What is foreign investment? Types of foreign investment. Conditions for foreign investors. Let us learn about this topic with LSX Law firm below:
Legal grounds
Investment Law 2020
What is foreign investment?
Foreign investment means that organizations and individuals of one country bring capital in different forms into another country to conduct business activities to seek profit. Foreign investment as in the form of direct investment or indirect investment.
According to Vietnamese law, foreign investment has the following signs:
First, the investors are foreign organizations and individuals or overseas Vietnamese;
Secondly, Investment capital is: moved from abroad into Vietnam or invested in Vietnam and can be cash; property in kind or property rights;
Moreover, Investment activities take place in the territory of Vietnam to earn profit; The investors can use these profits to use for re-investment or remit abroad.
Finally, Investment activities can be carried out in the form of business cooperation on the basis of a business cooperation contract; or the establishment of a foreign-invested enterprise in Vietnam.
As can be seen, foreign investment has the effect of expanding economic cooperation with foreign countries; taking advantage of capital, modern technology; and advanced foreign economic management experience to exploit and use effectively. the country’s resources.
Conditions for foreign investors
Firstly, foreign investors conducting investment activities in different lines of business must satisfy all investment conditions for those industries and trades.
Secondly, foreign investors subject to application of international treaties on investment with different provisions on investment conditions; may choose to apply investment conditions specified in one of those treaties; in case an international treaty has been selected; foreign investors shall exercise their rights and perform their obligations under the provisions of that international treaty;
Furthermore, Foreign Investors; in a territory that is not a member of the WTO; carrying out investment activities in Vietnam shall apply investment conditions as prescribed for investors from countries and territories that are WTO members; unless otherwise provided by law and international treaties between Vietnam and that country or territory;
Moreover, for service sectors and sub-sectors that have not yet committed or are not specified in Vietnam’s Schedule of Commitments in WTO and other international treaties on investment; which Vietnamese law already provides for investment conditions for foreign investors; then the provisions of Vietnamese law shall apply;
In addition, for service sectors and sub-sectors that have not yet committed or are not specified in Vietnam’s Schedule of Commitments in the WTO; and other international treaties on investment where Vietnamese law has not yet provided for investment conditions for foreign investors; The investment registration agency consults the Ministry of Planning and Investment and the line ministries for consideration and decision;
Finally, In case foreign investors may conduct investment activities in these specified service industries and sub-sectors; and these service industries and sub-sectors have been announced on the National Investment Portal. According to regulations, the Investment Registration Authority shall consider; and decide on investment activities of foreign investors in the same industry; or business without consulting the Ministry of Industry and Trade.
Types of foreign investment
The Investment Law 2020 stipulates specific Types of foreign investment as follows:
Firstly, Investing in the establishment of economic organizations;
Secondly, Investment in capital contribution, purchase of shares, purchase of contributed capital;
Thirdly, Implementation of investment projects;
Finally, Investment in the form of BCC contract and other forms of investment, new types of economic organizations according to the Government’s regulations.
Investment in the establishment of economic organizations.
Forms of establishment of an economic organization include two methods which are:
– Establishing a company with 100% foreign investment capital;
– Establishment of a company between domestic investors or domestic government and foreign investors.
Before establishing an economic organization, a foreign investor must have an investment project; carry out procedures for issuance of an investment registration certificate; and must satisfy the conditions on the percentage of charter capital according to provisions of the law on securities, on equitization and transformation of state-owned enterprises; and the conditions prescribed by law and international treaties to which Vietnam is a contracting party.
Implementation of investment projects
Foreign investors can sign investment contracts under the method of public-private partnership (PPP contract), an investment method made on the basis of a limited-term cooperation between the State and the investor. through the signing of PPP contracts to attract private investors to participate in the implementation of PPP investment projects.
Investment under BCC contract
BCC is an investment form; signed between investors for business cooperation, profit sharing and product distribution without establishing a new legal entity. This form of investment helps investors conduct investment activities quickly without spending time and money to establish and manage a newly established legal entity. BCC contracts signed between domestic investors comply with the provisions of civil law. For a BCC contract with at least one foreign investor, the procedures for granting an investment registration certificate must be carried out.
Investment to contribute capital, buy shares, buy capital contribution
Capital contribution, purchase of shares, capital contribution to economic organizations is a form of indirect investment by foreign investors. This form of indirect investment is through the purchase of stocks, bonds and other valuable papers in which investors are not directly involved in the management of investment activities. When making this form of investment, investors need to comply with the forms and procedures for capital contribution, share purchase, and capital contribution.
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Related questions
Investment capital is the amount of capital mobilized collectively to be used in the process of reproduction and maintenance of development purposes, this is defined as the accumulated capital amount of society, of production domestic business oranizations or funded by foreign organizations and enterprises.
Investment capital can be flexible depending on the implementation of specific investment projects. When enterprises carry out each project, the investment capital will be different, so the investment capital cannot be the same as the charter capital of the enterprise. Therefore, in order to ensure investment activities for project implementation, the implementing enterprise may contribute part or all of its charter capital in addition to other sources of capital mobilized for investment.
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