Law on Investment 2020
The new Law on Investment No. 61/2020/QH14 (LOI 2020) was released on 17 June 2020 and took effect from 1 January 2021. It contains important changes to create a more attractive legal framework for foreign investors.
Clearer rules on market access
The LOI 2020 introduces clearer rules on market access, taking into account various commitments in international treaties to which Vietnam is a signatory, and restrictions in local regulations.
Business sectors that foreign investors can access the market
Simpler licensing procedures for large scale
investment projects
Under the previous LOI 2014, any investment project with a total investment capital of VND5,000 billion (equiv. USD215 million1) and above was subject to in-principle approval of the Prime Minister. However, under the LOI 2020, the Prime
Minister’s approval is no longer required for such investment projects. This change reduces the administrative procedures for large scale investors.
New special incentives and investment support
The LOI 2020 and Decision 29/2021/QD-TTg prescribing special investment incentives dated 6 October 2021, issued by the Prime Minister, introduced a mechanism which allows the Government’s approval for special investment incentives at different levels to encourage the development of several investment projects that have significant socio-economic impact, including:
Subject:
A - Investment projects in sectors subject to special investment incentives which have investment capital of VND30,000 billion (equiv. USD1.3 billion) or above and disburse at least VND10,000 billion (equiv. USD430 million) within three years from the date of the Investment Registration Certificate (IRC) issuance or in-principle approval
B - New investment projects (including the expansion of such new projects) establishing innovation centers and research and development centers which have total investment capital of VND3,000 billion (equiv. USD130 million)
or above and will disburse at least VND1,000 billion (equiv. USD43 million) within three years from the date of IRC issuance or in-principle approval
C - National Innovation Center established under a decision of the Prime Minister
Non-subject:
- Investment projects that have been granted investment certificate, IRC,
or in-principle approval prior to the effective date of the LOI 2020.
- Investment projects in following sectors:
- Mineral mining projects
- Projects on manufacturing, sale of goods and services subject to special excise tax according to the Law on Special Sales Tax No. 27/2008/ QH12, except for projects on manufacturing of automobiles, aircrafts, and yachts
- Commercial housing construction projects prescribed by the Law on Residential Housing No. 65/2014/QH13
Detailed special investment incentives and support
In which:
- Level of high technology project is defined based on level of high-tech product revenue, R&D expenses and personnel.
- Level of participation of Vietnamese suppliers and service providers in the supply chain is defined based on level of Vietnamese enterprises participating and their value contributed into the supply chain.
- Level of technology transfer is defined based on number of Vietnamese enterprises received the technology transfer.
Facilitating the restructure and M&A activity
The LOI 2020 allows investors to:
- Amend the objectives, scale and contents of their investment projects
- Merge, separate of their investment projects
- Change investors
- Partly or wholly transfer investment projects
These new regulations create a clearer legal framework to facilitate M&A deals