VIETNAM - INVESTMENT AND DOING BUSINESS – CURRENT ISSUES AND HOW THE CPTPP FOREIGN DIRECT INVESTMENT CHAPTER AND THE EUVNA FREE TRADE AGREEMENT AND THE EU VN INVESTMENT PROTECTION AGREEMENT CAN SUPPORT LEGAL CERTAINTY AND BANKABILITY OF YOUR PROJECTS

1. VIETNAM - INVESTMENT AND DOING BUSINESS – CURRENT ISSUES AND HOW THE CPTPP FOREIGN
DIRECT INVESTMENT CHAPTER AND THE EUVNA FREE TRADE AGREEMENT AND THE EU VN
INVESTMENT PROTECTION AGREEMENT CAN SUPPORT LEGAL CERTAINTY AND BANKABILITY OF YOUR
PROJECTS
I. Investment and Doing Business in Vietnam – What are the current issues?
REGARDING FOREIGN INVESTMENT
1. Uncertain requirement to amend Investment Registration Certificate (‘IRC’) to conduct
on-the-spot importation
Under Article 3.3 of Decree 09/2018/ND-CP and interpretation of the Ministry of Industry and Trade
(‘MOIT’), foreign invested enterprises (‘FIE’) cannot conduct on-spot import activities. Also, the regulation
on on-spot export and import under Circular 04/2007/TT-BTM has expired and no further guidance on
this has been issued so far. Thus, it is currently impossible for FIE to import on the spot.
We recommend the Government to issue guidance allowing FIEs with trading activities to conduct on-
spot importation right.
2. Granting investment incentives
Some competent authorities were hesitant about granting incentives to foreign investors due to concern
about their fulfillment of the conditions to enjoy the applicable incentives. There are also cases that the
incentives granted have been adversely affected by the revision of laws and regulations, such as setting
higher criteria for enterprises.
We recommend that: (i) the laws and regulations must clearly describe the conditions to be eligible for
incentives; and (ii) investors shall continue to enjoy the granted incentives during their operation term or
the period provided by the law when there are changes in laws and regulations or policies after the grant.
3. Market entry conditions applicable to foreign investors
Annex I to Decree 31/2021/ND-CP lists out conditional investment sectors applicable to foreign investors.
Other than the listed sectors, foreign investors should enjoy the same market conditions as domestic
investors. However, under specialized documents, foreign investment in unlisted sectors has faced certain
restrictions on market access, which is a clear conflict with the mentioned rule in Article 17.1 of Decree
31/2021/ND-CP.
We suggest to carefully identify business sectors prohibited under specialized regulations and to update
Decree 31/2021/ND-CP accordingly, as well as to open the market to foreign investors, especially in
sectors where Vietnam has not committed to impose any restrictions in international treaties.
4. Requirement for obtaining the IRC for business locations, branches of FIEs

2. The current laws on enterprise and investment do not set out a proper guidance for FIEs to establish
business locations or branches. This leads to inconsistencies in implementation among provinces in terms
of whether a separate IRC is required for each branch or business location.
We recommend that new legislations should be adopted soon to address this issue and we suggest that
the investors/companies should have the right to decide whether to amend the investment capital shown
on the issued IRC, or to apply for a new IRC for each new location.
5. Inconsistency in regulating FIEs
Currently, an FIE is established via green-field investment or via an M&A. Whether an FIE is established
under green-field investment or via an M&A, there should be no difference between these FIEs as to
investment term and limitation on loan capital.
6. Government guarantee under the Investment Law
Many investors tend to obtain the permits for large-scale infrastructure projects under the scheme of the
Investment Law instead of in the form of a PPP project due to the prolonged investment process under
the PPP regulations.
The government guarantee of ensuring bankability to ensure the loans from international financial
institutions for large-scale projects under the Investment Law should also be granted for the eligible
investors in PPP projects.
7. Continuous use of land after the expiry of land lease by industrial zone developers
There is no clear guidance on the rights and obligations of FIEs in the form of joint venture operating
within industrial zones whose land lease agreement with the State is going to expire.
We recommend the Government to extend the terms of foreign investment projects in these industrial
zones, including continuous use of their land use rights and the factories after the expiry of the term of
the joint ventures.
8. All FIEs are required to submit report on investment while the reporting obligation is only
required for certain types of companies
Under the Investment Law, an FIE must file the quarterly and annual reports on the National Portal on
Business Registration. For amendment of the IRC, only reports per Form A.I. 12 is required. However, in
practice, during the application for IRC amendment, the local DPIs have required to complete other
reports for all kinds of investment projects (even small-scaled projects) other than reports under Form
A.I. 12. This has caused certain delay in the IRC amendment process.
REGARDING LICENSING PROCEDURE
1. Legalized document in corporate licensing

3. In practice, foreign investors must prepare and submit many legalized copies of one type of document in
one transaction. Local authorities have had different request on the validity term of these legalized copies,
ranging from 3- 6 months.
We propose that (i) the local authorities should accept certified true copies instead of requesting the
original legalized document; and (ii) the local authorities should not impose a strict limitation on validity
term of legalized and certified documents as long as their contents remain unchanged.
2. Licensing authority’s request for documents not required under laws
The current regulations (i.e., Article 9.2 of Decree 01/2021/ND-CP and Article 6.1(b) of Decree
31/2021/ND-CP) prohibit local authorities from requesting additional documents for licensing purpose
other than those prescribed by laws. In practice, it is contrary.
We recommend a direction to be issued to require licensing authorities not to ask for any additional
documents other than those prescribed by law and such direction should be published on the website of
the Ministry of Planning and Investment.
3. Guidance on "other contents" of enterprise and investment registration documents to
be notified to local authorities
Article 31.1 of the Enterprise Law and Article 63.2 of the Investment Law set out circumstances where
changes to IRC and ERC application dossiers require notification to the licensing authorities. However,
given the broad interpretation of “other contents” in these Articles, foreign investors are confused about
whether the unlisted changes to contents of their IRC and ERC application dossiers are not subject to
notification to the licensing authorities.
We recommend further guidance on Article 31.1(c) of the Enterprise Law and Article 63.2 of the
Investment Law in this regard.
4. Inconsistency in licensing procedure regarding capital/ share transfer
In the applications for (a) ERC amendment of multi-member limited liability company on changes of
capital contributing members due to capital transfer and (b) notification on the changes of foreign
shareholders of joint stock company, one of the required items is "transfer agreement or documents
evidencing the completion of the transfer". However, in practice, some DPIs further requires "documents
evidencing the completion of the transfer" even though the transfer agreement has already been
submitted.
We recommend a detailed guidance on what "documents evidencing the completion of the
transfer" should include and consistent implementation by DPIs.
5. Amending certain details of the ERC
Article 30.1 of the Enterprise Law requires registration of changes to the ERC be made within 10 days from
the change. However, in certain cases such as changes to information of foreign investors, due to the
licensing process abroad as well as the legalization process, foreign investors cannot meet the above

4. timeline. Therefore, we recommend the licensing authorities allow more flexibility for foreign investors in
case of material changes to the ERC.
6. Necessity of information of chief accountant/person in-charge of accounting when
establishing a new company online
According to the prescribed forms (e.g., Appendices 1-2, 1-3 and 1-4) for establishment of a new company
under Circular 01/2021/TT-BKHDT, information regarding chief accountant or person in-charge of
accounting is optional. However, in practice, when submitting the application dossier online, such
information is mandatory. We suggest MPI should remove such requirement from the current online
registration system and instruct the DPI to follow the same.
7. Time of entitlement of members’/shareholders’ rights and obligations
Based on the current regulations, foreign investors are uncertain about when they can officially be
considered as the members/shareholders of the target company, whether it is upon completion of
procedures for changing members/shareholders under Article 66.5 of Decree 31/2021/ND-CP or when its
information is fully recorded in the registry under Articles 28.3, 30.1, 47.5, 52.2, 124.4 and 127.6 of the
Enterprise Law.
We suggest MPI revise Article 66.5 of Decree 31/2021/ND-CP to make it consistent with the relevant
provisions in the Enterprise Law in relation to a joint stock company.
8. Charter capital shown on the ERC
There should be explicit regulations to distinguish between charter capital shown on the ERC and
contributed capital for implementation of the investment project shown on the IRC.
In case an FIE has multiple investment projects, it is not clear whether it must include the contributed
capital of all such projects as the total charter capital of the FIE.
Contributed capital can be either (a) additionally contributed by the investor/ owner, or (b) generated
from the retained profit of the company. It is unclear whether case b) considered as additional charter
capital of the company.
9. Non-acceptance of application to amend Construction Operation License of foreign
contractor
Currently, there is no detailed procedure to amend the construction operation license of foreign
contractors under Decree No. 15/2021/ND-CP. The Draft Decree amending Decree 15 is still pending for
issuance.
We recommend the Government finalize and issue the Decree amending the Decree 15 soon so that there
is a clear procedure to amend the construction operation license of foreign contractors.
10. Prolonged MOIT’s approval for retail outlet licenses due to internal restructuring

5. Under Decree 96/2022/ND-CP, MOIT’s prior Department of Planning and Department of Finance and
Enterprise Innovation has been merged into one new Department of Planning and Finance. Due to the
merge, the previous retail outlet license in-charge Department of Planning now no longer has the
authority to grant retail outlet licenses and it is still unclear now who is in charge. This has significantly
delayed the process for retail outlet license application beyond the statutory limit of 23 workings days.
We request the MOIT (i) take necessary and urgent action to solve the issue, and (ii) comprehensively
review the regulatory framework for retail outlet licenses for foreign investors.
11. Unclear definition and inconsistent understanding of M&A Approval Process
Apart from circumstanced listed in Article 26 of the Investment Law, an M&A Approval will not be
required. However, (i) in practice, an M&A Approval is still required in case of change in the nationality of
foreign investors (but no change in foreign ownership ratio); (ii) the definition of “security areas’’ is too
broad and normally the state secret; (iii) it is unclear who is in charge of applying for an M&A Approval
due to the inconsistency between Article 26 of the Investment Law and Article 66 of Decree 31/2021/ND-
CP.
Thus, we request that an M&A Approval be not required in (i) above and further clarifications to cases (ii)
and (iii).
12. Lengthy procedure for M&A Approval issuance as responsible local authorities lack
consistency
Pursuant to the Investment Law 2020, with respect to companies located in industrial zones, export
processing zones, high-tech zones, or economic zones, the Management Authorities of such zones have
the power to issue the M&A Approval. However, there are cases that the Management Authority of an
industrial zone requested the local DPI to give opinions on the application for an M&A Approval, which
has caused delay for the approval process.
ISSUES ON LAND, HOUSING AND REAL ESTATE
1. Confusion due to the issuance of the new Law on Investment
According to the new Law on Investment, there are provisions on approval and investor selection whereby
different level of authorities (e.g. National Assembly, the Prime Minister, and the Provincial People's
Committee) are authorized to grant the approval for different level of projects involving land use. At the
same time, the Law on land provides regulations on land allocation, land lease and alteration of land use
purpose whereby different level of authorities are also mentioned for specific use or change of land use.
As a result, confusion for investors existed since these provisions can both directly regulate their
investments even though such provisions regulated different aspects of land use and investment.
With respect to the Law on Real Estate Business, the newly issued Decree 02/2022/ND-CP failed to provide
clarity on the mix-up between the Law on Real Estate Business and the Law on Investment. According to
Article 9 of the said Decree, there are two cases where investment regulations prevail over real estate
regulations being (i) Real estate projects in which the investor has been approved under [Article 29] of
the 2020 Law on Investment; and (ii) Real estate projects in which the investor has received the
Investment Registration Certificate in accordance with the 2020 Investment Law. This provision created

6. confusion for developers with real estate project approved under the previous law (i.e. the Law on
Investment 2014 or before). As a side note, the draft (amended) Law on Real Estate Business, as published,
did not much more guidance on this issue.
2. Foreign-invested-enterprise (FIE) under relevant laws
Since the relevant regulations on land, housing and real estate business do not explicitly provide any
definition for “foreign-invested-enterprise”, it is generally understood that a company with any portion
of foreign investment under any form will be treated as a FIE with imposed restrictions. As a result, as a
way to avoid being treated as a FIE, it is observed that enterprises often set up multiple layer of ownership
to mitigate this uncertainty.
Further, according to the most updated draft of the Law on Real Estate Business, the right for a FIE to
implement its business of construction of properties for real estate business (e.g. logistics, warehouse
leasing) within industrial zones, industrial clusters and hi-tech zones is no longer provided. As a large
number of FIE is currently implementing this business in different industrial zones, the new provision,
should it be officially issued, will create legal uncertainties on the investment into the real estate sector
of Vietnam.
3. Access to land
As regulated under relevant regulations on land, it is widely understood that, outside of industrial parks,
FIEs are only permitted to lease land directly from the State or use land under the form of contribution of
capital from a Vietnamese enterprise. These methods, as a whole, do not meet the requirements for most
of the FIEs since they usually do not fit commercial purpose. Under Article 153.3 of the Law on Land, FIEs
are allowed to lease commercial land and non-agricultural production land from economic organization.
However, in practice, there has been no clear case whereby a FIE is permitted to lease the land from a
local land owner as a basis for an investment project. The most common and feasible option for FIEs to
be approved with investment projects are lease of assets attached to the land (i.e. office, factory etc.).
Further, as a practical issue, international investors in the industrial and logistics sectors often find it hard
to access land in Vietnam due to high prices from local vendors since it is believed that a number of local
enterprises in Vietnam are indeed land speculators. Currently, the government appears to have little
regulations and tools to control these local vendors/speculators. There are now draft suggestions to limit
independent property brokers by requiring them to work for a firm and subjecting them to more difficult
certification examinations. This may raise the bar for brokerage and discourage speculation, but it just
forms a portion of the whole. If local businesses postpone their timelines and schedules for implementing
land use projects, there should be more explicit and forceful actions used to ensure that the property is
returned to the State. When assessing the qualifications of investors, local governments themselves
should adopt a more skeptical stance.
On a side note, as Vietnamese entities are not allowed to mortgage their land use right and attached
assets (i.e. factory) to foreign lenders. Vietnamese entities often find it hard to get offshore financing
resources.
Relevant procedures
(i) Proposal on land use:

7. For an investor to apply for its investment project with land use and allocation/lease of land from the
competent authorities, such investor is required to submit the (i) proposal for investment project to
competent investment authority with contents on land use demand and (ii) land use demand document
to be prepared on the basis of land allocation and land lease dossier which comes after the investment
policy is approved to competent land authority. Thus, principally, relevant authorities would be required
to appraise the land use proposals of the investor twice.
(ii) Extension of project’s duration and land use term:
According to the Law on Investment and the Law on Land, an investor must extend the land use term and
the duration of its investment project at least 6 months before their expiring date. However, the term to
be extended first between the two remains unclear.
According to the guidance document of the Law on Land, in case the investment project must be
extended, the investor must apply for the extension at least 6 months before the expiring date and must
first obtain the competent investment authorities' approval regarding the extension of the project
duration. At the same time, according to the guidance document of the Law on Investment, the investor
must apply to extend the project's duration (again) at least 6 months before its expiring date. As a result,
in case the investor applies to extend the project's duration at least 6 months before its expiry, then there
would not enough time to extend the land use term. As a practical issue, the authorities do not allow
either procedure to be carried out too soon. There were also cases where the investment authority
requires that the investor obtain an approval to extend the land use term. However, by law, it is impossible
to extend the land use term prior to extending the project's duration.
(iii) Land compensation and clearance
According to the Law on Land, the land will be handed to the designated company after all of the payment
for compensation, support and re-settlement are done. However, as the procedure for land compensation
and clearance is conducted by the land authorities. The investors, in such case, are not in the driving seat
and, in most cases, the investors are required to deal with the applicable households first before the land
can be recovered. With respect to this issue, foreign investors face many difficulties in implementation of
their projects in Vietnam due to (i) lack of experience in dealing with local households; and (ii) other
options (i.e. leasing the land directly from households) are not available, by law, for foreign investors.
4. Second-home market
It is widely believed that a legal framework on second home built on non-residential land should be
developed for further investment into the sector to address the following issues:
(i) Pink Book: To provide a definition understanding on the Pink Book regarding the term (i.e. 50 years)
and the possibility for foreign owners to receive 50-year Pink Books.
(ii) Business line: To provide proper requirement on whether companies established under the law of
Vietnam must be licensed with the appropriate real estate business lines when engaging in long-term
lease or sub-lease of non-residential units, or participating in the rental pool program under the Law on
Real Estate Business.
(iii) Management of second-homes: For second-homes to be built on branded residence projects
implemented on residential land, it is important that the legal framework clarifies whether such second-

8. homes can be leased out on a daily basis for at least 10 – 20 years without contravening the Law on
Housing.
Main issues of the new Draft Law on Land and Draft Law on Real Estate Business
(i) Land user under the current Draft Law on Land: Although “foreign-invested economic organizations”
and “foreign organizations with diplomatic functions” are defined as land user in the Draft Law on Land,
it remains unclear whether foreigners are allowed to use land in Vietnam. It is also worth noting that,
under the Law on Housing, foreigners are allowed to own houses in Vietnam whereby the purchase/sale
of houses must be associated with land use rights. Thus, the Draft Law on Land, without defining
foreigners as land users, might cause difficulties for foreigners to exercise their rights in Vietnam in
relation to their ownership of houses. Further, a more consistent legal framework will attract foreign
individuals to trade and own new types of real estate such as condotels, tourism villas, resort villas,
bungalows, officetels, shophouses. To increase the consistency between the regulations on housing and
regulations on land, it is suggested that “foreigner” be added as a group of land user into the new Law on
Land.
Compared to the current Law on Land, the Draft Law on Land purely provides that foreign-invested
economic organization is a group of land user without any explanations in detail as in the current Law on
Land. This causes the legal uncertainty regarding the definition of “foreign-invested economic
organization” as there remains no clear definition for such group since the issuance of the current Law on
Land. It is recommended that further elaborations are made to the definition of “foreign-invested
economic organization” to solidify the consistency with the regulations on housing/investment/real
estate business.
(ii) One-off rental payment for land lease: According to the Draft Law on Land, two cases are provided
whereby one-off rental payment is allowed being (ii1) Agricultural production, forestry, aquaculture or
salt-making projects; and (ii2) Land in industrial zone, industrial clusters, processing zones, and hi-tech
zones. For all other cases, annually payment is applicable for rental payment. Thus, for one to be able to
mortgage the land use right, such transaction is only permitted in the two cases as mentioned above. For
this reason, the new projects not entitled for one-off rental payment will face financial difficulties since
they are not able to mortgage their land use right and/or transfer of land use right. Additionally, this
clause conflicts with the proposed amendment to the Law on Real Estate Business, which states that
among other requirements, a developer must be leasing land from the State with one-off land rental
payment in order to sell properties (such as condotels, officetels, etc.) that will be formed in the future.
(iii) Relevant right of foreign-invested enterprises: According to the Draft Law on Real Estate Business, a
foreign-invested enterprise is no longer permitted to make investment to sub-lease land inside of IPs,
industrial clusters, hi-tech zones and economic zones. From the issuance of the Law on Real Estate
Business, such right given to foreign-invested enterprises was the basis for investment in projects for the
lease of warehouses, factories, etc. Thus, the removal of such right will immensely impact the business.
At the same time, for current and active investors, Draft Law on Real Estate Business does not contain any
explicit transitional provisions. Moreover, the removal of subleasing right also conflicts with the right to
“lease assets under their ownership attached to land” provided to foreign investors under the Draft Law
on Land.
TAX ISSUE

9. 1. VAT treatment for exported services
The definition for services being used outside of Vietnam is not specifically stated in the law and is thus
ambiguous. When taxpayers assert their right to apply 0% VAT for exported services, this causes the tax
authorities to interpret the law at their discretion. The way tax authorities now interpret the law
discourages taxpayers from applying 0% VAT on exported services, which eventually reduces Vietnamese
service providers' price competitiveness on the global market if they are forced to apply 10% VAT instead
of 0% VAT. It is advised that the MOF update the rules to provide a precise description of exported
services. For simpler tax administration, exported services should instead be based on the status of the
overseas client and the foreign source of the service price.
II. How the Comprehensive and Progressive Trans-Pacific Partnership (‘CPTPP’) Foreign Direct
Investment Chapter and the EU – Vietnam Investment Protection Agreement (‘EVFTA’) and the
EU – Vietnam Investment Protection Agreement (‘EVIPA’) Can Support Legal Certainty and
Bankability of Your Projects?
For any investment-related dispute (i.e. expropriation without compensation, investment discrimination),
an investor of a party is allowed to bring such dispute against the Government of the other party to the
Investment Court for settlement. In case either of the disputing parties disagrees with the decision of the
Tribunal, it can appeal it to the Appeal Tribunal. While this is different from the common arbitration
proceeding, it is quite similar to the 2-level dispute settlement mechanism in the WTO (Panel and
Appellate Body). We believe that this mechanism could save time and cost for the whole proceedings. The
final arbitration award is binding and enforceable without the local courts’ review of its validity. The
Government of Vietnam has to fully implement this commitment within five years from the entry into
force of the EVIPA. For your information, as of February 2023, there have been 11 out of 27 EU members
having ratified the EVIPA. It means we need to wait until the remaining 16 EU members have ratified the
agreement for it to take effect and trigger the deadline for direct enforcement of arbitral award by the
Government of Vietnam.
While the CPTPP allows the same mechanism for an investor of a party to challenge the Government of
the other party, it does not include the 5-year transitional period as in the EVIPA. In other words, the
enforcement of arbitral award under the CPTPP would follow the NYC rules. However, we believe that the
Government of Vietnam will soon revise the current local arbitration regulations to ensure its
commitment under the EVIPA. Investors under the CPTPP could then take advantage of such
improvement.
We believe that the investor-to-state dispute settlement (“ISDS”) under both the EVIPA and the CPTPP
brings the highest level of enforceability and bankability when they are well designed in commercial
contracts in Vietnam.
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Please do not hesitate to contact Dr. Oliver Massmann at omassmann@duanemorris.com if you have any
questions. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.