Decree No. 62/1998/ND-CP Issuing the Investment Regulation under Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO), and Build-Transfer (BT) Contracts for Foreign Investment in Vietnam

DECREE OF THE GOVERNMENT

ISSUING REGULATIONS ON INVESTMENT UNDER BUILD-OPERATE-TRANSFER CONTRACTS, BUILD-TRANSFER-OPERATE CONTRACTS AND BUILD-TRANSFER CONTRACTS FOR FOREIGN INVESTMENT IN VIETNAM

establish business transfer contracts and construction transfer contracts applicable to foreign investment in Vietnam

in Vietnam

THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;

BASED ON THE LAW ON FOREIGN INVESTMENT IN VIETNAM PASSED BY THE NATIONAL ASSEMBLY ON NOVEMBER 12, 1996;

TO ENCOURAGE CONSTRUCTION AND DEVELOPMENT OF INFRASTRUCTURE PROJECTS IN VIETNAM;

At the proposal of the Minister of Planning and Investment,

DECREE:

Article 1. ATTACHED HERETO ARE THE REGULATIONS ON INVESTMENT UNDER BUILD-OPERATE-TRANSFER CONTRACTS, BUILD-TRANSFER-OPERATE CONTRACTS AND BUILD-TRANSFER CONTRACTS FOR FOREIGN INVESTMENT IN VIETNAM.

Article 2. THESE REGULATIONS SHALL TAKE EFFECT 15 DAYS AFTER THE DATE OF SIGNATURE AND REPLACE DECREE NO. 87/CP OF NOVEMBER 23, 1993 OF THE GOVERNMENT ON REGULATIONS ON INVESTMENT UNDER BUILD-OPERATE-TRANSFER CONTRACTS.

Article 3. Ministers, heads of ministerial-level agencies, heads of agencies under the Government, Chairmen of provincial people's committees directly under the central government are responsible for implementing this Decree./.

 

REGULATIONS
REGULATIONS ON INVESTMENT UNDER BUILD-OPERATE-TRANSFER CONTRACTS, BUILD-TRANSFER-OPERATE CONTRACTS AND BUILD-TRANSFER CONTRACTS FOR FOREIGN INVESTMENT IN VIETNAM
(Adopted along with Decree No. 62OF THE GOVERNMENT ON AUGUST 15, 1998

PART I
GENERAL PROVISIONS

ARTICLE 1. In these Regulations, the following terms shall be understood as follows:

1. "BUILD-OPERATE-TRANSFER CONTRACT" (BOT) means a contract signed between the competent State agency of Vietnam and a foreign investor to construct infrastructure projects (including expansion, upgrading, modernization of projects) and operate them for a certain period to recover investment capital and earn reasonable profits; at the end of the operating period, the foreign investor shall transfer the project无偿地给越南国家。

2. "BUILD-TRANSFER-OPERATE CONTRACT" (BTO) means a contract signed between the competent State agency of Vietnam and a foreign investor to construct infrastructure projects (including expansion, upgrading, modernization of projects); after completion, the foreign investor transfers the project to the Vietnamese state, and the Vietnamese government grants the foreign investor the right to operate the project for a certain period to recover investment capital and earn reasonable profits.

3. "BUILD-TRANSFER CONTRACT" (BT) means a contract signed between the competent State agency of Vietnam and a foreign investor to construct infrastructure projects (including expansion, upgrading, modernization of projects); after completion, the foreign investor transfers the project to the Vietnamese state, and the Vietnamese government facilitates the foreign investor to implement other projects to recover investment capital and earn reasonable profits.

4. "BOT ENTERPRISE," "BTO ENTERPRISE," "BT ENTERPRISE" (hereinafter referred to as BOT Enterprise) means a joint venture enterprise or a wholly foreign-owned enterprise established under the Law on Foreign Investment in Vietnam to implement BOT, BTO, and BT contracts.

5. "COMPETENT STATE AGENCY TO SIGN BOT, BTO, BT CONTRACTS" (hereinafter referred to as Competent State Agency) means ministries, agencies under the Government, provincial people's committees directly under the central government designated by the Prime Minister to sign and implement BOT, BTO, and BT contracts with foreign investors.

6. "FOREIGN INVESTOR SIGNING BOT, BTO, BT CONTRACTS" refers to foreign organizations or individuals implementing BOT, BTO, and BT projects (hereinafter referred to as Foreign Investor) who are fully responsible for their commitments under the BOT, BTO, and BT contracts.

7. "SUBCONTRACTOR" is a Vietnamese or foreign contractor signing a contract with the BOT Enterprise to participate in implementing parts of the BOT, BTO, and BT projects.

8. "SUBCONTRACT" is a contract signed between the BOT Enterprise and subcontractors to participate in implementing parts of the BOT, BTO, and BT projects.

9. "OTHER PROJECT" is a project linked to the BT project, which the foreign investor is permitted to implement under the Law on Foreign Investment in Vietnam to recover investment capital in the BT project.

Article 2.

1. The Vietnamese Government encourages foreign organizations and individuals to invest under BOT, BTO, and BT contracts in the fields of transportation, electricity production and trading, water supply and drainage, waste treatment, and other fields determined by the Prime Minister.

2. The Vietnamese Government protects ownership rights over investment capital and other legitimate benefits of foreign organizations and individuals investing under BOT, BTO, and BT contracts in Vietnam; at the same time, it creates favorable conditions and simplifies procedures for the implementation of these projects.

3. The Vietnamese Government grants preferential treatment to BOT Enterprises and subcontractors according to Chapter II of these Regulations.

Article 3.

1. To implement BOT, BTO, and BT projects, foreign investors establish BOT Enterprises.

2. BOT Enterprises are established and operate from the date they are granted an Investment License; they are responsible for complying with the provisions of the Investment License and the commitments of foreign investors under the BOT, BTO, and BT contracts.

Chapter II
INVESTMENT INCENTIVES AND GUARANTEES

Article 4.

1. Corporate income tax for BOT Enterprises is set as follows:

- The corporate income tax rate is 10% of the profit earned and applies throughout the duration of the project.

Exemption from corporate income tax for four years from the first profitable year, and a 50% reduction in the next four years. In cases of investment in encouraged areas, exemption from corporate income tax for eight years from the first profitable year.

The tax exemption and reduction period is calculated continuously from the first profitable year.

The repatriation tax rate is 5% of the profit repatriated.

In addition to the aforementioned taxes, BOT Enterprises must pay other taxes as prescribed by Vietnamese law.

2. Foreign subcontractors participating in BOT, BTO, and BT projects pay various taxes and enjoy tax exemptions and reductions according to current regulations applicable to foreign contractors.

Vietnamese subcontractors participating in BOT, BTO, and BT projects fulfill tax obligations according to current regulations applicable to Vietnamese enterprises.

Article 5.

1. BOT Enterprises and subcontractors are exempt from import duties to implement BOT, BTO, and BT projects for:

Equipment and machinery imported to create fixed assets (including equipment, machinery, spare parts for surveying, designing, construction, and building projects);

Specialized transportation means imported to create fixed assets and transportation vehicles used to pick up and drop off workers (cars with 24 seats or more, watercraft);

Spare parts, components, detachable parts, accessories, fixtures, molds accompanying the equipment, machinery, specialized transportation means, and transportation vehicles mentioned in this clause, including cases used for replacement, warranty, maintenance during project operation;

Fuels, raw materials, materials imported to implement BOT, BTO, BT projects, including fuels, raw materials, materials for production and operation of the project;

2. The exemption from import tax on equipment, machinery, transportation means, and raw materials, materials mentioned in Clause 1 of this Article shall apply to cases of expanding the scale of the project, replacing, and updating technology;

3. Goods imported under Clauses 1 and 2 of this Article shall not be sold on the Vietnamese market. In case of sale on the Vietnamese market, approval from the Ministry of Trade is required, and import tax, business income tax, or special consumption tax must be paid according to Vietnamese laws;

4. In cases where other Projects are carried out alongside BT Contracts, the importation and payment of import tax shall be implemented according to Article 63 of Decree No. 12/CP dated February 18, 1997, detailing the implementation of the Law on Foreign Investment in Vietnam, and Article 10 of Decree No. 10/1998/NĐ-CP dated January 23, 1998, concerning certain measures to encourage and ensure foreign direct investment activities in Vietnam;

5. Industrial property objects still within their protection period, technical secrets, technological processes, technical services for implementing the project shall be exempted from taxes related to technology transfer;

Article 6.

1. The transfer of capital in BOT Enterprises shall be carried out according to the provisions of Article 34 of the Law on Foreign Investment in Vietnam and Article 64 of Decree No. 12/CP dated February 18, 1997, detailing the implementation of the Law on Foreign Investment in Vietnam;

2. The transfer of capital shall only take effect after approval by the competent State authority and confirmation of the Capital Investment Permit issuing agency on the Capital Transfer Contract;

Article 7.

1. BOT Enterprises and Subcontractors may open foreign currency accounts, Vietnamese currency accounts, and loan capital accounts according to the provisions of Article 71 of Decree No. 12/CP dated February 18, 1997, detailing the implementation of the Law on Foreign Investment in Vietnam, and relevant regulations on foreign exchange management;

2. The State Bank of Vietnam guarantees that BOT Enterprises can convert Vietnamese currency obtained from implementing BOT, BTO, BT, and other Projects into foreign currency to meet business operation needs, repay loans and interest, and transfer profits and capital abroad;

BOT Enterprises may use lawful revenues in Vietnamese currency from implementing BOT, BTO, BT Projects to purchase goods for export or process them directly for export according to the regulations of the Ministry of Trade to create foreign currency sources to meet the business operation needs of BOT Enterprises;

Article 8.

1. During the implementation of the Project, BOT Enterprises may pledge or mortgage the following assets according to Vietnamese laws:

a) Equipment, factories, architectural works, and immovable properties purchased or constructed using BOT Enterprise investment capital;

b) Other assets owned by the BOT Enterprise;

c) Value of land use rights according to Vietnamese laws;

d) Property rights of the BOT Enterprise;

2. The pledging or mortgaging by the BOT Enterprise must be approved by the competent State authority and shall not harm the achievement of the project's objectives, progress, and operations as stipulated in the Contract, in accordance with Vietnamese laws;

3. Pledge and mortgage documents must be established according to Vietnamese laws and sent to the competent State authority;

Article 9.

1. The Government ensures that BOT Enterprises can use land, roads, and other public utility facilities to implement BOT, BTO, BT Projects;

2. BOT Enterprises are exempt from land rental fees during the project implementation period;

3. Provincial People's Committees, municipal people's committees directly under the central government where the investment project is located shall organize compensation, clearance of land, and complete the procedures for transferring land to the BOT Enterprise according to the law and the committed deadlines;

Compensation and clearance costs shall be borne by the foreign investor and included in the total investment capital, except when otherwise provided in the BOT, BTO, BT Contract;

Article 10.

1. Vietnamese Enterprises participating in BOT, BTO, BT Projects shall be approved by the competent State authority;

2. Depending on the nature of the Project, the Vietnamese Government may delegate the competent State authority to act on behalf of the Government to guarantee the fulfillment of financial obligations of Vietnamese Enterprises participating in the Project as determined in the BOT, BTO, BT Contract; guarantee the obligations of Vietnamese Enterprises in selling raw materials, purchasing main products, and services to implement the BOT, BTO, BT Project.

Article 11. During the implementation of the project, all organizations and individuals must comply with the regulations on foreign exchange management, import and export, technology transfer, environment, labor relations, accounting, statistics, entry and exit, and other relevant provisions of Vietnamese law.

Chapter III
METHODS OF IMPLEMENTING BOT, BTO, BT PROJECTS

Article 12.

1. Based on the planning and development orientation for each period, the Ministry of Planning and Investment shall take the lead in coordinating with relevant ministries, sectors, and provincial/municipal people's committees under the central government to submit to the Prime Minister for approval the list of projects to be invested under BOT, BTO, BT contracts.

2. The Prime Minister may approve BOT, BTO, BT projects outside the published list after obtaining opinions from relevant ministries, sectors, and provincial/municipal people's committees where the projects are expected to be implemented.

3. Projects to be invested under BOT, BTO, BT contracts submitted to the Prime Minister as stipulated in Clause 1 and 2 of this Article must clearly state the necessity, location, designed capacity, estimated investment capital; and propose the competent State agency, the form of selecting foreign investors to sign BOT, BTO, BT contracts.

Article 13.

1. On the basis of the approved list of BOT, BTO, BT projects and the form of selecting foreign investors to sign BOT, BTO, BT contracts, the competent State agency shall direct the preparation of a Preliminary Feasibility Study Report as the basis for preparing the documentation to select foreign investors. The competent State agency shall organize the review and approval of the Preliminary Feasibility Study Report.

The cost of preparing the Preliminary Feasibility Study Report belongs to the budget of the competent State agency and is approved according to regulations. If the project is implemented, the cost of preparing the Preliminary Feasibility Study Report will be included in the construction investment capital and the BOT enterprise is responsible for repaying it to the State budget.

2. Foreign investors prepare a Preliminary Feasibility Study Report for the BOT, BTO, BT projects mentioned in Clause 2 of Article 12, submit it to the competent State agency for review and approval. In case the Preliminary Feasibility Study Report is approved by the competent State agency, the foreign investor is entitled to prepare the documentation to apply for an Investment License.

Article 14.

1. The procedures and formats for selecting foreign investors to sign BOT, BTO, BT contracts shall be carried out in accordance with the Vietnamese law on bidding.

2. The results of selecting foreign investors to sign BOT, BTO, BT contracts must be approved by the Prime Minister.

Article 15.

1. After receiving the Prime Minister's decision approving the results of selecting foreign investors to sign BOT, BTO, BT contracts, the selected foreign investor must prepare a Detailed Feasibility Study Report and submit it to the competent State agency.

2. The competent State agency shall take the lead in coordinating with relevant ministries, sectors, and provincial/municipal people's committees to organize the review and approval of the Detailed Feasibility Study Report. In cases where there are differing opinions or issues beyond their authority, the competent State agency shall report to the Prime Minister for decision.

Article 16.

1. The competent State agency shall take the lead in negotiating and signing BOT, BTO, BT contracts with the selected foreign investor. For important projects decided by the Government, the competent State agency shall be responsible for submitting the principles for negotiation and signing BOT, BTO, BT contracts to the Prime Minister for approval.

2. The draft BOT, BTO, BT contract, after being negotiated and agreed upon by both parties and signed, shall be submitted to the Ministry of Planning and Investment along with other related documents for the application of an Investment License to organize the examination and submit to the Prime Minister for consideration and decision. The BOT, BTO, BT contract can only be officially signed after being approved by the Prime Minister.

Article 17.

1. The application for an Investment License includes:

Application for investment;

Signed BOT, BTO, BT contract;

Joint venture contract (if it is a joint venture BOT enterprise);

Articles of the BOT Enterprise;

Feasibility Study Report;

Contract signed or preliminary agreement on purchasing raw materials, selling products (if any);

Legal status confirmation document and financial situation of the investor;

2. For BT projects, in addition to the above provisions, the relevant project files must be submitted according to current regulations;

3. The BOT, BTO, BT contracts and the contracts for purchasing raw materials, selling products (if any), after being officially signed, must be sent to the Ministry of Planning and Investment;

Article 18.

1. The Ministry of Planning and Investment shall issue the Investment License for BOT, BTO, BT projects within fifteen days from the date the Prime Minister approves the BOT, BTO, BT projects;

2. The Investment License shall include the following main contents:

Main conditions of the Contract;

Scale of investment capital, objectives and operating period of the project;

Requirements for design, technology, condition and guarantee for normal operation of the works when transferred to the Government of Vietnam;

Tax and financial obligations;

Land use rights and ancillary facilities;

Conditions for environmental protection;

Principles for determining, adjusting prices and other revenues;

Provisions for converting Vietnamese currency into foreign currency;

Import and export of equipment, machinery, goods;

Rights and conditions for operating the works under BOT, BTO projects; business activities of other projects carried out under BT projects;

Principles for determining the value of assets at the time of transfer;

Commitments of the Government and related State agencies;

Article 19.

1. The BOT enterprise prepares technical designs to submit to the competent State agency;

The competent State agency shall coordinate with the Ministry of Construction, relevant ministries, sectors, and provincial/municipal people's committees to review the technical design of the works before implementation;

After the technical design of the works is approved, the BOT enterprise may commence construction;

2. The investor and the BOT enterprise have the right to select subcontractors or organize bidding to implement BOT, BTO, BT projects and are responsible for reporting the results of the selection or bidding to the competent State agency;

3. Subcontractors, after signing subcontracts with the BOT enterprise, must register their operations with the competent State agency;

Article 20.

1. Principles for determining prices, rates, fees, and other revenues of BOT, BTO projects must be stipulated in the BOT, BTO contracts;

2. Increases in prices, fees, and other revenues must be agreed upon and stipulated in the BOT, BTO contracts. When adjusting prices, fees, and other revenues, prior notice of thirty days must be given to the competent State agency;

Adjustments to prices, fees, and other revenues outside the scope previously agreed upon in the contract must be approved by the competent State agency before implementation;

Article 21.

1. The term of the BOT, BTO, BT contracts, the handover period of the BOT, BTO, BT works, and the operating period of the BTO works shall be agreed upon by the parties and clearly defined in the Investment License in accordance with foreign investment laws in Vietnam;

2. Upon expiration of the operating period of the BOT works, the foreign investor shall transfer the works无偿移交给越南政府。对于BTO和BT项目，完工后，外国投资者应根据合同规定条件将工程移交给越南政府；

3. The competent State agency shall accept the transfer of the BOT, BTO, BT works in accordance with Article 22 and Article 23 of this Regulation.

Article 22. When transferring the project to the Government of Vietnam, the competent State agency and the BOT enterprise must compare with the provisions stipulated in the Investment License and the BOT, BTO, BT Contract. The handover dossier includes the following main contents:

- The status of the project at the time of transfer;

- List of assets being transferred, including all related documents on surveying, designing, construction, installation, operation, maintenance, and management of the project;

- Appraisal documents on the value and quality of the transferred project;

- Responsibilities of the Parties for continuing the operation of the transferred project;

- Duration and conditions for maintaining the project after transfer;

- Contracts and other necessary conditions to maintain and operate the project after transfer.

Article 23. Before transferring the BOT, BTO, BT project, the BOT enterprise must carry out maintenance, repair, and perform necessary operations to transfer the project as agreed in the BOT, BTO, BT Contract.

The competent State agency will only accept the handover of the project according to the conditions specified in the BOT, BTO, BT Contract and the Investment License.

Chapter IV
BOT CONTRACTS AND SUBCONTRACTS

Article 24.

1. The BOT, BTO, BT Contract must include the following main contents:

Nationality, address, and authorized representatives of the Parties signing the Contract;

Objectives and scope of activities;

Investment capital and implementation schedule;

Capacity, technology, and equipment, design requirements, and technical standards of the project; quality standards and supervision, inspection of the project;

Provisions on environmental protection;

Conditions for land use, infrastructure works, and auxiliary works necessary for construction and operation;

Project construction schedule, operating period of the BOT enterprise, and the date of project transfer;

Rights and obligations of the Parties and commitments to guarantee, share risks of the Parties;

Provisions on prices, fees, and revenues;

Obligation to maintain normal operation of the projects;

Consulting, appraisal of design, equipment, construction, acceptance, operation, and maintenance;

Technical conditions, operational status, and quality of the project at the time of transfer. Principles for determining the value of the project and procedures for transferring the project;

Effectiveness of the Contract and cases of early termination of the Contract, provisions on the transfer of the Contract;

Authorities and methods for resolving disputes between the Contract signatories, risk allocation between the BOT enterprise and government agencies;

Handling violations caused by the Parties leading to non-compliance with the Contract terms;

Force majeure situations and handling principles;

Provisions on support and commitments from government agencies;

Conditions for implementing other projects under the BT Contract.

2. To implement the BOT, BTO, BT project, the BOT enterprise may enter into contracts regarding land use, construction, installation of machinery and equipment, consulting and appraisal services, purchasing raw materials, selling products and main services, providing technical services, borrowing funds, pledging, mortgaging assets, and other contracts as prescribed by Vietnamese law.

3. In cases where Vietnamese law does not regulate relationships related to investment under the BOT, BTO, BT Contract, the Parties may agree in the Contract to apply foreign law, but such agreements must not contravene Vietnamese law.

Article 25.

1. Disputes arising between the competent State agency and foreign investors during the implementation of the BOT, BTO, BT Contract shall first be resolved through negotiation and mediation. If the dispute cannot be resolved through negotiation and mediation, the Parties may resolve it before an arbitration tribunal established by mutual agreement. The arbitration procedure and applicable laws for resolving disputes are agreed upon by the disputing Parties in the Contract.

2. Disputes arising among the Parties within the BOT enterprise during the implementation of the Contract shall be resolved according to Clause 1, Article 102 of Decree No. 12/CP dated December 18, 1997, detailing the implementation of the Law on Foreign Investment in Vietnam.

3. Disputes arising between the BOT enterprise and foreign organizations and individuals during the implementation of the Contract shall first be resolved through negotiation and mediation. In case the disputing Parties cannot negotiate and mediate, they may agree to refer the dispute to resolution by the Vietnamese Arbitration Organization or an arbitration tribunal established by mutual agreement or an arbitration body established and operating in a third country.

Disputes arising between the BOT enterprise and Vietnamese economic organizations during the implementation of the Contract shall be resolved according to Clause 2, Article 102 of Decree No. 12/CP dated February 18, 1997, detailing the implementation of the Law on Foreign Investment in Vietnam.

4. Enforcement of arbitration decisions shall comply with Vietnamese law and international treaties to which the Socialist Republic of Vietnam is a party or has joined.

Chapter V
RIGHTS AND RESPONSIBILITIES OF THE COMPETENT STATE AGENCY

Article 26. Powers of the Competent State Agency:

Determining economic and technical indicators of the project; leading the examination and approval of the Preliminary Feasibility Study Report and the Detailed Feasibility Study Report;

Negotiating, agreeing upon, and deciding on the contents of the BOT, BTO, BT Contracts;

Leading coordination with the Ministry of Construction, Ministries, sectors, and provincial/municipal people's committees under the central government to examine and appraise the technical design of the works;

Organizing construction supervision and participating in the acceptance of work quality during the construction process;

Approving contracts for purchasing raw materials and selling main products/services signed between the BOT Enterprise and relevant Vietnamese economic organizations when such contracts require guarantees as stipulated in Clause 2, Article 10 of this Regulation;

Supervising the performance of obligations committed by the parties in the BOT, BTO, BT Contracts and ancillary contracts;

Receiving the transfer of works according to regulations.

Article 27. Responsibilities of the Competent State Agency:

Supporting foreign investors in establishing and implementing BOT, BTO, BT projects;

Supporting the BOT Enterprise in completing investment preparation, construction, and business procedures (if applicable) in accordance with the BOT, BTO, BT Contract and ancillary contracts;

Leading or coordinating with other state agencies to consider and resolve legitimate requests of the BOT Enterprise during the implementation of the BOT, BTO, BT project;

Fulfilling commitments made in the BOT, BTO, BT Contract;

Performing other tasks related to managing and operating BOT, BTO, BT projects in accordance with the law.

Article 28. Costs related to the exercise of powers and responsibilities of the Competent State Agency as stipulated in Articles 26 and 27 of this Regulation shall be drawn from the state budget based on the proposal of the Competent State Agency and the Ministry of Finance.

Chapter VI
IMPLEMENTING PROVISIONS

Article 29. Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, and Chairpersons of provincial/municipal people's committees under the central government are responsible for enforcing this Regulation.