Decree No. 27/2003/ND-CP Amending and Supplementing Certain Provisions of Decree No. 24/2000/ND-CP dated July 31, 2000 detailing the implementation of the Law on Foreign Investment in Vietnam

DECREE

Amending and supplementing some articles of Decree No. 24/2000/NĐ-CP dated July 31, 2000, detailing the implementation of the Law on Foreign Investment in Vietnam.

_____________________

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Law on Foreign Investment in Vietnam dated November 12, 1996;

The Law Amending and Supplementing Certain Provisions of the Law on Foreign Investment in Vietnam dated June 9, 2000;

At the proposal of the Minister of Planning and Investment.

DECREE:

Article 1. Amending and supplementing some articles and Appendix 1 of Decree No. 24/2000/NĐ-CP dated July 31, 2000, detailing the implementation of the Law on Foreign Investment in Vietnam (hereinafter referred to as Decree No. 24/2000/NĐ-CP) as follows:

1. Economic organizations conducting foreign exchange trading agency activities; economic organizations conducting foreign currency receipt and payment service provision activities; economic organizations conducting border country currency exchange agency activities.

"Article 1. Scope of Application

This Decree details the implementation of the Law on Foreign Investment in Vietnam dated November 12, 1996, and the Law amending and supplementing certain provisions of the Law on Foreign Investment in Vietnam dated June 9, 2000 (hereinafter collectively referred to as the Law on Foreign Investment).

This Decree regulates direct foreign investment activities in Vietnam, including activities involving the introduction of capital in the form of money or any other assets of foreign investors into Vietnam for direct production and business operations aimed at profit-making in accordance with the forms stipulated by the Law on Foreign Investment.

All direct foreign investment activities in Vietnam must comply with the provisions of the Law on Foreign Investment, this Decree, and other regulatory legal documents."

3. Clause 1 of Article 4 shall be amended and supplemented as follows:

"2. Domestic medical facilities, educational institutions, training centers, and scientific research organizations that meet the conditions prescribed by the Government."

3. Article 6 shall be amended and supplemented as follows:

"Article 6. Forms of Joint Business Contracts

1. A joint business contract is a document signed between two or more parties to conduct investment and business activities in Vietnam, wherein it specifies the responsibilities and distribution of business results for each party without establishing a new legal entity.

Foreign-invested enterprises may cooperate with foreign organizations and individuals to implement joint business contracts.

2. Joint business contracts in the fields of oil and gas exploration and exploitation and other resources under the product-sharing contract form shall be implemented in accordance with relevant laws and the Law on Foreign Investment."

4. Article 11 shall be amended and supplemented as follows:

- Clause 1 is supplemented with Point 2 as follows:

"A joint venture enterprise includes wholly foreign-owned enterprises established in Vietnam that have joint ventures with entities mentioned in Points b, c, and d of Clause 2 of this Article."

- Clause 2 is amended and supplemented with Point d and supplemented with Point e as follows:

"d) Joint venture enterprises;

e) Wholly foreign-owned enterprises."

5. Article 21 is amended and supplemented as follows:

"Article 21. Forms of Wholly Foreign-Owned Enterprises

1. A wholly foreign-owned enterprise is an enterprise owned by a foreign investor, established and managed by the foreign investor in Vietnam, and responsible for the business results.

Wholly foreign-owned enterprises already established in Vietnam may cooperate with each other and/or with foreign investors to establish new wholly foreign-owned enterprises in Vietnam.

2. A wholly foreign-owned enterprise can be established in the form of a Limited Liability Company, having legal personality under Vietnamese law, and can operate from the date of issuance of the Investment License."

6. Article 31 is amended and supplemented as follows:

"Article 31. Reorganization of Enterprises

1. The division, separation, merger, consolidation, or conversion of investment forms (hereinafter collectively referred to as reorganization of enterprises) must be approved by the investment license issuing authority according to the following contents and procedures:

a) "Division of an enterprise" means dividing all capital and assets of a foreign-invested enterprise (referred to as the divided enterprise) to establish two or several new enterprises (referred to as the divided enterprises).

b) "Separation of an enterprise" means transferring part of the capital and assets of a foreign-invested enterprise (referred to as the separated enterprise) to establish one or several new enterprises (referred to as the separated enterprises).

c) "Merger of an enterprise" means transferring all capital and assets of one or several foreign-invested enterprises (referred to as the merged enterprises) to merge into another foreign-invested enterprise (referred to as the receiving merged enterprise).

d) "Consolidation of enterprises" means two or several foreign-invested enterprises (referred to as the consolidated enterprises) bringing all their capital and assets together to consolidate into a new foreign-invested enterprise (referred to as the consolidated enterprise).

đ) "Conversion of investment form" means changing the investment form of a project that has been granted an investment permit under the Law on Foreign Investment to another form of investment under the Law on Foreign Investment."

The reorganization of enterprises must be agreed upon by the Board of Directors (for joint venture enterprises), or the foreign investor (for wholly foreign-owned enterprises), or the parties to the joint business contract (for joint business contracts).

Enterprises undergoing reorganization must prepare documents in accordance with Clauses 2 and 3 of this Article to adjust the Investment License and/or establish new foreign-invested enterprises in accordance with the Law on Foreign Investment. In cases where they convert into Vietnamese enterprises, they must register under one of the types of enterprises specified in Clause 1 of Article 2 of Decree No. 24/2000/NĐ-CP.

2. Documents for requesting enterprise reorganization include:

a) Request for enterprise reorganization;

b) Capital transfer documents (in cases of capital transfer);

c) Resolution of the Board of Directors of joint venture enterprises or decision of the investor (in cases of wholly foreign-owned enterprises);

d) New enterprise charter (except in cases of converting into Vietnamese enterprises) or amended and supplemented enterprise charter;

đ) Joint venture contract of the new enterprise or amended and supplemented joint venture contract;

e) Merger or consolidation contract between enterprises;

g) Reports on the operation and financial status of enterprises before reorganization;

h) Explanation of enterprise reorganization;

i) Documents related to land use rights;

k) Other documents required by the investment license issuing authority.

3. The explanation of enterprise reorganization mainly includes the following contents:

a) Name, address of the legal representative; name, address of enterprises before and after restructuring the enterprise;

b) Production and business objectives;

c) Labor utilization plan;

d) Plan for settling rights and obligations of enterprises before and after restructuring the enterprise;

đ) Time limit for implementing the enterprise restructuring;

4. The decision on enterprise restructuring shall be sent to creditors and employees for knowledge within fifteen days from the date of approval.

5. Within thirty working days from the date of receiving complete and valid application files, the Investment License Issuing Authority shall issue a decision approving the enterprise restructuring in the form of issuing an Investment License. In case of disapproval, the Investment License Issuing Authority must provide a written explanation of the reasons. If the restructured enterprise meets the conditions stipulated in point 2, clause 22, Article 1 of this Decree, the investment license registration procedures shall be carried out.

7. Article 32 shall be amended and supplemented as follows:

"Article 32. Succession of Rights and Obligations After Enterprise Restructuring

1. After enterprise restructuring and obtaining an Investment License, the new enterprise shall succeed the rights and obligations of the old enterprise, except where the parties have other agreements approved by the Investment License Issuing Authority. These rights and obligations shall be implemented according to the plan for settling the rights and obligations of the enterprise as stated in the explanation regarding the enterprise restructuring under clause 3, Article 31 of this Decree.

2. Depending on the field, area, scale, and investment conditions of the restructured enterprises, the incentives for enterprises after restructuring shall automatically apply according to the corresponding provisions of current laws.

3. Reorganized enterprises shall carry out the announcement of establishment and cessation of operations in accordance with Articles 27 and 38 of this Decree."

8. Article 46 shall be amended and supplemented as follows:

Point b, clause 1 shall be amended and supplemented as follows:

"b) Production projects not falling under the categories of projects mentioned in clauses 2 and 3 of this Article."

Point d, clause 2 shall be amended and supplemented as follows:

"d) Enterprises producing in Industrial Zones."

Point d, clause 3 shall be amended and supplemented as follows:

"d) Enterprises developing infrastructure in Industrial Zones, Export Processing Zones, High-Tech Zones; export processing enterprises in the production sector."

Clause 3 shall be supplemented with a paragraph at the end as follows:

"The preferential conditions at point (a) of clause 3 of this Article shall not apply to production projects in Industrial Zones with an export ratio below 50%, except where such projects meet two of the conditions set forth at points a, b, and đ of clause 2 of this Article."

- Supplement clause 7 as follows:

"7. In cases where foreign-invested enterprises have joint venture contracts for investment in multiple fields and/or in different areas with different corporate income tax preferences, if they can be separately accounted for, they shall be entitled to benefits according to each field and area; in cases where separate accounting is not possible, the benefits shall be applied according to the proportion of investment capital."

9. Clause 2 of Article 48 shall be amended and supplemented as follows:

"2. Projects mentioned in clause 2 of Article 46 of this Decree shall be exempt from corporate income tax as follows:

a) Enterprises producing in Industrial Zones with a product export ratio below 50% and not meeting the conditions set forth at points a, b, and đ of clause 2 of Article 46 shall be exempt from corporate income tax for two years, starting from when they begin making profits.

b) Other projects not mentioned at point a of clause 2 of this Article shall be exempt from corporate income tax for two years, starting from when they begin making profits, and shall have their tax reduced by 50% for the following three years."

10. Article 57 shall be amended and supplemented as follows:

Clauses 5 and 6 shall be amended and supplemented as follows:

"5. Foreign-invested enterprises, joint venture parties investing in projects listed in the Special Encouraged Investment Fields Catalogue or investing in areas with particularly difficult economic and social conditions as specified in the Appendix attached to this Decree shall be exempt from import duties on raw materials, materials, and components for five years, starting from the commencement of production.

6. Foreign-invested enterprises, joint venture parties producing mechanical parts, electrical, and electronic components shall be exempt from import duties on raw materials, materials, and components for five years, starting from the commencement of production."

- Supplement clause 10 at the end of Article 57 as follows:

"10. The Ministry of Trade shall coordinate with relevant ministries and sectors to issue guidelines for detailed classification of raw materials, materials, and components that are exempt from import duties for five years, starting from the commencement of production as stipulated in clauses 5 and 6 of this Article."

11. Article 59 shall be amended and supplemented as follows:

"Article 59. Import Duty Valuation Price

The import duty valuation price for imported goods shall be applied according to the provisions of Article 1 of Decree No. 60/2002/NĐ-CP dated June 6, 2002, of the Government on determining the import duty valuation price for imported goods based on the principle of implementing Article 7 of the General Agreement on Tariffs and Trade."

12. Clauses 1 and 3 of Article 67 shall be amended and supplemented as follows:

"1. Foreign-invested enterprises, foreign joint venture parties may purchase foreign currency from authorized banks to meet foreign exchange transactions and other permitted transactions according to the regulations on foreign exchange management."

"3. The Government of Vietnam shall ensure foreign exchange balance support for foreign-invested enterprises, joint venture parties building infrastructure projects and certain important projects in cases where authorized banks cannot meet the required foreign exchange needs as stipulated in clause 1 of this Article."

13. Paragraph 1 of clause 2 of Article 81 shall be amended as follows:

"2. The value of technology transfer used for capital contribution shall be agreed upon by the parties."

14. Clause 1 of Article 83 shall be amended and supplemented as follows:

"1. Foreign-invested enterprises, joint venture parties may directly recruit Vietnamese and foreign workers in accordance with the labor law."

15. Article 84 shall be amended and supplemented as follows:

"Article 84. Wages for Vietnamese Workers"

The minimum wage and wages for Vietnamese workers employed in foreign-invested enterprises and joint ventures shall be implemented in accordance with the regulations of the Ministry of Labor - Invalids and Social Affairs and paid in Vietnamese dong.

16. Article 85 is amended and supplemented as follows:

"Article 85. Leasing land, paying rent for land, and paying land use tax

1. Foreign-invested enterprises and joint ventures are allowed by the Government of Vietnam to lease land to implement investment projects and must pay rent according to the provisions of the Ministry of Finance.

2. In cases where the Vietnamese Party contributes capital through the value of land use rights obtained from transfer or granted by the State with payment of land use fees, and the funds paid for the transfer or the land use fees already paid do not originate from the budget, then there is no need to convert to a lease form, and the Vietnamese Party has the obligation to pay the land use tax according to current laws."

17. Article 88 is amended and supplemented as follows:

"Article 88. Authority to decide on leasing land

The People's Committee of the province decides on leasing land for foreign-invested projects in accordance with the laws on land."

18. Article 89 is amended and supplemented as follows:

"Article 89. Compensation, clearance of land, and land lease files

1. In cases where the land is leased by the Government of Vietnam, the People's Committee of the province where the investment project is located is responsible for organizing compensation, clearance of land, and completing the land lease procedures. The costs of compensation and clearance are included in the project's investment capital. The People's Committee of the province agrees with the enterprise leasing the land regarding the financial source for compensation and clearance.

2. In cases where the Vietnamese Party contributes capital through the value of land use rights, the Vietnamese Party is responsible for compensation, clearance of land, and completing the procedures to obtain land use rights. The costs of compensation and clearance are included in the Vietnamese Party's contribution or agreed upon by both parties.

3. The compensation unit price is carried out according to the general regulations of the State.

4. For projects licensed by the provincial People's Committee, the process of considering land leasing is conducted simultaneously with the consideration of issuing the Investment License.

5. For projects licensed by the Ministry of Planning and Investment, the documents related to land attached to the application for an Investment License include the following contents:

a) Location and area of land to be used;

b) Land rent proposed by the provincial People's Committee based on the framework of land rent prices set by the Ministry of Finance;

c) Plan for compensation and clearance of land.

6. Procedures and documents for land leasing and subleasing are carried out according to the guidelines of the Ministry of Natural Resources and Environment."

19. Article 92 is amended and supplemented as follows:

"Article 92. Mortgage of land use rights and assets attached to land

1. Foreign-invested enterprises are allowed to mortgage the value of land use rights and assets attached to land during the lease period at credit institutions operating in Vietnam in accordance with the law in the following cases:

a) Foreign-invested enterprises that have paid land rent for many years, if the remaining lease term is at least five years;

b) Joint ventures where the Vietnamese Party contributes capital through the value of land use rights, if the remaining contribution term through land use rights is at least five years.

2. The mortgaged value of land use rights includes compensation and clearance costs and paid land rent minus the rent for the time already used.

3. Documents and procedures for mortgaging the value of land use rights are carried out according to the guidelines of the Ministry of Natural Resources and Environment and the State Bank of Vietnam."

20. Article 95 is amended and supplemented as follows:

"Article 95. Review of planning and architectural plans

For investment projects in construction fields such as bridges, roads, airports, ports; industrial projects belonging to Group A; infrastructure of Industrial Zones, Export Processing Zones, High-Tech Zones; urban areas, tourist areas, entertainment areas; artistic performance venues; advertising structures; residential buildings, hotels, offices, and apartments; schools; hospitals; sports facilities, the application for an Investment License must include a layout plan of the overall site of the project.

The review of the overall site layout plan is conducted during the project review process."

21. Clause 1 of Article 98 is amended and supplemented as follows:

"1. Investors are responsible under Vietnamese law for the quality of the project; safety of the project; fire prevention and explosion control; environmental protection; labor safety and hygiene during the construction period as well as throughout the operational period of the project."

22. Article 105 is amended and supplemented as follows:

Point b, clause 1 shall be amended and supplemented as follows:

"b) Consistent with approved industry development plans or product plans. In cases where these plans have not been approved, they must be agreed upon by the relevant ministry."

Clause 2 is amended and supplemented as follows:

"2. In addition to the conditions stipulated in Clause 1 of this Article, investment projects requiring registration for an Investment License must meet one of the following conditions:

a) Projects with a product export ratio of 80% or more;

b) Investment projects in Industrial Zones not belonging to Group A but within the Special Encouraged Investment Sectors or Encouraged Investment Sectors list;

c) Belonging to production sectors with an investment capital scale up to 5 million USD."

23. Article 106 is amended and supplemented as follows:

"Article 106. Registration for Investment License

1. The registration dossier for an Investment License includes:

a) Application for an Investment License;

b) Joint venture contract and the charter of the joint venture company or the charter of a 100% foreign-invested company or the business cooperation contract;

c) Legal status confirmation documents and financial condition statements of the parties.

2. The registration dossier for an Investment License is prepared in three sets, including at least one original set, all of which are submitted to the Investment License Issuing Authority.

3. The Investment License Issuing Authority reviews the application for registration of an Investment License. If it meets the conditions and procedures stipulated in Articles 105 and 106 of this Decree, it will issue the Investment License without needing approval from any other authority."

4. Within fifteen working days from the date of receiving valid application files, the agency issuing Investment Permits shall notify the approval decision in the form of an Investment Permit.

5. The Ministry of Planning and Investment shall issue guiding documents for the preparation of project registration files for Investment Permits.

24. Clause 2 of Article 112 shall be amended and supplemented as follows:

"2. Ministries, sectors, and provincial people's committees shall seek the opinion of the Ministry of Planning and Investment before promulgating legal normative documents within their authority related to foreign direct investment activities; in cases where there are differing opinions, they must report to the Prime Minister for consideration and decision. Provincial people's committees shall not promulgate tax, financial, and other preferential provisions exceeding their authority."

25. Article 113 shall be amended and supplemented as follows:

"Article 113. Coordination of State Management Activities

1. Ministries, sectors, provincial people's committees, and licensing agencies in the banking, insurance, securities, and legal advisory fields shall manage state administration and coordination mechanisms in the work of managing foreign investment activities.

2. Provincial people's committees shall promptly address issues within their authority and guide enterprises to operate in accordance with the provisions of the Investment Permit and laws. During the process of handling, if ministries, sectors, and provincial people's committees have differing opinions on the same issue, they need to report to the Prime Minister for consideration and decision.

3. The Ministry of Planning and Investment shall compile and provide information on foreign investment situations to ministries, sectors, and provincial people's committees, regularly convening meetings with the Ministries of Finance, Trade, Natural Resources and Environment, State Bank, and relevant provincial people's committees to promptly address emerging issues, resolve issues raised by foreign-invested enterprises, and propose policies and measures to improve the investment environment."

26. Point a of Clause 1 of Article 114 shall be amended and supplemented as follows:

"1. The Prime Minister shall decide on projects in Group A, including:

a) Projects regardless of investment capital size in the following areas:

Construction of industrial zones, export processing zones, high-tech zones, urban areas, BOT, BTO, BT projects;

Construction and operation of seaports, airports; marine and air transportation operations;

Oil and gas activities;

Postal and telecommunications services;

- Publishing; printing services (excluding projects printing technical documents; packaging, labels, and ordinary patterns on textile, leather, and footwear products), press; broadcasting; advertising services linked to advertising distribution; film activities; artistic performances; gaming with rewards; medical facilities; general education, college, university, and postgraduate training; scientific research; production of human medicines;

Insurance, finance, auditing, and inspection;

Exploration and exploitation of rare resources;

Construction of housing for sale;

Projects in defense and security areas."

27. Clause 2 of Article 115 shall be supplemented with items e and g as follows:

"e) Projects in cultural, educational, and training areas;

g) Construction and operation of supermarkets."

28. Clause 1 of Article 116 shall be amended and supplemented as follows:

"1. Based on approved socio-economic development plans, coordinate with relevant ministries and sectors to establish and publish investment attraction plans and project lists at local levels after reaching consensus with the Ministry of Planning and Investment; organize promotional and investment solicitation activities."

29. Article 117 shall be amended and supplemented as follows:

Point a of Clause 1 shall be amended and supplemented as follows:

"1. The Ministry of Planning and Investment shall serve as the focal point for resolving issues during the promotion, formation, implementation, and execution of investment projects, including:

a) Guiding and coordinating with ministries, sectors, and provincial people's committees in the preparation of national planning, project lists for attracting foreign investment; developing investment promotion programs and plans; proposing the dispatch of personnel and establishment of investment promotion organizations in regions and countries with potential for investment in Vietnam for the Prime Minister's approval; conducting investment promotion activities."

Clause 3 shall be added as follows:

"3. The Ministry of Planning and Investment shall participate and coordinate with the Ministry of Justice in regularly reviewing legal documents related to foreign investment activities, recommending competent authorities to amend, supplement, or abolish legal normative documents that contradict foreign investment laws and higher-ranking legal normative documents."

30. Clause 3 of Article 121 shall be amended and supplemented as follows:

"3. Existing regulations that offer more benefits than previous corresponding regulations shall be applied automatically. The agency issuing Investment Permits, based on the investor's request, shall adjust the Investment Permit so that the investor enjoys such benefits from the effective date of the current legal documents providing those benefits."

31. Clause 3 of Article 123 shall be amended and supplemented as follows:

"3. Standards, conditions, and procedures for commendation shall be applied according to the Government's regulations on competition and commendation."

32. Articles 3 Clause 1 Points a and b, Article 46 Clause 2 Point a and Clause 3 Point b, Clause 4 Point a, Article 48 Clause 4, Article 57 Clause 8, Article 79 Clause 4, Article 81 Clause 3, Article 82 Clauses 2 and 4, Article 87 Clause 2, Article 90, Article 113 Clause 3, and Article 117 Clause 1 Point c shall be amended and supplemented as follows:

- Articles 3 Clause 1 Points a and b, Article 46 Clause 2 Point a and Clause 3 Point b, Clause 4 Point a, Article 48 Clause 4, and Article 57 Clause 8 shall replace the phrase "List of specially encouraged investment projects" name, "List of specially encouraged investment sectors" and replace the phrase "List of encouraged investment projects" name, "List of encouraged investment sectors";

In Article 79 Clause 4 at the end, replace the phrase "General Department of Customs" with the phrase "Ministry of Finance";

In Article 81 Clause 3 at the end, Article 82 Clauses 2 and 4, and Article 117 Clause 1 Point c, replace the phrase "Ministry of Science, Technology and Environment" with the phrase "Ministry of Science and Technology";

In Article 87 Clause 2 and Article 113 Clause 3, replace the phrase "General Department of Land Administration" with the phrase "Ministry of Natural Resources and Environment";

In Article 90, replace the term "time limit" with the term "time point".

33. Appendix 1 of Decree No. 24/2000/NĐ-CP shall be amended and supplemented as set out in the Appendix attached to this Decree.

Article 2. Implementation Provisions

1. This Decree takes effect fifteen days from the date of publication in the Official Gazette. All previous provisions contrary to this Decree are hereby abolished.

2. The Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, and Chairpersons of provincial people's committees directly under the central government are responsible for guiding the implementation of this Decree.