Legal policies to attract foreign investment into Vietnam - Current situation and recommendations for foreign investors

Abstract:

This study provides a comprehensive analysis of Vietnam’s legal framework for attracting foreign direct investment (FDI), tracing its evolution from the 1987 Foreign Investment Law to the 2020 Investment Law. The findings highlight Vietnam's significant progress in creating a favorable investment environment through well-designed incentive policies and administrative reforms. Despite these advancements, challenges such as overlapping regulations and cumbersome administrative procedures persist, limiting the efficiency of the investment process. The study offers forward-looking recommendations to enhance the stability and transparency of the legal framework, simplify licensing processes, and maintain targeted tax incentives for strategic sectors. These proposed reforms aim to strengthen Vietnam’s investment climate and elevate its competitiveness in the global market.

Keywords: foreign direct investment, investment law, recommendations for foreign investors, administrative reforms.

1. Overview of legal policies to attract foreign investment into Vietnam

1.1. History of the Law on Foreign Investment in Vietnam

1.1.1. Foreign Investment Law 1987

On December 31, 1987, at the 2nd session of the 8th National Assembly, the Law on Foreign Investment in Vietnam was approved (Do Nhat Hoang, 2014). This law marked a major milestone in Vietnam's legal landscape for investment, aligning with the Party’s goals to foster foreign investment and leverage foreign direct investment (FDI) effectively. The 1987 law, structured into six chapters with 42 articles, was primarily based on the 1977 Investment Charter, adapted to Vietnam's situation, and informed by international experiences. Its straightforward structure and general alignment with international investment standards made it initially appealing to foreign investors (Do Nhat Hoang, 2014).

1.1.2. Amendments in 1990 and 1992

Following the 1987 law, Vietnam introduced amendments on June 30, 1990, during the 7th session of the 8th National Assembly. This revision, containing two articles, amended 15 articles in response to the international political climate and Vietnam’s drafting and implementation experience. Key changes addressed cooperation between private sectors and foreign partners, multi-party joint ventures, and import substitution issues.

On December 23, 1992, further amendments were introduced. This included changes to nine articles and the addition of three new articles. Key revisions enabled private enterprises to engage in international cooperation and outlined capital contributions, rights related to natural resources, land, water, and sea surface use, as well as rules regarding foreign bank accounts, export processing zones, and other significant areas.

1.1.3. Law on Foreign Investment 1996

The National Assembly’s 10th session approved a new Foreign Investment Law on November 12, 1996. This version, comprising six chapters and 68 articles, incorporated the 1987, 1990, and 1992 amendments. Its key changes included a reduction in FDI incentives, such as the removal of import tax exemptions on certain supplies and equipment. This adjustment impacted foreign investment attraction at the time.

The 1996 law also introduced a list of encouraged and restricted projects, enabling investors to select projects more easily while allowing authorities to approve investment plans efficiently. This legislation helped clarify regulations and reduce potential issues for investors, such as excessive time and costs (Kerkvliet, 1997). Noteworthy incentives included reduced land rents and significant tax exemptions for particular projects, such as BOT (Build-Operate-Transfer) initiatives and projects in disadvantaged regions.

1.1.4. Law on Amendments in 2000

Approved on June 9, 2000, the 2000 amendments added two new articles and revised 20 articles from the 1996 law. This version sought to address challenges facing foreign-invested enterprises, reducing risks and ensuring fairer treatment between domestic and foreign investors. It also aligned with Vietnam’s international agreements and commitments.

1.1.5. Investment Law 2005 and Investment Law 2014

In 2005, Vietnam introduced a comprehensive Investment Law, alongside the Enterprise Law, establishing a balanced legal framework for both domestic and foreign investors. The new Investment Law, effective July 1, 2006, replaced the previous laws on foreign and domestic investment promotion. Key changes included a focus on investment-related provisions, with organizational regulations addressed in the Enterprise Law. Tax incentives were outlined in tax-specific legal documents, with specialized laws governing other aspects.

The Investment Law 2014, effective from July 1, 2015, marked significant reforms, particularly regarding administrative procedures to streamline foreign investment. The law transitioned the “Investment License” to an “Investment Registration Certificate,” allowing enterprises to create seals without police authorization. In 2016, foreign investment statistics showed 2,061 new projects, totaling $12.265 billion USD, demonstrating the law’s positive impact (Ngọc Bích, 2016). However, challenges remained, including overlapping regulations and procedural conflicts that hindered investment efficiency.

1.1.6. Investment Law 2020

The National Assembly approved and issued Investment Law 2020, effective from January 1st, 2021, in order to improve the quality and efficiency of attracting domestic and foreign investment resources in accordance with development planning and orientation of sectors, fields and geographical areas so that Vietnam can ensure security, national defense, sustainable development and environmental protection.

Investment Law 2020 completed regulations on conditional business lines and investment conditions. At the same time such Law also reduces several unnecessary and unreasonable business lines to ensure fully and consistently the freedom right of individuals and enterprises. Accordingly, enterprises and individuals are entitled to do business in the sectors which are not prohibited by laws. In the meantime, investment Law also completes the mechanism of management decentralization between central competent authorities and local competent authorities on the basis of ensuring the effectiveness and efficiency of governmental management to investment and business activities.

1.2. System of legal documents in the investment field

The Investment Law and Enterprise Law serve as the foundational legal frameworks governing investment and enterprise activities in Vietnam. Investment activities encompass various sectors and involve numerous regulatory considerations, including land use, taxation, labor, finance, and environmental protection. Consequently, foreign investment activities are also regulated by other specialized laws and a comprehensive system of subsidiary documents.

Investment projects in production and service provision are generally governed by the Investment Law, the Enterprise Law, and the by-laws guiding their application. Specifically, the Investment Law oversees the operations of investment projects and the issuance of investment licenses, while the Enterprise Law governs business registration and the establishment of legal entities. Beyond investment and business registration laws, enterprises carrying out investment projects must also comply with regulations on tax, imports, exports, land, environmental protection, and labor, among other areas.

For certain specialized investment projects involving conditional business lines, such as oil and gas exploration, insurance, legal services, banking, and credit institutions, specific laws apply. These projects are governed by specialized laws, including the Insurance Business Law, Lawyers Law, and Banking Law, and are supervised by competent authorities designated for these fields.

In addition to the Investment Law and Enterprise Law (2020), other key legislative documents relevant to the investment sector include:

Law on Environmental Protection No. 72/2020/QH14 (dated November 17, 2020)
Law on Enterprise Income Tax No. 14/2008/QH12 (dated June 3, 2008)
Law No. 32/2013/QH13 (amendments to Law on Enterprise Income Tax, effective January 1, 2014)
Law No. 71/2014/QH13 (amendments and supplements to laws on tax, effective January 1, 2015)
Law on Securities No. 54/2019/QH14 (dated November 26, 2019)
Decree No. 31/2021/ND-CP (detailing and guiding the implementation of the Investment Law)
Decree No. 29/2021/ND-CP (regarding procedures for appraising significant national projects, supervision, and investment assessment)
Decree No. 50/2016/ND-CP (penalties for administrative violations in planning and investment)
Decision No. 29/2021/QD-TTg (issued by the Prime Minister, outlining special investment incentives)
Circular No. 03/2021/TT-BKHĐT (providing templates for documents and reports related to investment activities in Vietnam, outward investment, and investment promotion)
Circular No. 38/2015/TT-BTC (detailing specific aspects of public-private partnership investments under the Ministry of Industry and Trade)
Circular No. 83/2016/TT-BTC (guiding the implementation of investment incentives under Investment Law No. 67/2014/QH13 and Decree No. 118/2015/ND-CP)
Circular No. 02/2017/TT-BKHDT (issued by the Minister of Planning and Investment, guiding the cooperation mechanism for processing investment registration and enterprise registration applications)

Additional laws and by-laws related to investment projects further complement the legal framework for foreign and domestic investors in Vietnam. These documents collectively provide a comprehensive regulatory foundation to ensure compliance and facilitate streamlined investment processes.

2. Current fundamental legal policies for attracting foreign investment in Vietnam

2.1. Investment incentive policies for foreign investors under the 2020 Investment Law

The Investment Law 2020 introduces amendments and additions to the range of business lines and sectors eligible for investment incentives, aligning with Resolution No. 50/NQ of the Politburo to attract promising and effective foreign investment projects. This law enhances coherence across various supportive measures in accordance with the Investment Law, tax laws, and related legislation. Key areas include:

2.1.1. Business lines and sectors eligible for investment incentives

The Investment Law 2020 promotes research and development activities, the manufacturing and commercialization of products resulting from scientific research, and innovation initiatives. It also encourages sectors involved in supply chains, industrial clusters, and environmentally sustainable industries. To ease investment barriers, the law reduces certain conditional business requirements that hinder investor participation in the market, including 22 specified business lines listed in Appendix IV.

Expanded regulations on forms and beneficiaries of investment incentives
Article 15 of the Investment Law 2020 broadens the forms of investment incentives and the categories of eligible beneficiaries. Specifically:

Incentive Types: The law outlines incentives applicable under corporate income tax, import-export tax laws, and introduces additional benefits such as accelerated depreciation and increased deductible expenses when calculating taxable income.
Eligible Beneficiaries: The law clarifies the eligibility criteria, ensuring that incentives target appropriate projects accurately. Notable categories now include:

Projects with a minimum capital of VND 6,000 billion, with disbursement of VND 6,000 billion within three years from the issuance of the investment registration certificate or policy approval. Qualifying projects must either achieve annual revenue of at least VND 10,000 billion within three years or employ over 3,000 staff.
Additional eligible projects, including social housing construction, rural projects with 500+ employees, projects supporting disabled individuals, and others as outlined in Clause 2, Article 15.

Specific sectors benefiting from incentives include high-tech enterprises, scientific research-based businesses, and environmentally-focused industries. Startup projects, national innovation centers, and small-to-medium enterprise (SME) incubators also qualify under the 2020 provisions.

2.1.2. Special investment incentives

A key highlight of the 2020 Investment Law is the introduction of special incentives. The Prime Minister can apply these incentives to attract FDI promptly, with further provisions allowing the Government to propose special incentive policies to the National Assembly for crucial or strategically important projects. Projects eligible for special incentives include:

Innovation centers or R&D centers with at least VND 3,000 billion in total investment and VND 1,000 billion disbursed within three years.
Projects with at least VND 30,000 billion investment capital, disbursing VND 10,000 billion within three years in sectors eligible for special incentives.

The duration and extent of these incentives follow the Corporate Income Tax Law and the Land Law, with a flexible approach based on project performance rather than a maximum cap. These incentives apply exclusively to new projects.

2.1.3. Administrative reforms

To facilitate investment, the 2020 Investment Law introduces administrative reforms to streamline procedures, reduce costs, and simplify project approval processes. Key reforms include:

Principles and conditions for selecting investors for land-use projects, covering (1) land-use rights auctions, (2) investor selection bidding, and (3) investment policy approvals.
Standardized procedures for approving investment policies in housing and urban development projects, thus reducing bureaucratic overlap.
Delegation of authority to the Provincial People's Committee to approve investment policies for golf and golf infrastructure projects.
Enhanced autonomy for investors, enabling them to adjust project scope, merge or split projects, and manage capital contributions.

Moreover, the law assigns the Government responsibility for detailing new investment forms to keep pace with evolving business models and practices influenced by the Fourth Industrial Revolution. This reform underscores Vietnam's commitment to fostering a modern, investor-friendly legal environment.

2.2. Current basic legal policies to attract foreign investment in Vietnam

2.2.1. Investment incentive policies for foreign investors under the Investment Law 2020

The 2020 Investment Law introduces amendments to expand the scope of business lines and sectors eligible for investment incentives, aligning with Resolution No. 50/NQ issued by the Central Committee of the Politburo. These changes aim to attract high-potential and effective foreign investment projects and promote consistency across various investment and support policies in accordance with the Investment Law, tax laws, and other relevant legislation.

Investment business lines and sectors eligible for incentives

The 2020 Investment Law introduces provisions that promote activities in research and development, production and commercialization of products originating from scientific research, and innovation. It also encourages sectors focused on manufacturing goods and providing services that contribute to commercial chains, industrial clusters, and environmentally sustainable industries. Furthermore, the law continues to eliminate certain unreasonable conditional business requirements, thereby enhancing investor access to the economic market. A total of 22 conditional business lines have been removed, as specified in Appendix IV.

Expanded forms and beneficiaries of investment incentives

Article 15 of the Investment Law 2020 broadens the forms of investment incentives and clarifies the categories of eligible beneficiaries:

Forms of incentives: The law specifies applicable forms, such as those under corporate income tax and import-export tax regulations, and introduces additional incentives like accelerated depreciation and higher deductible expenses for taxable income calculations.
Eligible beneficiaries: Eligibility criteria are defined with greater clarity to ensure incentives target suitable projects. Key amendments include:

Projects with capital of at least VND 6,000 billion, with disbursement of VND 6,000 billion within three years from the issuance of the investment registration certificate or investment policy approval. These projects must also meet at least one of the following criteria: annual revenue of VND 10,000 billion within three years or over 3,000 employees.
Additional projects eligible for incentives include social housing construction, rural-area projects employing over 500 people, and projects supporting disabled employees, as specified in Clause 2, Article 15.

The expanded scope covers high-tech businesses, science and technology companies, and sectors related to environmental sustainability. Other areas such as startup projects, national innovation centers, and SMEs involved in distribution chains are now eligible for incentives under the updated law.

Special incentives for investment

The 2020 Investment Law empowers the Prime Minister to apply special incentives, providing flexible mechanisms to attract foreign direct investment (FDI) effectively. The Government may also propose additional incentive policies to the National Assembly for projects of significant economic importance or those situated in special administrative-economic areas. Eligible projects include:

Establishment or expansion of innovation and R&D centers with at least VND 3,000 billion in investment and a disbursement of VND 1,000 billion within three years.
Projects within special investment incentive categories, with at least VND 30,000 billion investment capital and disbursement of VND 10,000 billion within three years.

Incentives are applied flexibly based on project outcomes and adhere to the Corporate Income Tax and Land Law, without a maximum limit. These special incentives, outlined in Article 20 of the 2020 Investment Law, apply exclusively to new projects.

Administrative reforms

To facilitate investment, the 2020 Investment Law simplifies administrative procedures, reducing costs and clarifying project approval processes. Key reforms include:

Selection principles for land-use projects, covering land-use rights auctions, investor selection bidding, and investment policy approvals.
Unified approval procedures for housing and urban development projects to eliminate overlapping authorities.
Delegation of authority to the Provincial People’s Committee to approve golf-related investment projects.
Expanded investor autonomy, enabling project adjustments, mergers, splits, and capital contributions with minimal bureaucratic hurdles.

The law further mandates that the Government define new investment forms to adapt to emerging business models and innovations spurred by the Fourth Industrial Revolution.

2.2.2. Additional policies for foreign investment incentives

Additional investment incentives are provided under other legal frameworks, including:

Tax incentives

Corporate Income Tax: Tax rates of 10% for up to 15 years or 20% for up to 10 years; exemptions and reductions for up to nine years; loss carryforward for five years; exemption from profit remittance tax, and reinvestment tax refunds. Eligibility conditions vary based on location, economic zone status, high-tech or scientific focus, essential infrastructure projects, software production, education, and environmental initiatives.
Non-Agricultural Land Use Tax: Special reductions or exemptions for projects in specific sectors or regions.

Land-related incentive

Foreign investors are eligible for exemptions on land and water surface rent for certain projects:

Projects eligible for special investment incentives in areas with severe socio-economic challenges.
Projects in industrial zones providing housing for workers, where investors are not allowed to include land rent in rental charges.
Projects in essential services sectors, such as aviation service facilities, water supply infrastructure, and common infrastructure in industrial zones.

For investors leasing land from the government for industrial, economic, or high-tech zones, land and water surface rent exemptions are also applicable as follows:

11 years for projects in areas not eligible for investment incentives.
15 years for projects in areas with challenging socio-economic conditions.
Full exemption for the entire lease term for projects in areas with extreme socio-economic challenges.

These policies collectively enhance Vietnam’s legal framework for attracting foreign investment, creating a more accessible, incentivized environment for a wide range of investors.

3. Current situation and recommendations for foreign investors

3.1. Current situation of legal policies regarding investment

Currently, laws regarding investment and other specialized laws are still in the situation of overlap causing a lot of problems for foreign investors, enterprises when implementing investments. This can be mentioned as follows (VCCI, 2019):

3.1.1 Overlap and Inadequacy between Land law and Investment law

Investment Law 2020 is inconsistent with Land Law 2013 regarding the timing of determining the land use need of the application for approval of the investment policy and the application for determining the land use demand. (Thư Chiến, 2020)

Specifically, according to Investment Law, the time to appraise the land use demand is the time to appraise the investment dossier. The time to appraise the guiding provisions of this Law is 15 working days. However, the Land Law regulates that the appraisal documents shall be made on the basis of records of land allocation, land lease, amendment of land use purpose, the appraisal time according to guiding regulations is 30 working days.

Regarding the termination of investment projects and the related land right of the investors, Law on Investment stipulates that the project shall be terminated where after 12 months, the investor fails to perform it or is unable to perform it and the project is not considered as the projects which may be extended regarding the implementation schedule of investment projects as stipulated in Point g, Clause 1, Article 48.

However Land Law stipulates that in the case that investors have the right of land lease from the authority to implement the investment project and do not use the land for a period of 12 consecutive months or the progress of the project is delayed for 24 months, the investor will be allowed to extend the term of using land for 24 months and such investors shall be obligated to pay to the State an amount corresponding to the land use and rent for the period of delay according to Point i, Clause 1, Article 64.

The difference above between two regulations of Law on Investment and Land Law leads to a number of cases. For example many projects that the competent authority have issued decisions to terminate their operation due to violations of the project implementation time limit under Investment Law, however the land use period is still 24 months.

At the current time, there are still the existing inadequacy between regulations of land law and investment law relating to decision on the policy approval of project implementation (for non-budget projects) with annual land use plan of the district.

For example Point a, Clause 3, Article 33 of Investment Law 2020 stipulates: “The contents of the appraisal for approval of the investment policy including: a) Evaluation of the conformity of the investment project with the national planning, regional planning, provincial planning, urban planning and special administrative - economic unit planning (if any). However Point b, Clause 4, Article 33 stipulates: “The appraisal contents of request for approval of the investment policy concurrently with the approval of investors include: …b) The ability to satisfy the conditions for land allocation or land lease when the land allocation or land lease is not implemented through auction of land use rights, bidding for investor selection; ability to satisfy the conditions on changing the land use purpose for projects which require to change land use purpose”.

The regulations regarding the projects which are requested to be included in the annual land use plan of the district and the conditions to get approval of the investment policy are unclear. It cannot be confirmed that whether the decision of investment policy must be made first and then the authority will approve the project dossier to be included in the district's annual land use plan, or the project must be included in the district's annual land use plan first and then the investment policy will be approved. Some provinces proposed that where Land Law is not amended and the provincial planning has not yet been approved, the investment policy can be approved and then the project will be updated and added to the land use plan of the district.

3.1.2. Inadequacy between Investment Law 2020 and Law on Housing

Regarding the approval of investment policy for housing projects, according to the provisions of Clause 3, Article 76 of Investment Law 2020, Article 75 of Investment Law 2014 is still valid in connection with amending and supplementing a number of articles of investment regulations related to business investment.

In which, amending and supplementing Clause 1, Article 23 of Law on Housing regarding the form of land use for the implementation of commercial construction projects as follows: “1. Having the lawful right to use residential land, and other types of land permitted by a competent authority to change the land use purpose to residential land.”

Clause 2, Article 170 of Law on Housing is amended as follows: “2. For other housing construction projects which the investors are obligated to obtain the approval of investment policies in accordance with Investment Law, shall be regulated by the provisions of Investment Law.

These regulations cause a lot of problems for provinces in practice and can be understood that the housing project must have residential land. Some provinces have proposed to abolish this regulation and to amend Investment Law 2020 regarding the form of land use to implement investment projects on commercial housing

3.1.3. Inadequacy between Investment Law 2020 and Law on Forestry

Regarding the change of forest land use purposes, neither Investment Law nor Decree 31/2021/ND-CP detailing and implementing several articles of Investment Law do stipulate that the procedures for changing land use purposes should be implemented before or after the approval of investment policies. Such laws only regulate the procedure for projects which shall be decided by the Government and lack of regulations providing guidelines for local authorities.

Clause 4, Article 1 of Decree 83/2020/ND-CP stipulates: “4. For investment projects that change the forest use purpose, the policy on changing the forest use purpose is one of the contents in the approval of the project investment policy. Some local authorities have proposed to amend Investment Law, in which clearly stipulates that, during the investment stage, where there is an appraisal opinion of the Ministry of Agriculture and Rural Development on the eligibility to change the forest land use purpose of the project according to the provisions of the Forestry Law, the change of forest land use support can be done before or after the approval of investment policy.

3.2. The stability of legal system regarding investment

The current legal regulations on investment are constantly being improved to create favorable conditions so that foreign investors to carry out investment procedures easily and conveniently. However, that laws on investment are frequently amended and supplemented without certain stability is creating difficulties for foreign investors in Vietnam. For example, tax issues are relatively complex issues and regulated by many different regulations from laws, circulars to decrees. The system of tax regulations causes many difficulties for foreign businesses. However, tax regulations have been amended and updated continuously in a short time.( VCCI, 2019)

3.3. Administrative procedures in issuing licenses, amendments, and adjustments regarding investment projects of foreign investors

Although Investment Law 2020 issues many new regulations to overcome the cumbersome and complicated administrative procedures affecting foreign investors. However, there are still the situation that many authorities are involved in the process of license issue such as: Department of planning and investment, management boards of industrial zones, export-processing zones, and investment registration authorities. Procedures are regulated in legal documents on investment; however, the procedures are not implemented according to the guiding documents (VCCI, 2021).

In addition, during the operation after being granted the investment registration certificate, enterprises must also carry out many other procedures related to project implementation, different reports to many authorities participating in the investment management. There is not currently inter-agency management system. This leads to the situation that enterprises must carry out many duplicate administrative procedures. In addition, during the operation of enterprises, since many authorities are responsible for the investment management, enterprises must meet many reporting requirements for many different authorities.

According to the surveys of different organizations, there are still many issues that FDI enterprises are in concern such as although customs clearance procedures have been improved, it still takes quite a long time compared to ASEAN- 4, the recruitment of skilled foreign workers.

4. Recommendations for foreign investors

As of 2024, Vietnam's economy continues to grow robustly, with the government making sustained efforts to enhance the investment climate and attract foreign direct investment (FDI) through incentives and administrative reforms. Major free trade agreements (FTAs) like the CPTPP, EVFTA, and RCEP have created significant opportunities for market expansion and deeper integration into global supply chains. Additionally, infrastructure development, particularly in technology and transportation, has strengthened Vietnam’s position as an attractive destination for regional and international investors. To capitalize on Vietnam’s investment potential effectively, foreign investors must thoroughly understand the country’s legal framework and government support policies. Key recommendations include:

4.1. Legal conditions of investment fields and business lines

Most of the ordinary investment fields and business lines have been fully opened by Vietnam and the investors are permitted to do business in Vietnam as individuals or established legal entities in Vietnam. However, several conditional business lines request their own requirements such as legal status of investors, restriction of capital or other special conditions. Investors can consider regulations on conditions of business lines and investment fields stipulated in Vietnamese laws as well as commitments of Vietnam regarding market opening stipulated in bilateral and multilateral trade agreements.

Conditional business lines are a business line which the investor must fully meet the necessary requirements provided by law before the investors would like to enter into business activities. The conditional business lines are listed in a number of specific fields namely national defense, security, finance, health, culture - tourism, environment and etc. Currently, conditional business lines provided in accordance with Appendix IV of Investment Law 2020. Besides depending on the specific business field or business entity or business form, there will be separate specialized legal documents stipulating and guiding the necessary and specific sufficient conditions for a business line. Therefore the foreign investor should have a understanding and clarification of legal conditions of investment fields and business lines.

For example, when the investor would like to invest into real estate business line in Vietnam, the investor shall be bound by the regulations of Enterprise Law 2020, Investment Law 2020, Law on Real Estate Trading 2014 and other related regulations. Accordingly, the foreign investor would like to invest into establishing the real estate company, shall meet the minimum legal capital condition under Law on Real Estate Trading 2014 (minimum 20 billion Vietnamese dongs).

4.2. Legal issues regarding Investment capital

Investment capital includes equity of the owner and loan capital. Investors who wish to establish an enterprise in Vietnam in several fields with minimum capital requirements, shall meet the requirements of legal capital. In addition, based on different types of investment project, investor shall consider the level of investment capital to meet the explanation of the intended business objectives.

For example, the management services of exploitation, transportation and logistics (especially in the maritime sector) is an attractive content for foreign investment in recent years. This sector has a limitation on the percentage of foreign investment capital regarding the exploitation and logistics services by all methods such as road, railway, inland waterway, inland sea transportation, air transportation (except international shipping). Accordingly the foreign investors are allowed to invest up to 49% to 51% capital in such sector. However, due to the attractiveness of commercial factors and high competition, there are still many foreign investors interested in participating and investing into the transportation and logistic sector.

Another issue regarding investment capital which the foreign investor should consider when investing into Vietnam is opening the direct investment account. These contents regarding the direct investment account are stipulated under Circular 06/2019/TT-NHNN dated June 26th, 2019 guiding the foreign exchange management for the foreign direct investment in Vietnam. Under Article 5 of the Circular, “FDI enterprises” means:

a) Any enterprise established in the form of investment of establishing a business organization whose members or shareholders are foreign investors and granted the investment registration certificate in accordance with law on investment.

b) Any enterprises other than those prescribed in point a of this clause and at least 51% of charter capital of which is owned by foreign investors as follows:

(i) Any enterprises (operating in conditional business lines or without conditions applicable to foreign investors) at least 51% of charter capital of which is held by foreign investors through contribution purchase of shares/stakes;

(ii) Enterprises derived from division, acquisition, consolidation whose 51% of charter capital is owned by foreign investors after such events.

(iii) New enterprises established in accordance with relevant laws;

c) Project enterprises established by foreign investors to implement PPP projects in accordance with law on investment.

FDI shall open the direct investment account as follows:

a) Open a foreign currency account at one (01) authorized bank in order to receive and make payments in that currency during the process of foreign direct investment in Vietnam;

b) Only 01 (one) direct investment account may be opened for a foreign currency at one (01) authorized bank;

c) In case of investing in Vietnamese dong, the investor open one (01) direct investment account in Vietnamese dong at the authorized bank where the direct investment account in foreign currency is opened in order to receive and make payment in VND during the process of foreign direct investment in Vietnam;

4.3. Legal issues regarding contribution of investment capital and charter capital following the duration regulated by laws

Foreign investors establishing enterprises in Vietnam shall comply with the regulations on contribution of investment capital and charter capital following the duration regulated by laws and mentioned in the Investment Certificate. In case the capital contribution is not in accordance with the schedule and the duration regulated by law, the investor may be subject to relevant sanctions, including withdrawal of the Investment Certificate. In addition, investors should also have a plan of time to contribute capital to avoid violating the duration of capital contribution or/and punished by competent authorities where there is any unexpected event.

Depending on each form of investment, the time limit for registered capital contribution is prescribed under Enterprise Law 2020 and other related regulations as follows:

Regarding capital contribution to establish a company in Vietnam, the time limit for foreign investor to contribute the registered capital is 90 days from the date of issuance of the Certificate of Business Registration. The investor can request the investment competent authority for a longer term to contribute capital, however it shall be consistent with the registered project implementation schedule.
For investment under the cooperation contract/agreement, the time limit to contribute capital shall be agreed by the parties.
For share purchase, the time limit to pay share capital is mentioned in the share purchase agreement/contract. Enterprises may allow shareholders, members to delay capital contribution, however it must be expressed through signed documents to guarantee the completion of enterprise accounting books.

4.4. Legal issues regarding Land and business location

Investors should conduct a survey to find a business location which are suitable to their targets and business lines. This is a very important factor during the procedure of preparation and conducting of investment procedures. Investors should pay attention to the regulations on land lease, finding locations for headquarters that are allowed to rent, designs and functions of the location are suitable for the purpose of use and in accordance with regulations such as environment, security, fire prevention and so on.

Basing on and developing the previous regulations regarding land, Land Law 2013 maintains regulations which allow the foreign-invested enterprises to choose the method of holding the land right from the State or from the market. At the same time, Land Law 2013 also stipulates the expanding of the forms of receiving land use rights of foreign-invested enterprises corresponding to the method of holding the land right from the State or from the market. In case a foreign-invested enterprise has the right to land from the State, Land Law 2013 stipulates two forms of land use:

1) The State allocates land together with collection of land use levy for projects of housing business which the investors invest into for the purpose of sale or a combination of sale and lease;

2) The State leases land with annual rental payment or one-off rental payment for the entire lease period.

In case a foreign-invested enterprise chooses the method of accessing land from the market, it can choose from one of the following forms: receiving the transfer of investment capital as the value of the land use right; receiving capital contribution by land use right; lease or sub-lease land in industrial parks, industrial clusters, export processing zones, hi-tech parks, and economic zones.

It can be seen that the current Land Law has expanded the right of accessing land of foreign-invested enterprises in comparision with the previous Land Laws. In addition to the form of land lease from the State, for the first time Vietnamese law stipulates the form of receiving land use rights from the State for foreign-invested enterprises in the form of land allocation with collection of land use levy to implement investment projects in the field of housing business for the purpose of selling or a combination of sale and rent. This is aimed at creating the equal right of land access between foreign enterprisesand domestic enterprises when doing business in Vietnam and contributes to creating favorable conditions for foreign-invested enterprises in accessing land for a stable and long-term use of land to implement investment projects.

4.5. Other issues such as tax, labor, investment reports in accordance with Vietnamese laws

Taxes are one of the fundamental obligations of an investor. Therefore, when conducting investment business in Vietnam, foreign investors are obligated to implement the reporting procedures and tax payment in accordance with Vietnamese laws. Investors should research and have information about the different types of taxes under their obligations as well as tax incentives such as corporate income, value added tax, and so on.

Foreign investors establishing a company in Vietnam or implementing investment project in Vietnam shall be bound by regulations of tax namely, enterprise income tax, individual income tax, export – import tax, land use tax and other related taxes during the investment period. However, in order to attract the foreign investment into Vietnam, the government also issues tax incentivé policy for the foreign investors, especially regarding some specific projects.

According to the committed tax reduction program, the common tax rate has been reduced from 25% to 22% since 2014 and to 20% since 2016 and onwards. Particularly, small and medium-sized enterprises can apply the tax reduction earlier (from July 2013 to apply the 20% tax rate). Law on amending and supplementing a number of articles of Law on Corporate Income Tax 2013 also supplements incentives for investment project in the industrial zone (except for industrial zone in areas with favorable socio-economic conditions). ( Lê Xuân Trường, 2019)

Tax incentives have been specifically supplemented to encourage investment projects in areas with difficult socio-economic conditions and especially difficult social economic conditions. Besides tax incentives are applied in some fields which producing products with great added value, supporting industries which use high technology, bio-technology and so on, education, high-quality services, socialization. The preferential tax rates include 10% for a period of 15 years, 17% for a period of 10 years; Tax exemption for up to 4 years and 50% tax reduction for up to 9 years are applicable to investment projects in the fields or areas on the list of investment incentives.

Investment projects in the field of agriculture and agro-processing also have new incentives such as tax exemption for the whole term for the fields of cultivation, husbandry, processing of agricultural and aquatic products in the area withextremely difficult socio-economic conditions.

Import-Export Tax Law 2016 continues to base on the provisions of preferential export tax and import tax 2005 and amend some regulations to meet the demand of the new situation namely hi-tech enterprises, science and technology enterprises, science and technology organizations have import tax exemption for raw materials, supplies and components that cannot be produced domestically within 5 years from the date of producing. Law 2016 supplements regulations on tax exemption for raw materials, supplies and components to produce and assemble special medical equipments for research and manufacture which are imported into Vietnam due to the fact that Vietnam has not yet had ability to produce domestically.

In summary, it can be said that our legal policies have been established and improved to create an attractive market for foreign investor as well as to have a mechanism to implement our policies on attracting and increasing foreign investment methodically and effectively. However, the reality of economic development, new challenges from global integration, and other external factors of the world economy are posing problems for the legal policies of Vietnam regarding the foreign investment. These require more effort and effective policies from Vietnam to become one of the most attractive markets.

References:

Bộ Tài chính (2019). Chính sách thuế và ưu đãi đầu tư trong đầu tư trực tiếp nước ngoài tại Việt Nam. Kỷ yếu Hội thảo 30 thu hút đầu tư trực tiếp nước ngoài tại Việt Nam.
Bộ Tài chính (2019). Báo cáo tóm tắt đánh giá thực trạng hoạt động của doanh nghiệp có vốn đầu tư nước ngoài và chính sách ưu đãi tài chính.
Đỗ Nhất Hoàng (2014). Quá trình hình thành và phát triển của Luật Đầu tư nước ngoài tại Việt Nam. Luận án Tiến sĩ Luật học, Trường Đại học Luật Hà Nội.
Lê Xuân Trường (2019). Chính sách thuế thu hút doanh nghiệp có vốn đầu tư trực tiếp nước ngoài vào Việt Nam. Tạp chí Tài chính, số 704.
Ngọc Thúy (tháng 10/ 2024). Lịch sử của Luật Doanh nghiệp Việt Nam. Truy cập tại: https://luatvietnam.vn/linh-vuc-khac/lich-su-luat-doanh-nghiep-viet-nam-883-99333-article.html.
Thư Chiến (2020). Pháp luật đầu tư và những quy định chồng chéo, mâu thuẫn gây ‘rào cản’ cho doanh nghiệp. Truy cập tại; https://phaply.net.vn/phap-luat-dau-tu-va-nhung-quy-dinh-chong-cheo-mau-thuan-gay-rao-can-cho-doanh-nghiep-a233047.html
Dương Thị Tuyết Nhung, Đào Thị Tuyết (2021). Chính sách thuế đối với doanh nghiệp có vốn đầu tư nước ngoài tại Việt Nam qua các thời kỳ. Tạp chí Công Thương, Số 29+30, tháng 12/2020 .
Ngọc Bích (2016). Luật Đầu tư năm 2014: Một số điểm còn tồn tại. Truy cập tại: https://baophapluat.vn/luat-dau-tu-2014-mot-so-diem-con-ton-tai-post233465.html.
Vương Thanh Thúy (2021). Điểm mới của Luật Đầu tư năm 2020 dành cho doanh nghiệp. NXB Hồng Đức, Hà Nội.
Benedict J. Tria Kerkvliet (1997) . In Vietnam's Rural Transformation
Government of the Socialist Republic of Vietnam (2021). Decision No. 29/2021/QD-TTg issued by the Prime Minister on special investment incentives.
Government of the Socialist Republic of Vietnam (2015). Decree No. 118/2015/ND-CP dated November 12, 2015, specifying and guiding the implementation of several articles of the Investment Law.
Government of the Socialist Republic of Vietnam (2021). Decree No. 29/2021/ND-CP on procedures for appraisal of important national projects and supervision, assessment of investment.
Government of the Socialist Republic of Vietnam (2021). Decree No. 31/2021/ND-CP on detailing and guiding the Investment Law.
Decree No. 50/2016/ND-CP on penalties for administrative violations in the field of planning and investment.
Government of the Socialist Republic of Vietnam (2014). Decree No. 46/2014/ND-CP, Clause 6, Article 3 Decree No. 135/2016/NĐ-CP.
Ministry Of Planning and Investment (2017). Circular No. 02/2017/TT-BKHDT guiding the cooperation in processing of applications for investment registration and enterprise registration issued by the Minister of Planning and Investment.
Ministry Of Planning and Investment (2021). Circular No. 03/2021/TT-BKHĐT providing templates for documents and reports regarding investment activities in Vietnam, outward investment, and investment promotion.
Ministry of Finance (2015). Circular No. 38/2015/TT-BTC on certain contents of investment in the form of public-private partnership under the authority of the Ministry of Industry and Trade.
Ministry of Finance (2016). Circular No. 83/2016/TT-BTC guiding the implementation of investment incentives under the provisions of Investment Law No. 67/2014/QH13 and Decree No. 118/2015/ND-CP dated November 12, 2015.
National Assembly of the Socialist Republic of Vietnam (2008). Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008.
National Assembly of the Socialist Republic of Vietnam (2019). Law on Securities No. 54/2019/QH14 dated November 26, 2019.
National Assembly of the Socialist Republic of Vietnam (2014). Law No. 32/2013/QH13 dated June 19, 2013, on amendments to the Law on Corporate Income Tax, effective from January 1, 2014.
National Assembly of the Socialist Republic of Vietnam (2015). Law No. 71/2014/QH13 dated November 26, 2014, on amendments and supplements to laws on tax, effective from January 1, 2015.
VCCI (2019). Report on overlap of laws regarding investment and business.
VCCI (2021). Report on the implementation of Resolution 02, 2020, and Resolution 35, 2016 of the Government.

Chính sách pháp luật thu hút đầu tư nước ngoài vào Việt Nam -

Thực trạng và khuyến nghị đối với nhà đầu tư nước ngoài

TRƯƠNG HIỂU QUÂN

Tổng Thư ký Trung tâm Nghiên cứu Pháp luật Trung Quốc - ASEAN,

Giáo sư hướng dẫn Tiến sĩ

TRẦN ANH TÚ

Luật sư Hội Luật gia Việt Nam,

Nghiên cứu sinh Tiến sĩ (Khóa 2020) Chương trình Nhân tài ASEAN

tại Trường Đại học Chính trị và Pháp luật Tây Nam

Tóm tắt:

Nghiên cứu này phân tích sâu các chính sách pháp lý của Việt Nam nhằm thu hút đầu tư trực tiếp nước ngoài (FDI) và đánh giá những cải cách pháp lý quan trọng từ Luật Đầu tư Nước ngoài năm 1987 đến Luật Đầu tư năm 2020. Kết quả cho thấy, Việt Nam đã đạt nhiều tiến bộ trong việc kiến tạo môi trường đầu tư thuận lợi nhờ các chính sách ưu đãi đa dạng và cải cách hành chính toàn diện. Tuy nhiên, những thách thức như sự chồng chéo giữa các quy định pháp luật và quy trình hành chính phức tạp vẫn là rào cản lớn. Đóng góp nổi bật của nghiên cứu bao gồm đề xuất những giải pháp mang tính đột phá, như tăng cường sự ổn định và minh bạch trong hệ thống pháp luật, đơn giản hóa quy trình cấp phép và duy trì ưu đãi thuế cho các ngành đầu tư trọng điểm. Những giải pháp này sẽ góp phần cải thiện đáng kể môi trường đầu tư và nâng cao vị thế cạnh tranh của Việt Nam trên trường quốc tế.

Từ khóa: đầu tư trực tiếp nước ngoài, Luật Đầu tư, nhà đầu tư nước ngoài, cải cách hành chính.