Legal risk assessment and penalties for terminating an investment project in Vietnam without notification
Question:
The Investment Registration Certificate for project code X has been issued but the project is currently inactive, and we need to close it. What risks might we face when winding up this project, and what penalties would apply? Please cite the relevant legal provisions.
Answer:
- Risk of Administrative Penalties for Failure to Notify and Submit Termination Decision of the Investment Project to the Investment Registration Authority.
According to the information provided by the Client, SB Law understands that, in practice, the investment project registered under Investment Registration Certificate with project code X has ceased operation at the registered project location since May 28, 2021.
Pursuant to Clause 2, Article 57 of Decree No. 31/2021/ND-CP, in the event the investor decides to terminate the operation of an investment project, the investor is obligated to submit the decision on termination of the investment project to the Investment Registration Authority within 15 days from the date of such decision, together with the Investment Registration Certificate.
In case the investor fails to comply with the obligation to notify or submit the decision on termination of the investment project, according to Point d, Clause 2, Article 15 of Decree No. 122/2021/ND-CP, the investor may be subject to administrative penalties in the form of a monetary fine ranging from VND 30,000,000 to VND 50,000,000, along with a remedial measure requiring the investor to submit the notification or decision on termination of the investment project to the Investment Registration Authority.
- Risk of Administrative Penalties for Non-Compliance with Investment Activity Reporting Obligations
In addition to the obligation to notify and submit the decision on termination of the investment project as mentioned above, the Client should also pay attention to compliance with the investment activity reporting obligations.
Regarding the submission of investment reports by foreign-invested companies, pursuant to the Law on Investment 2020 and Decree No. 29/2021/ND-CP on investment monitoring and evaluation, investors/ economic organizations implementing investment projects in Vietnam are required to periodically submit reports related to the investment project, including the following:
- Investment monitoring and evaluation reports;
- Periodic investment activity reports.
a, For Semi-Annual and Annual Investment Monitoring and Evaluation Reports
Submission deadlines:
+ Semi-annual report: To be submitted before July 10 of the reporting year.
+ Annual report: To be submitted before February 10 of the following year.
Form of submission: Direct submission to the Investment Registration Authority.
b, For Quarterly and Annual Periodic Investment Activity Reports
Submission deadlines:
+ Quarterly report: To be submitted before the 10th day of the first month of the quarter following the reporting quarter (for example: the Q3/2024 report must be submitted before October 10, 2024);
+ Annual report: To be submitted before March 31 of the following year.
Form of submission: Online submission via the National Foreign Investment Information System (https://fdi.gov.vn/pages/trangchu.aspx)
- Legal Consequences of Non-Compliance with Investment Monitoring and Activity Reporting Obligations
The Client should note that failure to comply with the investment monitoring and reporting obligations may result in administrative penalties with the following specific forms of penalties (according to Article 15 of Decree No. 122/2021/ND-CP):
- Preparing investment monitoring and evaluation reports not in accordance with the prescribed timelines or with incomplete contents; or failure to submit periodic investment monitoring and evaluation reports as required may result in a fine ranging from VND 20,000,000 to VND 30,000,000.
- Failure to submit investment activity reports or submitting reports not in accordance with the prescribed timelines may result in a fine ranging from VND 30,000,000 to VND 50,000,000.
