The Decree No. 31/2021/ND-CP prescribing instructions about implementation of the 2020 Investment Law

On March 26, 2021, the Government of Vietnam issued Decree 31/2021/ND-CP prescribing details and instructions the implementation of the 2020 Investment Law. Decree 31 takes effect immediately from the date of issuing.

In order to ensure the advantage conditions for the foreign investors, Decree 31/2021/ND-CP has specified some of regulations such as investment procedures in the form of capital contribution, share purchase, capital share contribution of foreign investors; business investment conditions; trades and market access conditions for foreign investors; business investment guarantee; investment incentives and support; investment promotion; the State’s management of business investment activities in Vietnam and offshore investment activities; …

The following analysis of Decree 31/2021/ND-CP relating to investment incentives and some of changes in investment activities was made by LawPlus, in order to support enterprises and investors in the investment operations as well as a few notes when applying the Investment Law 2020.

>>> Major changes in Law on Investment 2020

update instructions for investment activities

1.  Detailed regulations on other areas affecting national defense and security

Under the provision “Investors have the right to contribute capital, buy shares, buy capital contributions of economic organizations”, compared to the Law on Investment 2014, the Law on Investment 2020 has added the regulation “Investor foreign countries contribute capital, purchase shares, purchase capital contributions of economic organizations having certificates of land use rights in border islands, communes, wards or towns; coastal communes, wards and towns; other areas affecting national defense and security ”. So what does “other area that affects national defense and security” mean? The lack of clear regulations on other areas affecting national defense and security causes concerns for investors in choosing the appropriate location for project implementation.

Decree 31/2021/NĐ-CP detailed regulate “other area that affects national defense and security”, specially:

a) The areas have defense and security constructions, military zones, restricted zones, protection zones, safety belts of defense works and military zones in accordance with the law on protection of defense works and military zone;

b) The areas border on the important political, economic, diplomatic, scientific-technical, cultural and social points that are guarded by the People’s Police. They have responsible for protection in according to Law on police;

c) The important constructions related to national security and protection corridor of important constructions related to national security under the law on protection of important constructions related to national security;

d) The economic-defense zones under the Government’s regulations on combining national defense with socio-economic and socio-economic with national defense;

đ) The valueable areas have the military defense and defense under the Prime Minister’s decision approving the general planning on defense arrangement combined with social-economic development;

e) The areas do not allow for foreign organizations and individuals to own houses to ensure national defense and security in accordance with The Law on Housed of Vietnam.

As a result, Decree 31/2021/NDCP has detailed the defination “other areas that affect national defense and security” in the Investment Law 2020, which helps the investors to have a more comprehensive view of this issue and select the location of the investment project in accordance with the provisions of law, in case the foreign investors invest in the form of enterprise, capital contribution, buy shares, buy capital contributions in enterprises in islands, communes, wards, border towns, coastal areas or areas sensitive to security or defense.

2. Detailed provisions on guarantee of investment incentives in case of changes of law

The previous guaranteed investment incentives do not have a specific definition, but  it is understood that the incentives that investors are entitled to under the provisions of legal documents that take effect before the new legal documents issued through the investment incentives, in specific:

  • Investment license;
  • Enterprise license;
  • The investment incentives certification;
  • The investment certification;
  • The investment registration certification;
  • Decision on investment policy, Decision on approval of investment policy or other documents issued by a competent person, a competent state agency, and be applied as prescribed by the law.

The ensured investment incentives which the investors received in according to the law not be belongs to the regulation above.

In addition, there are 2 cases where the new policy changes change the applicable incentive as follows:

  • In case the newly issued legal document stipulates the investment incentives higher than those that investors have, the investor will be entitled to investment incentives in accordance with the new legal the remaining preferential period of the project.
  • In case the newly promulgated legal document regulates investment incentives lower than the investment incentives that an investor was entitled in advance, the investor may continue to apply investment incentives according to the previous regulations for the remaining preferential period of the project.

3. Detailed regulate about the List of Restricted Sectors applicable to the foreign investors

For the first time, the List of Restricted Sectors from market access for foreign investors was officially announced and enclosed with Decree 31/2021/ND-CP, providing some of sectors, in specific:

  1. Foreign investors are not allowed to invest in 25 Business lines that have not yet had access to the market as prescribed in Section A, Appendix I of this Decree: Trading in goods and services on the list of goods, services of exercising state monopoly in the field of commerce; press activities and information gathering in any form; fishing; investigation and security services, administrative and judiciary; import and demolition of seagoing ships trading in the temporary import for re-export; ….
  2. The list of Business lines with conditional market access for the foreign investors includes 59 sectors. If choosing to invest in the Business lines are not belongs to these 84 sectors (includes the Business lines with conditional market access and the Business lines that have not yet had access to the market as point a above). The foreign investors will be entitled to the same market access conditions as for the domestic investment regulations.
  3. For the first time, Decree 31/2021/NQ-CP has clearly regulates the conditions for access to Business lines in which Vietnam has not yet committed to market access for foreign investors. Specifically, there is no regulation by national law to restrict market access for that Business lines, foreign investors are entitled to access the market as prescribed for domestic investors.

The Decree detailed regulates the principles and how to apply the List of Restricted Sectors from market access. This helped improve the legal framework in more transparent and unify. Besides, it also helps to complete the State management system in controlling the investment activities of foreign investors in the Vietnamese market. Thereby,  full and consistent implementation of the constitutional principles on freedom of business, compliance with Vietnam’s commitments on market activities under the new freedom commercial agreements.

4.  Adds the provisions on the investors being Vietnamese citizens have the foreign nationalities and invest in Vietnam

Decree 31/2021/ND-CP is regulate, besides the investors are listed in Law on Investment 2020, and in case the Vietnamese investor is both a Vietnamese citizens and the foreign nationalities in Clause 2, Article 16. They can select to apply the market access conditions and the investment procedures as applicable to the domestic investors or foreign investor. In case of selecting to apply the market access conditions and investment procedures as same as the domestic investors, the investors who are Vietnamese citizens with foreign nationality are not allowed to conduct their rights and obligations towards the foreign investors.

5.  Add new conditions for investment incentives

a.  List of investment incentives sectors

Decree 31/2021/ND-CP added a list of industries subject to investment incentives, including:

  • Science technology, electronics, mechanics, materials production, information technology (20 sectors);
  • Agriculture (11 sectors);
  • Environmental protection, construction of infrastructure (23 sectors);
  • Education, culture, society, sports, health (09 sectors);
  • Other sectors (04 sectors).

b. Change and unite the List of investment projects in areas with difficult socio-economic conditions

Decree 31/2021 also specifically lists investment projects in areas with difficult socio-economic conditions or areas with extremely difficult socio-economic conditions as prescribed in the Appendix III, according to this Decree, replaces the provisions in Appendix II of the List of areas eligible for investment incentives (enclosed with Decree 118/2015/ND-CP dated November 12th, 2015).

This policy was issued, and the specific provisions aimed to increase investment resources from the State to develop economic infrastructure in areas with difficult socio-economic conditions, in addition to increase investment efficiency of the businesses investing in areas with difficult conditions.

c. Adds the conditions of the beneficiaries of investment incentives

Pursuant to point c, Clause 4, Article 17, Decree 31/2021/NĐ-CP regulates on the investment projects employing the disabled workers must be at least 30% of the annual average number of regular employees to have the investment incentives.

Detailed conditions for the product distribution chain of small and medium enterprises that are entitled to investment incentives when:

  • At least 80% of participating enterprises are the small and medium enterprises;
  • Have at least 10 locations to distribute goods to consumers;
  • At least 50% of the chain’s revenue is generated by the small and medium enterprises in the chain.

 6. Determine the level of ensuring the implementation of investment projects

Obligation to ensure the implementation of an investment project (Article 25): An investor must deposit a deposit or have a guarantee from a credit institution or foreign bank branch established under the laws of Vietnam on deposit obligations to ensure the implementation of investment projects that are assigned land, leased land by the State, or permitted to change the land use purpose (Except for the case specified at Points a, b, c and d, Clause 1, Article 43 of the Investment Law).

According to Clause 2, Article 26 of Decree 31/2021/NDCP, the level of ensuring for the implementation of the investment project is calculated by the percentage of the investment capital of an investment project on the principle of partial progression, specially:

a) For the capital portion up to 300 billion VND, the guarantee is 3%;

b) For the capital portion of over 300 billion VND to 1,000 billion VND, the guarantee level is 2%;

c) For the capital portion of over 1.000 billion VND, the guarantee is 1%.

– The investor have a discount on ensuring to implementation of investment discount in the following cases:

a) 25% reduction for investment projects in sectors to investment incentives under the provisions in Appendix II Decree 31/2021/NĐ-CP; the investment projects in the areas with difficult socio-economic conditions as prescribed in Appendix III Decree 31/2021/NĐ-CP;

b) 50% reduction for investment projects in sectors specially investment incentives according to the provisions in Appendix II Decree 31/2021/NĐ-CP; the investment projects in the areas with extremely difficult socio-economic conditions as prescribed in Appendix III Decree 31/2021/NĐ-CP; the investment projects in sectors to investment incentives, implemented in the areas with difficult socio-economic conditions.

Decree 31/2021/ND-CP specified some of regulations on the investment procedures

7. Adds the cases of granting, adjusting, and revocating of the investment registration certificates; the procedures for regrant and correction of information on Investment Registration Certificates

>> New regulations on the enterprise registration 2021.

Clause 2 and 3, Article 34 Decree 31/2021/ND-CP provides for the grant, adjustment and revocation of the investment registration certificate:

– The Department of Planning and Investment where an investor conducts an investment project, or locates or plans to locate an executive office so that they can implement the investment project which is granted, adjusted, and revoked the investment registration certificates of the project. The following investment projects below:

a) Investment projects implemented in 02 administrative units of province or higher;

b) Investment projects implemented inside and outside the industrial zones, the export processing zones, hi-tech zones and economic zones;

c) Investment projects are within the industrial zones, export processing zones, hi-tech zones or economic zones where the management of industrial zones, export processing zones, hi-tech zones, economic zones are not established or are not managed compentent of industrial parks, export processing zones, hi-tech zones and economic zones.

– The managers of industrial zones, export processing zones, hi-tech zones and economic zones have the compentent to grant, adjust and revoke investment registration certificates for the following investment projects:

a) The investment projects on construction and commercial operation of infrastructures of industrial zone, export processing zones, hi-tech zones and functional zones in economic zones;

b) The investment projects implemented in industrial zones, export processing zones, hi-tech zones or economic zones.

In addition, this Decree also provides detailed provisions on: procedures in case an investment registration certificate is lost or damaged; correct information on the Investment Registration Certificate.

– In case the investment registration certificate is lost or damaged, the investor shall submit a request for reissuance of the investment registration certificate to the investment registration authority for re-issuance within 05 days. Working from the date the investment registration agency receives the request.

– If the investment registration certificate is stored as the electronic data in the National Investment Information System with the different contents than the Iinvestment registration certificate, so that the content to be recorded according to the content in the investment registration dossier is of legal validity. The investment registration agency shall correct information on the investment registration certificate within 3 working days after receiving the investor’s request.

– In case the information on the investment registration certificate is inaccurate compared to the information registered in the application for implementation of investment procedures, the investment registration authority shall correct information on the investment registrationc in within 03 working days from the date of receive the investor’s request.

8. Regulations on the time to stop investment projects

Article 56 Decree 31/2021/NĐ-CP provides for the operate suspension of investment projects as follows: The conditions for the total operate suspension of investment projects are not over 12 months. In case of expiration of the limit time from the terminate day, the investment registration agency shall terminate all or a part of the operation of that investment project.

In case the investment project under a court judgment, decision, an effective judgment of an arbitration or a state management agency in charge of investment, the operation cessation period of an investment project is determined by a judgment or decision of a court, an arbitral award or under a decision of the State management agency on investment.

9. Adds the conditions for termination of investment projects

Clause 3 Article 57 Decree 31/2021/NĐ-CP provides for the investment projects operating under the investment certificate (also is an enterprise registration certificate) or investment license, and investment registration agency makes a decision to terminate of an investment project operation without revokes the investment certificate (also the enterprise registration certificate) or the investment license. In this case, the enterprise registration contents in the investment certificate (also the enterprise registration certificate) or the investment license will continue to be valid.

In case an enterprise has its enterprise registration certificate revoked in accordance with the law on enterprises, the enterprise registration agency shall conduct the procedures for revoking the business registration content of the investment certificate (also the enterprise registration certificate); the investment project contents will continue to be valid.

10. The provisions of the export manufacturing enterprises

Under the provisions of Clause 15, Article 3 of Law on Investment 2020, the export manufacturing enterprises is understood as an industrial zone specializing in the production of exports, supplying services for the export manufacturing and export facilities.

Decree 31/2021 guiding the Law on Investment 2020 states that “Export manufacturing enterprises in hi-tech zones may apply the particular regulations to export manufacturing enterprises operating in industrial zones and economic zones”. Accordingly, enterprises in a high-tech industrial area within a hi-tech zone completely meet the customs inspection and supervision requirements. The regulations apply to non-tariff zones and regulations of laws on import tax and export tax prior to the effective date of Decree 31/2021/ND-CP shall apply as same regulations as for business enterprises operating in industrial zones and economic zones from the date the enterprise meet those conditions.

Therefore, with the continuous development of the economy, the legal provisions are no longer formal or ambiguous, and becomes more detail. And the government is always fully equipped and makes increasingly complete the legal system to strictly manage domestic investment as well as to be ready to recieve new forms of investment and enterprise in the future.

The above is entire analysis regarding the major regulations on the investment operations and the regulations of the conditional market access in Decree 31/2021/NĐCP prescribing details and instructions the implementation of the 2020 Investment Law that enterprise and investor need to pay attention.

For detailed advice, please contact us via hotline: +84 2862 779 399 or email info@lawplus.vn.

 

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