Asia Counsel provides a brief summary of the changes to the new Law on Investment of Vietnam

1. ASIA COUNSEL INSIGHTS
September 2020
NEW LAW ON INVESTMENT
On 17 June 2020, the National Assembly
of the Socialist Republic of Vietnam
adopted the Law on Investment No.
61/2020/QH14 (“New LOI”), which will
come into effect from 1 January 2021.
The New LOI will replace the current Law
on Investment No. 67/2014/QH13 dated
26 November 2014 (“Current LOI”). This
insight provides a brief summary of the
key changes to be brought in by the
New LOI.
changes to the issued IRC must be
subject to IRC amendment procedures.
While under the Current LOI, it is not
compulsory to amend the IRC.
No IRC requirements for innovative
startup
Under the New LOI, small- or medium-
sized innovative startup or creative
startup investment fund are not required
to have an investment project or obtain
the IRC before setting up an enterprise.
Extension of the project term
Under the New LOI, a project will be
rejected for term extension if: (i) it uses
outdated technology that potentially
causes harm to the environment; or (ii)
the investor of such project are required
to transfer the assets to the State of
Vietnam without compensation. Under
the Current LOI, no restriction for project
extension is provided.
Acquisition approval cases
The New LOI sets forth clearer cases
where an acquisition approval is
required. An acquisition by a foreign
investor will be subject to the acquisition
approval if:
Market approach conditions
The New LOI provides that the
Government will issue a list of business
lines subject to foreign ownership
restrictions. This list will cover all
conditions and restrictions provided
under domestic laws and international
treaties that Vietnam is a party.
Therefore, when this list is issued and
takes effect, foreign investors will have
to review the restricted business lines
provided in this list to conduct a foreign
ownership assessment. We hope that
this list will be issued before the New LOI
takes effect.
New threshold foreign ownership
The New LOI will treat a company as a
local company for licensing purposes if
its foreign ownership ratio is not ‘more
than 50%’. Under the Current LOI, this
threshold is ‘less than 51%’.
Termination of façade transaction
Under the New LOI, the licensing
authority may terminate an investment
project if it is based on a façade
transaction. Under the civil code,
façade transaction is a transaction
established to hide another real
transaction.
National defense and security
The New LOI provides that any
investment activity which causes or
may cause harm to the national
defense and security will be
suspended or terminated by the
Prime Minister on proposal from the
Ministry of Planning and Investment. It
remains unclear on which investment
activities will be treated as causing
harm to the national defense and
security.
Project license matters
New conditions for IRC issuance
To obtain the investment registration
certificate (“IRC”), the New LOI
provides that the investment project
must comply with, among others, (i)
the approved national plan; (ii) the
investment rate per land area unit
and the required employee number;
(iii) the market approach conditions.
Compulsory IRC amendment
Under the New LOI, any amendment
to the investment project that cause
About Asia Counsel
Asia Counsel is a dynamic international corporate and commercial law firm dedicated to serving clients in Vietnam. Our partners have over nine years of
experience in working on complex and challenging matters in Vietnam. We are committed to helping clients achieve their business strategies and
providing outstanding legal services.
If you have any questions on any of the items discussed above, please do not hesitate to contact us.
Minh Duong
Partner
E minh@asia-counsel.com
Asia Counsel Vietnam Law Company Limited, Unit 15.03 – 15.04, Level 15, Deutsches Haus, 33 Le Duan Boulevard, Ben Nghe Ward, District 1, Ho Chi Minh City

2. ASIA COUNSEL INSIGHTS
September 2020
and operation of infrastructure
facilities or provision of public services.
Selection of investors mechanism
The New LOI clarifies the mechanism
for selecting investors under a
competitive process as provided
under the law on land, the law on
tendering and the law on investment.
The selection of investors can be under
the following forms: (i) auction of the
land use right in accordance with the
law on land; (ii) tendering for selection
of an investor in accordance with the
law on tendering; (iii) approval of the
investor by the licensing authority if
auction or tendering process are not
successful; (iv) approval of the investor
by the licensing authority for
investment project that must obtain
the investment policy without going
through auction and the tendering
process. Further clarifications will be
provided under guiding legislations.
Offshore investment
Under the Current LOI, there is no
restriction on business lines for offshore
investment. However, under the New
LOI, any prohibited business lines
applicable to investment in Vietnam
will be prohibited for offshore
investment, and other prohibited
business lines under the law of
investment recipient countries will also
apply. Certain business sectors will be
conditional for offshore investment
include banking, insurance, security,
press, radio and television and real
estate business.
Pediodical reporting obligations
The investor is no longer required to
report monthly on the status of
implementation of the investment
project, but only on quarterly and
annually basis.
(i) it leads to the increase of foreign
ownership ratio in the target
company carrying on business in a
conditional business sector;
(ii) it leads to the increase of foreign
ownership ratio in the target
company of more than 50%; and
(iii) the acquisition by the foreign
investors in the target company
having land use right certificate for
land on island or coastal or border
areas which affects the national
defense and security.
Additional conditions for acquisition
approval
Under the New LOI, acquisition
approval will be subject to two
additional conditions: (i) ensuring the
national defense and security
requirements; and (ii) complying with
conditions for receiving land use rights
and using land in islands, in border and
coastal areas under the law on land.
No environment report for project
license issuance
The environment impact assessment
report (“EIAR”) is no longer required for
issuing the IRC or the investment policy.
However, the investor may need to
obtain the EIAR before project
implementation.
Investment incentives
New investment incentives form
The New LOI provides a new form of
investment incentives being
accelerated depreciation and
increased deductible expenses when
calculating taxable income.
More preferential investment sectors
More investment sectors will be subject
to investment incentives such as,
among others, university education,
medicines storage and medical
equipment production.
Special incentives and support policy
The New LOI introduces the policy of
special incentives and support which
is applied to new investment projects
which are (i) for establishing creative
innovation centers with total
investment capital of at least
VND3,000bil; or (ii) in specially
preferential business lines with the
total investment capital of at least
VND30,000bil. The level of special
incentives and support will be in
accordance with the relevant tax law.
Prohibited and conditional
business lines
New prohibited business lines
‘Debt collection services’ and
‘firecrackers trading’ will be
prohibited under the New LOI. Any
ongoing contract providing debt
collection services will no longer be
effective from 1 January 2021.
Conditional business lines list
Certain business lines are removed
from the conditional business lines list
such as franchising, logistics services
and medical equipment inspection.
However, other conditional business
lines are added such as, architectural
services, payment service provision,
insurance auxiliary activities, etc.
Removal of PPP contract
The PPP contract investment form is
removed under the New LOI. Under
the Current LOI, PPP contract is signed
between the competent state
authority and investors for projects of
new construction, renovation,
upgrading, expansion, management