This Law amends and supplements certain articles of the Law on Foreign Investment in Vietnam with the aim of expanding economic cooperation with foreign countries and protecting investors' rights. The main points include provisions on investment areas, conversion of investment forms, tax incentives, asset management, business inspections, and investment guarantee measures.
Scope of application
Foreign investors, enterprises with foreign invested capital, parties to joint venture contracts, state management agencies for foreign investment, commercial banks, and the Government.
Key points
- Enterprises with foreign invested capital are permitted to convert their investment forms, divide, split, merge, or consolidate enterprises (Article 19a).
- Foreign investors and parties to joint venture contracts are not subject to expropriation or confiscation of capital through administrative measures during the investment process (Article 21).
- Enterprises with foreign invested capital may carry forward losses to the next year, and such losses shall be deducted from taxable income (Article 40).
- Foreign investors and parties to joint venture contracts are exempt from import duties on goods imported for the purpose of creating fixed assets (Article 47).
- Enterprises with foreign invested capital, parties to joint venture contracts that cease operations in accordance with the law and proceed to liquidate assets (Article 53).
🌐 Social impact of this document
- Positive impact: Creating favorable conditions for foreign investors, encouraging international economic cooperation, and enhancing investment resources in Vietnam.
- Negative impact: May impose burdens on asset management and taxation for enterprises with foreign invested capital.
❓ Frequently asked questions
How can foreign investors convert their investment forms?
Enterprises with foreign invested capital, parties to joint venture contracts are permitted to convert their investment forms, divide, split, merge, or consolidate enterprises (Article 19a).
Are foreign investors subject to expropriation or confiscation of capital?
No, during the investment process in Vietnam, the capital and other lawful assets of foreign investors will not be expropriated or confiscated through administrative measures (Article 21).
What goods are foreign investors exempt from import duties on?
Parties to joint venture contracts are exempt from import duties on goods imported for the purpose of creating fixed assets, including equipment, machinery, and parts (Article 47).
Can foreign investors carry forward losses to the next year?
Yes, enterprises with foreign invested capital, parties to joint venture contracts may carry forward losses to the next year, and such losses shall be deducted from taxable income (Article 40).
Are foreign investors entitled to tax incentives?
Yes, foreign investors and parties to joint venture contracts are entitled to a 20% reduction in corporate income tax compared to similar projects (Article 44).
Full text
LAW
Amending and Supplementing Certain Provisions of the Law on Foreign Investment in Vietnam
To expand economic cooperation with foreign countries, serve the cause of industrialization and modernization, and develop the national economy based on the effective exploitation and utilization of domestic resources;
Pursuant to the Constitution of the Socialist Republic of Vietnam in 1992;
This Law amends and supplements certain provisions of the Law on Foreign Investment in Vietnam adopted by the National Assembly of the Socialist Republic of Vietnam on November 12, 1996.
Article 1. Amending and supplementing certain provisions of the Law on Foreign Investment in Vietnam as follows:
1. Point 2, Paragraph 2 of Article 3 shall be amended as follows:
"2. Areas:
a) Areas with difficult socio-economic conditions;
b) Areas with particularly difficult socio-economic conditions."
2. Clause 1 of Article 14 shall be amended as follows:
"1. The most important issues in the organization and operation of joint ventures include the appointment and dismissal of General Directors, Deputy General Directors; the amendment and supplementation of the company charter decided by the Board of Directors according to the principle of consensus among the members of the Board of Directors present at the meeting.
The parties to the joint venture may agree in the company charter other issues that need to be decided according to the principle of consensus."
3. Adding Article 19a as follows:
"Article 19a
Foreign-invested enterprises and parties participating in business cooperation contracts during their operations are permitted to convert investment forms, split, divide, merge, or consolidate enterprises.
The Government shall stipulate the conditions and procedures for converting investment forms, splitting, dividing, merging, or consolidating enterprises."
4. Article 21 is amended as follows:
"Article 21
During the process of investing in Vietnam, the lawful capital and other assets of foreign investors shall not be requisitioned or confiscated by administrative measures, and foreign-invested enterprises shall not be nationalized.
The State of the Socialist Republic of Vietnam shall protect intellectual property rights and ensure the legitimate interests of foreign investors in technology transfer activities in Vietnam."
5. Adding Article 21a as follows:
"Article 21a
1. In cases where changes in Vietnamese laws result in losses to foreign-invested enterprises and parties participating in business cooperation contracts, such enterprises and parties shall continue to enjoy the incentives specified in the Investment License and this Law or be resolved satisfactorily by the State through the following measures:
a) Changing the project's objectives;
b) Exempting or reducing taxes in accordance with the law;
c) Losses suffered by foreign-invested enterprises and parties participating in business cooperation contracts shall be deducted from the taxable income of the enterprise;
d) Being considered for appropriate compensation in certain necessary cases.
2. New preferential regulations issued after obtaining the Investment License shall apply to foreign-invested enterprises and parties participating in business cooperation contracts."
"Article 33. After being approved by the Chairman of the Marking Board, the Director of the Department of Examinations and Quality Assurance in Education shall be responsible for announcing the official examination results and issuing certificates to students who have won awards in the national excellent student selection examination for Grade 12 of secondary schools, to be completed before May 31 of the year the examination takes place. Certificates will only be issued once. In case of loss of certificates, they will not be reissued but only confirmed in the student's application form."
"Article 33
Foreign-invested enterprises and parties participating in business cooperation contracts are allowed to purchase foreign currency from commercial banks to meet current transactions and other permitted transactions under the law on foreign exchange management.
The Government of Vietnam ensures the balance of foreign currency for special important projects invested according to the Government's program in each period.
The Government of Vietnam ensures support for the balance of foreign currency for construction projects of infrastructure and some other important projects."
7. Article 34 shall be amended as follows:
"Article 34
Parties within a joint venture have the right to transfer the value of their capital in the joint venture, but must prioritize transferring it to other parties within the joint venture. In the case of transferring to a party outside the joint venture, the conditions for transfer shall not be more favorable than those set for parties within the joint venture. The transfer of capital must be agreed upon by all parties within the joint venture.
These provisions also apply to the transfer of rights and obligations of parties in business cooperation contracts.
Foreign investors in wholly foreign-owned enterprises have the right to transfer their capital.
In cases where profit arises from the transfer of capital, the transferring party shall pay corporate income tax at a rate of 25%."
8. Paragraph 2 of Article 35 shall be amended as follows:
"In special cases approved by the State Bank of Vietnam, foreign-invested enterprises are permitted to open accounts abroad."
9. Article 40 shall be amended and supplemented as follows:
"Article 40
After settling taxes with the tax authority, foreign-invested enterprises and foreign parties participating in business cooperation contracts that incur losses may carry forward these losses to the next year, and deduct them from taxable income. The period for carrying forward losses shall not exceed five years."
10. Article 41 shall be amended and supplemented as follows:
Article 41
After paying corporate income tax and fulfilling other financial obligations, the remaining income shall be allocated to establish reserve funds, welfare funds, production expansion funds, and other funds as determined by the enterprise."
11. Article 43 shall be amended as follows:
"Article 43
When transferring profits abroad, foreign investors must pay a tax of 3%, 5%, or 7% of the transferred profits, depending on the proportion of the foreign investor's contribution to the statutory capital of the foreign-invested enterprise or the actual performance of the business cooperation contract."
12. Article 44 shall be amended as follows:
"Article 44
Vietnamese citizens residing abroad who invest in Vietnam according to this Law shall be granted a 20% reduction in corporate income tax compared to similar projects, except when applying a corporate income tax rate of 10%; they shall be subject to a 3% tax rate on the transfer of profits abroad."
13. Article 46 shall be amended and supplemented as follows:
"Article 46
1. Foreign-invested enterprises and foreign parties participating in joint business contracts must pay rent for the use of land, water, and sea surfaces; in cases of resource exploitation, they must pay resource taxes as prescribed by law.
The Government shall stipulate the conditions for exemption or reduction of land, water, and sea surface rents for construction-operation-transfer projects, construction-transfer-operation projects, construction-transfer projects, and investment projects in areas with difficult socio-economic conditions and extremely difficult socio-economic conditions.
2. In cases where the Vietnamese party contributes capital through the value of land use rights, the Vietnamese party shall be responsible for compensation, clearance, and completion of procedures to obtain land use rights.
In cases where the Vietnamese State leases land, the People's Committee of the province or centrally-administered city where the investment project is located shall organize the implementation of compensation, clearance, and completion of leasing procedures.
3. Foreign-invested enterprises may mortgage assets attached to land and the value of land use rights to secure loans from credit institutions permitted to operate in Vietnam.
The Government shall stipulate the conditions and procedures for foreign-invested enterprises to mortgage land use rights.
14. Article 47 is amended and supplemented as follows:
Article 47
1. Export duties and import duties on exported goods and imported goods of foreign-invested enterprises and parties participating in joint business contracts shall be applied according to the Law on Export Duties and Import Duties.
2. Foreign-invested enterprises and parties participating in joint business contracts shall be exempted from import duties on goods imported to form fixed assets, including:
a) Equipment and machinery;
b) Special-purpose transportation equipment within production lines and transportation equipment used to transport workers;
c) Spare parts, components, detachable parts, accessories, fixtures, molds accompanying equipment, machinery, and special-purpose transportation equipment as specified in point b of this clause;
d) Raw materials and materials used to manufacture equipment and machinery within production lines or to manufacture spare parts, components, detachable parts, accessories, fixtures, molds accompanying equipment and machinery;
d) Construction materials not yet produced domestically.
The exemption from import duties on goods imported as specified in this clause shall apply to cases of expanding project scale, replacing, or updating technology.
3. Raw materials, materials, and spare parts imported for production in investment projects in sectors particularly encouraged for investment or in areas with extremely difficult socio-economic conditions shall be exempted from import duties for a period of five years, starting from the date of commencement of production.
4. The Government shall stipulate the exemption or reduction of export duties and import duties on other special goods that need to be encouraged for investment.
15. Article 52 is amended and supplemented as follows:
"Article 52
Foreign-invested enterprises and joint business contracts shall cease operations in the following cases:
1. Upon expiration of the operating term stated in the Investment License;
2. According to termination conditions stipulated in the contract, company charter, or agreement between the parties;
3. According to the decision of the competent state management agency on foreign investment due to serious violation of laws or provisions of the Investment License; 4. Due to being declared bankrupt."
16. Article 53 is amended and supplemented as follows:
"Article 53
1. When ceasing operations in cases specified in points 1, 2, and 3 of Article 52 of this Law, foreign-invested enterprises and parties participating in joint business contracts must liquidate enterprise assets and terminate contracts.
2. During the process of liquidating enterprise assets, if bankruptcy is discovered, the bankruptcy resolution of the enterprise shall be carried out according to the procedures prescribed in the law on enterprise bankruptcy.
3. The resolution of bankruptcy of foreign-invested enterprises shall be carried out according to the provisions of the law on enterprise bankruptcy.
4. In cases where the Vietnamese party participates in a joint venture by contributing capital through the value of land use rights and the enterprise is dissolved or declared bankrupt, the remaining value of the contributed land use rights shall belong to the enterprise's liquidation assets."
17. Paragraph 2 of Article 55 is amended and supplemented as follows:
"The Government shall stipulate the appraisal and registration procedures for issuing Investment Licenses; based on planning and socio-economic development plans, the nature, scale, and field of investment projects, it shall decide on the delegation of authority to issue Investment Licenses to provincial People's Committees and centrally-administered municipal People's Committees; it shall stipulate the issuance of Investment Licenses for projects invested in industrial zones and export processing zones."
18. Article 59 is amended and supplemented as follows:
"Article 59
Parties or one of the parties or foreign investors shall submit application files for Investment Licenses to the issuing authority in accordance with the regulations of the Government."
19. Article 60 is amended and supplemented as follows:
"Article 60
The issuing authority shall examine applications and notify decisions to investors within forty-five days for projects subject to appraisal for Investment Licenses, and thirty days for projects subject to registration for Investment Licenses, from the date of receipt of valid application files. Approval decisions shall be notified in the form of an Investment License.
The Investment License serves simultaneously as a Business Registration Certificate."
20. Article 63 is added as follows:
"Article 63
Enterprises and individuals who have outstanding achievements in business activities and have made significant contributions to national construction and development shall be rewarded in accordance with the law.
Foreign investors, foreign-invested enterprises, parties participating in joint business contracts, organizations, individuals, officials, civil servants, and state agencies violating the laws on foreign investment shall be dealt with according to the degree of violation as prescribed by law."
21. Article 64 is amended and supplemented as follows:
Article 64
1. Inspections of enterprise activities must be conducted in accordance with their functions, within their jurisdiction, and in compliance with the law.
2. Financial inspections shall not exceed once per year for each enterprise.
An extraordinary inspection may only be carried out when there is evidence that the enterprise has violated the law.
When conducting an inspection, there must be a decision by the competent authority. At the end of the inspection, there must be a record and an inspection conclusion. The head of the inspection team is responsible for the content of the record and the inspection conclusion.
If the person issuing the inspection decision acts contrary to the law, or if anyone takes advantage of the inspection to seek personal gain, harass, or cause inconvenience to the business operations of the enterprise, they shall be subject to disciplinary action or criminal liability depending on the severity of the violation; if damage is caused, compensation must be provided according to the provisions of the law.
3. Foreign investors, enterprises with foreign investment capital, parties involved in joint venture contracts, organizations, and individuals have the right to lodge complaints or initiate lawsuits against decisions and actions that contravene the law, causing difficulties or inconvenience to the activities of civil servants, public officials, and state agencies. Complaints and lawsuits, as well as their resolution, shall be conducted in accordance with the provisions of the law.
22. Article 66 is amended and supplemented as follows:
Article 66
1. Based on the principles stipulated in this Law, the Government may enter into agreements with foreign investors or provide guarantees and assurances regarding investments.
2. Foreign investment activities in Vietnam must comply with the provisions of this Law and related regulations of Vietnamese law. In cases where Vietnamese law does not provide specific provisions, the parties may agree in the contract to apply foreign law, provided that such application does not conflict with the fundamental principles of Vietnamese law.
23. The term "tax on income" in the Law on Investment of Foreign Organizations and Individuals in Vietnam is replaced by the term "corporate income tax."
Article 2. This Law shall take effect from July 1, 2000.
Article 3. The Government shall amend and supplement detailed implementing regulations for the Law on Investment of Foreign Organizations and Individuals in Vietnam to be consistent with this Law.
This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, the tenth session, seventh meeting, on June 9, 2000.
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