Legal framework for investment under vietnamese laws

In order to attract large-scale foreign investment, in addition to sound business strategies, the establishment of a clear and transparent legal framework is important. Investment policies must ensure the creation of a stable and predictable investment environment, facilitate the removal of barriers, and enable investors to reasonably forecast project revenues.

I. Overview of the legal framework for investment

Investment is currently one of the main methods promoting the development of Vietnam’s economy and enhancing its position on the global economic market.

II. Legal regulations on investment in Vietnam

1. What does the legal framework for investment in Vietnam include?

The current legal framework for investment in Vietnam comprises the following legislative and regulatory instruments:

Law on Amendments to the Law on Public Investment, the Law on Investment in the Form of Public–Private Partnership, the Law on Investment, the Law on Housing, the Law on Bidding, the Law on Electricity, the Law on Enterprise, the Law on Special Consumption Tax, and the Law on Civil Judgment Enforcement (2022);
Law on Investment in the Form of Public–Private Partnership 2020;
Law on Investment 2020;
Law on Public Investment 2019;
Law on Bidding 2013;
Decree No. 122/2021/ND-CP on administrative sanctions in the sector of planning and investment;
Decree No. 31/2021/ND-CP guiding the implementation of the Law on Investment;
Decree No. 15/2021/ND-CP guiding certain contents on management of construction investment projects;
Decree No. 40/2020/ND-CP guiding the Law on Public Investment;
Decree No. 25/2020/ND-CP guiding the Law on Bidding regarding investor selection;
Decree No. 35/2021/ND-CP guiding the Law on Investment in the form of Public–Private Partnership;
Decree No. 151/2018/ND-CP amending and supplementing decrees on investment and business conditions under the state management of the Ministry of Finance;
Decree No. 10/2019/ND-CP on the implementation of rights and responsibilities of agencies representing state ownership;
Decree No. 140/2018/ND-CP amending and supplementing decrees relating to investment and business conditions and administrative procedures under the state management of the Ministry of Labour, Invalids and Social Affairs;
Circular No. 02/2022/TT-BKHDT guiding supervision and evaluation of foreign investment activities in Vietnam, issued by the Minister of Planning and Investment;
Circular No. 08/2022/TT-BTC on the management and use of revenues and expenditures in the process of investor selection, issued by the Minister of Finance;
Circular No. 108/2021/TT-BTC on the management and use of revenues from consultancy and project management activities of investors and project management units using public investment capital, issued by the Minister of Finance;
Circular No. 09/2021/TT-BKHDT guiding the selection of investors for public–private partnership investment projects and land-use investment projects, issued by the Minister of Planning and Investment;
Circular No. 86/2021/TT-BTC guiding Decree No. 147/2020/ND-CP on the organization and operation of local development investment funds, issued by the Minister of Finance;
Circular No. 11/2019/TT-BKHDT regulating the provision and publication of bidding information, the roadmap for applying online contractor selection, and the management and use of forfeited bid security and performance security, issued by the Minister of Planning and Investment.

2. Forms of investment prescribed by law

Article 21 of the Law on Investment 2020 provides for the following forms of investment:

Investment in the establishment of economic organizations;
Investment in capital contribution, acquisition of shares, or acquisition of capital contributions;
Implementation of investment projects;
Investment in the form of Business Cooperation Contracts (BCC);
Other forms of investment and new types of economic organizations as prescribed by the Government.

Accordingly, the prevailing law recognizes the above-mentioned forms of investment.

3. Investment sectors and investment conditions

In principle, investors are entitled to invest and conduct business in any sector or industry in Vietnam that is not prohibited by law, except for conditional business lines and sectors subject to market access restrictions applicable to foreign investors.

Pursuant to Article 7 of the Law on Investment 2020, conditional business investment sectors are those in which investment and business activities must satisfy certain conditions for national defense and security, social order and safety, social ethics, or public health. The list of conditional business investment sectors is stipulated in Appendix IV to the Law.

Investment and business conditions may be imposed in the following forms:

a) Licenses;

b) Certificates;

c) Practice certificates;

d) Written confirmations or approvals;

dd) Other requirements that individuals or economic organizations must satisfy in order to conduct investment and business activities without requiring written confirmation from competent authorities.

Conditional business investment sectors and the corresponding conditions must be publicly disclosed on the National Business Registration Portal.

Pursuant to Article 9 of the Law on Investment 2020, the list of sectors and industries subject to market access restrictions for foreign investors is promulgated by the Government based on laws and resolutions of the National Assembly, ordinances and resolutions of the Standing Committee of the National Assembly, Government decrees, and international treaties to which the Socialist Republic of Vietnam is a member.
Market access conditions applicable to foreign investors under the restricted sectors list include:
Foreign investors’ ownership ratio of charter capital in economic organizations;
Forms of investment;
Scope of investment activities;
Capacity of investors and partners participating in investment activities;

d) Other conditions prescribed by laws, resolutions of the National Assembly, ordinances and resolutions of the Standing Committee of the National Assembly, Government decrees, and international treaties to which the Socialist Republic of Vietnam is a party.

III. Certain questions regarding the legal framework for investment

1. Are foreign investors required to obtain the Investment Registration Certificate?

Pursuant to Clause 1, Article 37 of the Law on Investment 2020, the following cases are required to implement procedures for issuance of the Investment Registration Certificate:

Investment projects of foreign investors;
Investment projects of economic organizations specified in Clause 1, Article 23 of the Law.

Clause 1, Article 23 of the Law on Investment 2020 provides that an economic organization must satisfy conditions and implement investment procedures applicable to foreign investors when conducting investment activities if it falls under one of the following cases:

A foreign investor holds more than 50% of the charter capital, or a majority of general partners are foreign individuals in the case of a partnership;
An economic organization specified in point a above holds more than 50% of the charter capital;
A foreign investor and an economic organization specified in Point a above jointly hold more than 50% of the charter capital.

Accordingly, foreign investors falling within the above cases are required to obtain an Investment Registration Certificate when implementing investment projects.

2. Are foreign investors restricted in terms of capital ownership in Vietnamese enterprises?

Pursuant to point a, Clause 3, Article 9 of the Law on Investment 2020, foreign investors may be subject to restrictions on capital ownership when investing in sectors or industries included in the list of restricted market access for sectors applicable to foreign investors.

Accordingly, one of the market access conditions applicable to foreign investors is the limitation on foreign ownership ratio of charter capital in economic organizations, as prescribed in the restricted sectors list.

3. Which authorities may enterprises contact when encountering legal difficulties in investment activities?

Pursuant to Clause 4, Article 69 of the Law on Investment 2020, provincial-level People’s Committees and investment registration authorities, within their assigned functions and powers, are responsible for performing state management tasks relating to investment activities in Vietnam and outward investment from Vietnam, including resolving, or submitting to competent authorities for resolution, difficulties and obstacles encountered by investors.

IV. Legal advisory services on investment

The above provides NPLaw’s guidance on issues relating to the legal framework for investment. Should readers have any further inquiries or require clarification, please contact NPLaw using the details below.