnamese investor residing abroad, or a foreign investor contributing capital or purchasing shares in accordance with this Law, may transfer out of the country:

1. Income earned during production and business operations, income from reinvestment, income from purchasing shares;

2. Principal and interest on loans from abroad during production and business operations;

3. Investment capital;

4. Other lawful funds and assets.

CHAPTER V
STATE MANAGEMENT OF DOMESTIC INVESTMENT INCENTIVES

Article 35

The Government shall uniformly manage state affairs concerning investment and domestic investment incentives throughout the country. The Government shall issue regulations on procedures, formalities, and authorities for granting investment incentives to projects in accordance with this Law.

Article 36

The Ministry of Planning and Investment shall perform state management functions regarding domestic investment incentives and have the following tasks and powers:

1. To take the lead and coordinate with relevant ministries and sectors in drafting, supplementing, amending, and submitting to the Government for decision specific lists of investment incentives as stipulated in Article 29 of this Law;

2. To disseminate, guide, monitor, and inspect the implementation of support measures and investment incentive regimes;

3. To grant or refuse to grant Investment Incentive Certificates to enterprises established pursuant to decisions of the Prime Minister; to enterprises established pursuant to decisions of Ministers authorized by the Prime Minister within thirty days from the date of receipt of applications for investment incentives; to recommend to the Prime Minister investment incentive measures for newly-established enterprises decided by the Prime Minister; to unify opinions on investment incentive measures with Ministers authorized by the Prime Minister to decide on establishing new enterprises. Investment incentive measures shall be recorded simultaneously in the Business Registration Certificate.

Article 37

Provincial People's Committees and municipal people's committees directly under the central government shall have the following tasks and powers:

1. To implement state management functions regarding domestic investment incentives at the local level in accordance with the law;

2. To grant or refuse to grant Investment Incentive Certificates to production and business establishments that have been established within thirty days from the date of receipt of applications for investment incentives; to decide on investment incentive measures for newly-established production and business establishments. Investment incentive measures shall be recorded simultaneously in the Business Registration Certificate.

Article 38

The supervision of production and business activities shall be regulated as follows:

1. Supervision of production and business activities must be carried out in accordance with functions, within authority, and in compliance with the provisions of the law.

Economic and financial supervision shall be conducted no more than once a year for each enterprise. The maximum duration of supervision shall not exceed thirty days, and in special cases, the duration of supervision may be extended according to the decision of the competent superior authority, but not exceeding thirty days.

Unusual supervision and specialized supervision shall only be implemented when there is evidence that the production and business establishment violates the law;

2. When conducting supervision, a decision by the person with authority must be made; upon completion of supervision, a supervision conclusion record must be made; the supervisor of the inspection team is responsible for the record and conclusion of the supervision;

3. If the person making the decision to conduct supervision does so contrary to the law or takes advantage of supervision for personal gain, harassment, causing inconvenience to the production and business activities, they will be disciplined or criminally prosecuted depending on the nature and severity of the violation; if damage is caused, compensation must be provided to the investor in accordance with the law.

Chapter VI
REWARD AND VIOLATION HANDLING

Article 39

Investors who achieve outstanding results in production and business activities, contributing to promoting production and improving the living standards of the people, shall be rewarded in accordance with the law.

Article 40

Investors who violate the provisions of this Law, if causing damage, must compensate for the damage, return the incentives already enjoyed, and depending on the nature and severity of the violation, may be subject to administrative penalties or criminal prosecution in accordance with the law.

Article 41

Those who abuse their positions or powers to obstruct investment, grant investment incentives improperly, harass, cause inconvenience to investors, or violate other provisions of this Law, shall be disciplined or criminally prosecuted depending on the nature and severity of the violation; if damage is caused, compensation must be provided in accordance with the law.

Chapter VII
IMPLEMENTING PROVISIONS

Article 42 |||

1. Investors currently enjoying incentives under the Domestic Investment Encouragement Law dated June 22, 1994, shall continue to enjoy investment incentives until the remaining period specified in the Investment Incentive Certificate issued to them.

2. Additional incentives such as exemptions and reductions in land use tax, land rental fees, corporate income tax incentives, import tax exemptions, investment credit, export credit, investment credit guarantees, and export credit guarantees stipulated in this Law for investors holding Investment Incentive Certificates issued before the effective date of this Law shall be adjusted to apply for the remaining incentive period;

3. Production and business establishments operating in fields specified in Article 15 or in areas specified in Article 16 of this Law shall enjoy incentives from the date this Law comes into effect.

4. The State shall not refund taxes and other financial obligations that investors have fulfilled prior to the effective date of this Law.

1. The "Labor Medal" second class shall be awarded or posthumously awarded to individuals meeting one of the following criteria:

This Law shall take effect from January 1, 1999.

This Law replaces the Domestic Investment Encouragement Law which was adopted by the National Assembly, the fifth session of the ninth term, on June 22, 1994.

All previous provisions that are contrary to this Law are hereby abolished.

Article 44 |||

The Government shall provide detailed regulations and guidance for the implementation of this Law./.

This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, the third session of the tenth term, on May 20, 1998.