DECREE No 27/2003/ND-CP DATED 19 MARCH 2003 AMENDED SOME ARTICLES OF DECREE No 24/2000/ND-CP DATED 31 JULY 2000 PROVIDING DETAILED REGULATIONS ON THE IMPLEMENTATION OF THE
LAW ON FOREIGN INVESTMENT IN VIETNAM
The Government
- Pursuant to the Law on the Organization of the Government dated 30 September 1992;
- Pursuant to the Law on Foreign Investment in Vietnam dated 12 November 1996 and the Law on Amendment of and Addition to a Number of Articles of the Law on Foreign Investment in Vietnam dated 9 June 2000;
- Following the proposal of the Minister of Planning and Investment;
Decrees:
Chapter I
General Provisions
Article 1. Scope of application
This Decree makes detailed regulations on the implementation of the Law on Foreign Investment in Vietnam dated 12 November 1996 and the Law on Amendment of and Addition to a Number of Articles of the Law on Foreign Investment in Vietnam dated 9 June 2000 (hereinafter collectively referred to as the Law on Foreign Investment).
This Decree governs the foreign direct investments in Vietnam by the capital contribution under the form of money or assets of foreign investors to Vietnam in order to carry out directly the production and business activities for profits in accordance with the forms authorized by the Law on Foreign Investment.
All foreign direct investments in Vietnam must comply with the provisions of the Law on Foreign Investment, this Decree and other relevant regulations.
Article 2. Entities participating in investment co-operation
2. Domestic medical examination and treatment establishments, education and training establishments and scientific research establishments which satisfy the conditions stipulated by the Government.
Article 3. Lists and selection of investment projects
1. To issue with this Decree:
(a) A list of specially encouraged investment sectors;
A list of encouraged investment sectors;
Chapter II
Forms of Investment
Article 6. Business co-operation contract
1. A business co-operation contract is a document, which is signed by two or more parties and which stipulates the responsibilities of, and the sharing of business results between, the parties for the purposes of conducting investment and business in Vietnam without creating a legal entity.
The enterprises with foreign owned capital are authorized to execute a business co-operation contract with foreign individual or organization.
2. Business co-operation contracts for prospecting, exploration and exploitation of oil and gas and a number of other natural resources in the form of production sharing contracts shall be implemented in accordance with the provisions of the relevant law and the Law on Foreign Investment.
Article 11. Joint venture enterprise
(a) A joint venture enterprise is also established by and between an existing enterprise with 100% foreign owned capital in Vietnam and [one of] the entities defined in points b), c) and dd) - clause 2 of this Article.
(dd) A joint venture enterprise;
(e) An enterprise with one hundred (100) per cent foreign owned capital.
Article 21. Enterprise with one hundred (100) per cent foreign owned capital
1. An enterprise with one hundred (100) per cent foreign owned capital is an enterprise owned and established in Vietnam by foreign investor(s) which shall by themselves manage the enterprise and take full responsibility for its business results.
The existing enterprises with one hundred (100) per cent foreign owned capital in Vietnam are authorized to co-operate them-selves and/or with foreign investors to establish a new enterprise with one hundred (100) per cent foreign owned capital in Vietnam.
2. An enterprise with one hundred (100) per cent foreign owned capital shall be established in the form of a limited liability company and shall be a legal entity in accordance with the law of Vietnam and shall be established and operate from the date of issuance of the investment license.
Article 31. Re-organization of enterprises
1. The division, demerger, merger or consolidation of an enterprise or the conversion of the form of investment (hereinafter collectively referred to as re-organization of an enterprise) must be approved by the investment license-issuing body, in accordance with the following definitions and procedure.
a) “The division of enterprise” means the division of total capital in cash and assets of an enterprise with foreign owned capital (hereafter referred to as “enterprise to be divided”) for the purpose of the establishment of two or several new enterprises ((hereafter referred to as “[new] divided enterprise”).
b) “The demerger of enterprise” means the transfer of a part of capital in cash and assets of an enterprise with foreign owned capital (hereafter referred to as “enterprise to be demerged”) in order to establish one more or several new enterprises (hereafter referred to as “[new] demerged enterprise”).
c) “The merger of enterprise” means the transfer of total capital in cash and assets by an enterprise with foreign owned capital (hereafter referred to as “enterprise to be merged [sold]” in order to merge into another enterprise with foreign owned capital (hereafter referred to as “merger [acquisition] enterprise”)
d) “The consolidation of enterprise” means the consolidation of total capital in cash and assets by two or several enterprise with foreign owned capital (hereafter referred to as “enterprise to be consolidated”) in order to be converted into a new enterprise with foreign owned capital (hereafter referred to as “consolidated enterprise”).
dd) “The conversion of the form of investment” means the conversion of the foreign investment form of a project for which investment license has been issued into another form according to the Law on Foreign Investment.
The re-organization of enterprise must be approved by the Board of Management (of joint venture enterprise) or the foreign owner (of enterprise with 100% foreign owned capital) or of the co-operation parties (to a business co-operation contract).
The enterprise to be re-organized have to prepare an application file in accordance with guidelines stipulated in clauses 2 and 3 of this Article, then submit it to the competent body for the amendment of its Investment Licenses and/or the establishment of new enterprise with foreign owned capital under the Law on Foreign Investment. In case of the transformation into a Vietnamese enterprise, the business registration shall be effected under one of the legal forms stipulated in Article 2.1 of Decree 24/2000/ND-CP.
2. The application file for re-organization of an enterprise shall comprise the following:
(a) An application for re-organization of the enterprise;
(b) The capital assignment file (in the case of assignment of capital);
(c) The resolution of the board of management of the joint venture enterprise or the agreement of the business co-operation parties;
(d) The charter of the new enterprise (except in the case of conversion into a Vietnamese enterprise);
(®) The new joint venture contract of new enterprise or the amended joint venture contract;
(e) The merger or consolidation contract of the enterprises;
(g) The financial statements of the enterprise prior to its re-organization;
(h) An explanatory statement on re-organization of the enterprise;
(i) Documents relating to the right to use land;
(k) Other documents at the request of the investment license-issuing body.
3. The explanatory statement on re-organization of an enterprise shall contain the following main items:
(a) The name and address of the representative; the names and addresses of the enterprises prior to and after re-organization;
(b) The objectives of production and business;
(c) A plan for employment;
(d) A plan for dealing with the rights and obligations of the enterprises related to the re-organization of the enterprise;
(dd) The duration of implementation of the re-organization.
4. The decision of re-organization of enterprise shall be addressed to its creditors and employees within 15 days from the day of decision.
5. Within thirty (30) working days from the date of receipt of a complete and proper file, the investment license-issuing body shall make a decision to approve the re-organization of the enterprise in the form of an investment license. Where approval is refused, the investment license-issuing body must provide reasons in writing. Where the re-organized enterprise meets all conditions stipulated in point 2 of Article 1.22 of this Decree, it shall be subject to the investment registration procedure.
Article 32. Taking over rights and obligations after re-organization of an enterprise
1. After the re-organization of an enterprise and the issuance of an investment license , the new enterprise shall take over the rights and obligations of the former enterprise, otherwise agreed by and between the parties and duly approved by the license issuance body. These rights and obligations shall be taken over in accordance with the plan for dealing with the rights and obligations of enterprises as specified in the explanatory statement on re-organization of the enterprise stipulated in clause 3 of article 31 of this Decree.
2. Subject to the investment domain, area, dimension and conditions of the re-organized enterprises, the incentives shall automatically apply to such enterprises in compliance with the current regulations.
3. The re-organized enterprises shall perform the establishment and termination notifications according to the provisions of Articles 27 and 38 of this Decree
Article 46. Corporate income tax in cases of encouraged investment
Preferential rates of corporate income tax shall apply as follows:
1. The rate of twenty (20) per cent shall apply to projects, which satisfy one of the following criteria:
(a) Production projects other than projects prescribed in clauses 2 and 3 of this article.
2. The rate of fifteen (15) per cent shall apply to projects, which satisfy one of the following criteria:
(a) Being included in the list of sectors in which investment is encouraged;
Industrial zone enterprises carrying out production activity;
(a) 3. The rate of ten (10) per cent shall apply to projects which satisfy one of the following criteria:
(b) Being included in the list of sectors in which investment is specially encouraged
Enterprises engaged in infrastructure development of industrial zones, export processing zones or high-tech zones; export processing zone enterprises carrying out production activity;
The incentive conditions prescribed in point (a) – clause 3 of this Article shall not apply to a production [manufacture] project invested in an industrial zone and having a product exportation rate less than 50%, except for such a project satisfying two of the conditions prescribed in points (a), (b) and (dd) – clause 2 of this Article.
7. Where an enterprise with foreign owned capital or a business co-operation contract [i] operates many business sectors and/or in many different areas, for which the incentives of corporate income tax are different, and [ii] can make separately cost-accounting [of each sector’s or area’s activities], the incentive for each sector or area shall apply to this project; if the making separately cost-accounting is impossible, the incentives shall be based on invested capital ratio.
Article 48. Exemption from and reduction of corporate income tax
2. The projects referred to in clause 2 of article 46 of this Decree shall be exempt from corporate income tax as follows:
a) An industrial zone enterprise carrying out production activity, having the product exportation rate less than 50% and not satisfying the conditions prescribed in points (a), (b) and (dd) – clause 2 of Article 46 shall be shall be exempt from corporate income tax for two (2) years from the first beneficial year.
b) The projects being not subject to point a) – clause 2 of this Article shall be exempt from corporate income tax for two (2) years commencing from the time when their operations start to earn profits and shall be granted a fifty (50) per cent reduction for the three (3) subsequent years.
5. Enterprises with foreign owned capital and business co-operation parties investing in projects included in the list of specially encouraged investment projects or investing in regions with especially difficult socio-economic conditions as provided in the Appendix to this Decree shall be entitled to exemption from import duties in respect of raw materials for production, materials and components for five (5) years from the time when production commences.
6. Enterprises with foreign owned capital and business co-operation parties investing in the manufacture of mechanical, electrical and electronic components and parts shall be entitled to exemption from import duties in respect of production materials, materials and components for five (5) years from the time when production commences.
10. The Ministry of Trade coordinates the work with relevant Ministries and branches in order to promulgate the implementation regulations classifying specifically the raw materials for production, materials and components to be exempted from import duties for five years from the time when production commences, as stipulated in clauses 5 and 6 of this Article.
Article 59. Price for calculation of import duties
The price for calculation of import duties on imported goods shall be determined according to the provisions of Article 1 of Decree 60/2002/ND-CP dated June 6, 2002 of the Government on the determination of the price for calculation of import duties on imported goods in accordance with the principles of the Treaty, that implements the provisions of Article 7 of the Common Treaty on Trade and Duty.
Article 67. Provisions on assurance of foreign currency
1. Enterprises with foreign owned capital or foreign business co-operation parties may purchase foreign currency from the banks permitted to trade in foreign currency in order to meet the demands of their current transactions and other permitted transactions in accordance with the provisions of the law on foreign exchange control.
3. The Government of Vietnam shall assure its assistance in the foreign currency balance for enterprises with foreign owned capital and business co-operation parties investing in the construction of infrastructure facilities and some other important projects where the banks permitted to trade in foreign currency fail to provide sufficient foreign currency required as referred to in clause 1 of this article.
Article 81. Technology transfer and capital contribution in the form of technology
2. The value of technology transferred in the form of capital contribution shall be agreed by the parties.
Chapter VIII
Labour Relations
Article 83. Recruitment of employees
1. Enterprises with foreign owned capital and business co-operation parties are authorized to directly recruit Vietnamese and foreign employees in compliance with labor laws.
Article 84. Salaries payable to Vietnamese employees
Minimum wages and salaries of Vietnamese employees working for enterprises with foreign owned capital and for business co-operation parties shall be regulated by the Ministry of Labour, War Invalids and Social Affairs, and paid in Vietnamese Dong.
Chapter IX
Land, Construction, Tendering, Acceptance
and Finalisation of Projects
Article 85. Land lease and payment of land rent
1. Enterprises with foreign owned capital and business co-operation parties may lease land from the State of Vietnam for the purpose of implementing investment projects and shall pay land rent in accordance with the provisions of the Ministry of Finance.
2. Where [i] Vietnamese party’s capital contribution is the value of land use right obtained through a transfer affair or a delivery by the State subject to a rental and [ii] the achieved payment of such transfer or rental is not funded by state budget, then the new land lease for the project shall not require and Vietnamese party has to [continue to] pay the rental according to current regulations.
Article 88. Authority to decide on lease of land
The provincial People’s Committee shall make a decision on the lease of land to the foreign investment projects in compliance with the provisions of land laws.
Article 89. Compensation, site clearance and land lease files
1. In respect of enterprises to which the State of Vietnam leases land, the provincial people's committee of the locality in which the investment project is located shall have the responsibility to organize compensation and site clearance and to complete all formalities relating to land leasing. Expenses for compensation and site clearance shall be included in the invested capital of the project. Provincial people's committees shall agree with enterprises leasing land on financing sources for conducting compensation and site clearance.
2. Where a Vietnamese party makes capital contribution in the form of the value of land use rights, the Vietnamese party shall be responsible for carrying out compensation and site clearance and completing all formalities in relation to obtaining the land use rights. Expenses for compensation and site clearance shall be included in the capital contribution of the Vietnamese party or otherwise accounted as agreed by the parties.
3. Rates of compensation shall be in compliance with the general provisions of the State.
4. In respect of projects for which provincial people's committees issue investment licenses, consideration of land lease shall be carried out at the same time as consideration of the issuance of investment licenses.
5. In respect of projects for which the Ministry of Planning and Investment issues investment licenses, the documents for leasing land to be submitted together with the application file for an investment license shall contain the following items:
(a) The location and area of land used;
(b) The land rent as proposed by the provincial people's committee on the basis of the land rent tariff stipulated by the Ministry of Finance;
(c) The plan for compensation and site clearance.
6. The formalities and the file for leasing land or sub-leasing land shall be completed in accordance with guidelines provided by the Ministry of Natural Resources and Environment.
Article 92. Mortgage of value of land use rights and of assets attached to land
1. Enterprises with foreign owned capital may mortgage the value of land use rights and assets attached to land within the term of the lease of land or sub-lease of land with the credit institutions permitted to operate in Vietnam in accordance with law in the following cases:
(a) Enterprises with foreign owned capital have already paid land rent for several years provided that the remaining period for which land rent has been paid is at least five (5) years;
(b) Joint venture enterprises where the Vietnamese party has made capital contribution in the form of the value of land use rights provided that the remaining period for which capital contribution has been made is at least five (5) years.
2. The mortgaged value of the land use rights shall include expenses for compensation and site clearance and land rent already paid minus (-) the land rent for the used period.
3. Application files and procedures for mortgage of the value of land use rights shall be completed in accordance with guidelines provided by the Ministry of Natural Resources and Environment and by the State Bank of Vietnam.
Article 95. Evaluation of zone planning and architectural plans
Regarding the construction investment projects (such as: bridge, road, airport, and seaport; the industrial projects in group A; infrastructure of industrial zone, export processing zone or high-tech zone; municipal area, tourism and entertainment area; art-performance building; advertisement construction; dwelling house, hotel, office and apartment; school; hospital; and sport building), the application file for Investment License must include a drawing design of whole construction horizontal surface.
The evaluation of the drawing of whole construction horizontal surface shall be effected during the evaluation of investment project.
Article 98. Responsibilities for construction works
1. Investors shall be responsible before the law of Vietnam for the quality of construction works, for the safety of construction works, for fire and explosion prevention and fighting, for environmental protection, working security and sanitation during the period of construction as well as during the whole period of operation of the construction works.
Chapter X
Procedures for Issuance of Investment Licenses
Article 105. Conditions for projects subject to registration for issuance of investment licenses
1. Projects subject to registration for issuance of investment licenses shall concurrently satisfy the following conditions:
(a) Conform with the approved planning of the products or of the branch development. Where such plannings have not yet been approved, the consent of the branch managing Ministry shall be required;
2. In addition to the conditions stipulated in clause 1 of this article, the projects subject to registration for issuance of investment licenses must satisfy one of the following conditions:
(a) The projects with ratio of export products of at least 80%;
(b) Investment projects in an industrial zone, which are out of group A and prescribed in the List of specially encouraged investment sectors or in the List of encouraged investment sectors;
(c) Belong to the manufacturing sector with an invested capital of up to five (5) million USD.
Article 106. Registration for issuance of investment licenses
1. A registration file for an investment license shall consist of:
(a) An application for registration of an investment license;
(b) The joint venture contract and the charter of a joint venture enterprise, or the charter of an enterprise with one hundred (100) per cent foreign owned capital, or the business co-operation contract;
(c) A document verifying the legal status and financial position of the parties.
2. A registration file for an investment license shall be made in three (03) sets, at least one of which shall be an original and all of which shall be submitted to the investment license-issuing body.
3. The investment license-issuing body shall exam the application file for the delivery of investment license and, if all conditions and procedure stipulated in Articles 105 and 106 of this Decree are met and completed, issue investment license without requesting opinion of any other authority.
4. Within fifteen (15) working days from the date of receipt of proper documentation, the investment license-issuing body shall notify its decision of approval in the form of an investment license.
5. The Ministry of Planning and Investment shall provide guidelines on preparation of registration files for investment licenses.
Chapter XI
State Administration of Foreign Investment Activities
Article 112. Guidelines on investment activities
1. Ministries, branches and provincial people’s committees shall be responsible for providing guidelines on foreign investment activities in sectors and localities under their administration; for providing necessary information and creating favourable conditions for investors to choose investment opportunities in Vietnam; for improving management and reviewing investment procedures so as to ensure prompt and simple investment procedures.
2. Ministries, branches and provincial people’s committees shall obtain opinions of the Ministry of Planning and Investment prior to the issuance of legal documents which fall within their respective competence and which relate to foreign direct investment activities; different opinions should be reported to the Prime Minister of the Government for his consideration and decision. Provincial people’s committees cannot promulgate the taxation and financial incentives and others exceeding their power and competence.
Article 113. Co-ordination of State administration
1. Ministries, branches, provincial people’s committees and investment license-issuing bodies in banking, insurance, securities and legal consultation sectors shall exercise State administration and coordination regime in the management of foreign investment activities.
2. Provincial people’s committees shall be responsible for promptly dealing with issues falling within their authority and shall guide enterprises to operate strictly in accordance with their investment licenses and the law. In case of different opinions of Ministries, branches and provincial people’s committee during the dealing with the same matter, it shall be referred to the Prime Minister for consideration and decision.
3. The Ministry of Planning and Investment shall summarise information on the status of foreign investment and provide it to ministries, branches and provincial people’s committees and shall work periodically with the Ministry of Finance, the Ministry of Trade, the Ministry of Natural Resources and Environment, the State Bank, and relevant provincial people’s committees in order to resolve promptly any problems arising, to deal with recommendations of enterprises with foreign owned capital or of business co-operation parties, and to propose policies and measures for improving the investment environment.
Article 114. Authority to make decisions on investment projects
1. The Prime Minister of the Government shall make decisions in relation to Group A projects, comprising:
(a) Projects in the following sectors, irrespective of invested capital:
· Infrastructure construction of industrial zones, export processing zones, high-tech zones, urban areas; BOT, BTO and BT projects;
· Construction and operation of sea ports and airports; operation of sea and air transportation;
· Oil and gas;
· Post and telecommunication services;
· Publishing, printing service (excluding printing projects for technical documents, package, commodity label and mark, normal design on garment, textile and footwear products), press; radio and television broadcasting; advertisement service including advertisement publication; cinema activities; art performance; awarding entertainment business; medical examination and treatment establishments; school education, higher education, further education and the equivalent levels education and training; scientific research and production of medicine for human diseases;
· Insurance, finance, auditing and inspection;
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