Law on Investment 2020 – Breakthroughs in the field of investment

Nội dung bài viết

A number of fields concerning the Land Law, the Law on Real Estate Business and other related laws have been specified and amended in this Law on Investment 2020, thereby contributing to the improvement of the laws. Compared with the Law on Investment 2014, the Law on Investment 2020 has 22 notable changes, some priciple and remarkable points as follows:

Definition of “Innovative start-up investment projects”

The first time ever the Law on Investment 2020 determines definition of “Innovative Start-up Investment Projects”, which can be considered to create a new premise for regulations with regard to this kind of projects afterwards on the basis of exploiting intellectual property, new technologies and models, start-up projects which can be promptly applied. In parallel to this, regulations become more and more open to start-up investment projects.

Regarding offshore investment projects with reference to innovative start-up investment, investors shall be required no investment registration procedure. Even innovative start-up investment funds just be required to performing enterprise registration procedures and there is no need of registering for investment. This is so meaningful for constituting a creative and dynamic innovative start-up investment environment. Furthermore, cases eligible for enjoying investment incentives are expanded to innovation centers, research and development centers.

Determination of principles, conditions for business investment

For the first time ever, the principles and conditions of business investment are identified. As compared to the past, these principles and conditions were regulated in many different documents, which causes rampant, inconsistent phenomena and leads to obstacles for investors.

Conditions for business investment are stated as follows: minimum conditions for business investment must be ensured, furthermore, subject, scope, form, content and administrative procedures to apply conditions shall be clearly stipulated. Restricting the phenomena of holding dossiers for a long time by competent state agencies.

That progress is reflected in the provision that business conditions shall be applied in one of the forms: license, certificate, credential, … without written confirmation of competent state agencies as before.

Supplement with more forms of investment incentives

The Law on Investment 2020 has supplemented more forms of investment incentives, the most prominent one in that progress is "quick depreciation". This form assists enterprises and investors to reach their break-even point faster. Moreover, levels of deductible expenses for tax calculation have been increased.

Legislators also give incentives to enterprises employing women and ethnic employees. In addition, investors eligible for enjoying incentives are additionally acknowledged with deductible expenses for tax calculation even if such expenses are not really reasonable.

Expansion with more subjects eligible for investment incentives

Legislators, upon amending and supplementing the new law, have simultaneously expanded more subjects eligible for investment incentives. Outstanding subjects supplemented are: Social housing construction investment projects; Projects on manufacture of products on the portfolio of supporting industrial products prioritized for development; technology incubators; projects on environmental protection; large-scale projects capitalized at VND 6,000 billion or more in case of meeting additional conditions on turnover or the number of employees, ...

Stricter regulations on M&A activities

With reference to the ratio requiring registration for approval procedures in M&A activities of foreign investors with projects in Vietnam, the treshold of 51% or more is reduced to over 50%. Furthermore, M&A activities of foreign investors having impact on national defense and security according to the provisions of the land law, including: Projects located in crucial and sensitive areas such as communes, wards, towns, ... of sea-islands, borderlands and coastal lands shall require approval from the competent state authorities. Such regulations demonstrate the strong control of Vietnamese government, which is aimed at restricting the events that foreign enterprises may control the land, land use right in such sensitive and crucial areas via M&A activities.

Concretization on the selection of investors according to bidding procedures as prescribed in the law on bidding

Investors already having land use right or receiving the transfer of land use right from another party, upon proposing an investment project on that land, shall be required no bidding procedures for selection of investors.

Amendment on the portfolio of investment project under approval of the Prime Minister, Provincial People's Committee

The Law on Investment 2020 has reduced the investment portfolios approved by the Prime Minister and increased ones approved by provincial-level People's Committees.

Changes from investor in investment activities which require approval are limited toonly 6 cases: Change on investment policy; change on the scale of land use area; change on total investment capital; change on schedule for project implementation; modification on duration of investment project; change on appraised technology. It can be seen that the reduction of administrative procedures is the policy and goal that legislators are aiming for.

Specific provisions on investment extension

Regarding the extension of investment schedule, the time limit of project can not be extended more than 24 months from the original one. Except for force majeure as prescribed by law and other cases, the time limit may exceed more than 24 months. Thereby creating a "way out" for many pending projects in Vietnam.

Re-regulation on ecrow to secure the implementation of investment projects

In comparison with the Law on Investment 2014, all projects in relation to land use right shall be ecrowed. Under the Law on Investment 2020, it has been eliminated for investors in one of the cases as follows:

  • Investors win the land use right auction to implement investment projects subject to land allocation by the State, and land use fee collection or land lease with one-off rental payment for the entire lease term;
  • Investors win the bidding to implement investment projects subject to land use;
  • Investors are entitled to land allocation or land lease by the State on the basis of receiving transfer of investment projects that have made ecrow or have completed capital contribution or capital raising in accordance with the schedule specified in written investment policy approvals or investment registration certificates;
  • Investors are entitled to land allocation or land lease by the State to implement investment projects on the basis of receiving transfer of land use rights and properties attached to land of other land users.

Regarding condition for the extension of time limit for project performance

Upon the expiry of the time limit for project performance, if wishing to continue implementing the investment project and satisfying the conditions as prescribed by law, an investor may be considered for extension but it must not exceed 70 years for investment projects in the economic zone; 50 years with projects outside economic zone; 70 years for investment projects in difficult economic areas or investment projects having foreign investors and its capital amount is slowly recovered.

Further cases not considered for extension upon the expiry of the time limit for project performance are: projects using outdated technology with a latent possibility of causing serious environmental impacts; projects in cases where investors must transfer without asset compensation to the Vietnamese State.

Additional cases of investment projects are terminated by competent state agencies:

Investment project falls into the cases where the land is recovered; investor do not ecrow or have no guarantee; investor makes investment activities on the basis of artificial civil transactions.

Furthermore, the Law on Investment 2020 has oriented the government regarding the form of investment incentives, including: The tax reduction level compared to the preferential tax rate, the extension of this tax application duration affects the preferential tax rate applied for enterprises eligible for enjoying investment incentives. Abolishing regulations on legal capital of VND 20 billion in real estate business activities.


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