Main characteristics of Law on FDI

- Liberal : No restriction on foreign ownership:

 Foreign investments in Vietnam are realized in the following forms

+ 100 % foreign-owned enterprise
+ Joint-venture
+ Business Co-operation Contract
+ Other forms such as Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO), and Build-Transfer (BT).

 - Tax incentives:  

• Corporate Income tax:
  + 20% as standard rate - Manufacturing sector
  + 28%  - Service sector

• Profit remittance tax :  0%

 - Constantly improving:

The first Law on FDI in Vietnam was promulgated by Vietnam's National Assembly (Parliament) in December 1987. After being amended twice, the law was rescinded and replaced by a new Law on FDI that was passed in November 1996. The new law was amended again in May 2000 with a view to further improving foreign direct investment environment. The Law and its amendments and supplements are further detailed and guided in government Decree No 24/2000/ND-CP issued on 31 July 2000 .

Apart from the above-mentioned law and decree, FDI in Vietnam is also governed by other relevant Vietnamese laws and regulations. In addition, foreign investors may be allowed to apply foreign laws to deal with the areas and/or issues which have not been covered by Vietnamese laws provided that such application does not run counter to the basic principles of Vietnamese laws.

As set forth earlier, the FDI sector is recognized in Vietnam 's Constitution as an important integral part of the country's economy. The Law on Foreign Direct Investment in Vietnam guarantees that investors will receive "fair and equitable treatment". The capital and other lawful assets of foreign investors will not be requisitioned or expropriated by administrative measures or without their voluntary consent. Enterprises with foreign capital shall not be nationalized. The investor’s industrial property rights and legitimate interests in technology transfers are also protected.

Foreign investors' legitimate interests are protected from detrimental legislative changes. In the event that there are changes in the law of Vietnam that adversely affect the interests of enterprises with foreign capital or parties to business cooperation contracts, those interests stated in their investment or business licenses continue to apply or will be dealt with satisfactorily by the Vietnamese authority through measures such as:

• Change the stated objective of the project;

• Grant a tax reduction or exemption in accordance with the law;

• Deem the adverse effect on the investor to be a loss and carry such loss forward to the following years; and

• Consider payment of fair compensation where necessary.

In addition, the Law also guarantees that beneficial legislative changes will also be applied to licensed investors.

Investors may invest in any form allowed by the Law. They may take initiative in selecting the investment projects, the investment partners, regions and duration of investment, markets for products, and the legal capital contribution percentages, in accordance with the provisions of the legislation on FDI. Investors are entitled to convert the form of investment, divide or separate, consolidate or merger, or equitize their companies in accordance with the law.

Companies with foreign capital will be autonomous in their operation. They can recruit local labor directly from the market, and sign and terminate labor contracts directly with employees in accordance with the Labor Law. They can also directly handle the importation of equipment, machinery, materials and other supplies for the construction and operation of their project, as well as the export and/or distribution of their products in Vietnam .

FDI enterprises and business cooperation parties may open branches and/or representative offices outside the provinces or cities where they are headquartered or at the major operating locations of the business cooperation contracts in order to carry out business activities according to the provisions in the investment licenses. Where it is necessary to step up exports, FDI enterprises may open their branches or representative offices overseas in order to carry out transactions, marketing and product-selling activities.

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