Foreign investor means an individual with foreign nationality or an organization established under foreign laws that conducts business investment activities in Vietnam. What is the current Law on Investment about investment activities of foreign investors in the establishment of economic organizations? So about the matter “Benefits of foreign-invested enterprises under Vietnam” Let’s find out with LSX in the article below.
Legal grounds
- Investment Law 2020
The definition of investment
Investment means the investment by an investor of capital and assets in the forms and methods prescribed by law to carry out activities for profit or other economic and social benefits.
Prohibited investment sectors: trading in narcotics, chemicals, minerals, specimens of plants and wild animals, prostitution, human trafficking, cloning activities on humans.
Current investment forms: Investment in the establishment of economic organizations, Investment in the form of capital contribution, purchase of shares, capital contribution to economic organizations, Investment in the form of PPP contract, Investment under BCC contract form.
In the trend of economic globalization, Vietnam is no exception.
The concept of foreign investment
Foreign investment means that organizations and individuals of one country bring capital in different forms into another country to conduct business activities for profit. Foreign investment is made in the form of direct investment or indirect investment.
Foreign investment activities in Vietnam are regulated from Decree No. 115/CP dated April 18, 1977 promulgating the charter on foreign investment in Vietnam and really developed after the promulgation of the Law on Foreign Investment. in Vietnam on December 29, 1987. According to Vietnamese law, foreign investment has the following signs: 1) The investor is a foreign organization or individual or an overseas Vietnamese; 2) Investment capital: moved from abroad into Vietnam or invested in Vietnam and can be cash, property in kind or property rights; 3) Investment activities are conducted in the territory of Vietnam to earn profits and these profits can be remitted abroad or used for re-investment in Vietnam; 4) 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.
Foreign investment has the effect of expanding economic cooperation with foreign countries, taking advantage of capital, modern technology and advanced economic management experience of foreign countries to effectively exploit and use the resources of foreign countries.
The role and meaning of foreign investment in Vietnam
With its strengths in resources and young human resources, our country has annually attracted a large amount of foreign investment and is internationally evaluated as one of the most successful countries in attracting FPI in the region and in the world. , is considered as a reliable and effective investment location for many foreign investors.
The attraction of foreign investors has partly contributed to promoting the transformation, promoting economic development, many outstanding growth models, improving the competitiveness of domestic and foreign investors. , thereby promoting economic development. Many products and services are competitively put on the market, promoting institutional reform, economic policies, business investment environment, helping to create many jobs for the young population of our country. Currently, direct employment in the foreign-invested sector has increased from 330,000 people in 1995 to about 3.6 million people in 2017, while creating indirect jobs for about 5-6 million workers.
In addition, foreign investment also creates many advantages for Vietnam, accelerating the time to expand the international market, increasing export turnover, many garment products in Vietnam are imported to other countries in the world from the world market to countries with developed economies, at the same time introducing international friends to our culture, attracting the tourism economy. Many foreign-invested enterprises have been established in association with domestic enterprises to create a global production network to help participate in the regional division of labor. Foreign investment also creates favorable opportunities for Vietnam to expand to international markets, increase export turnover, step by step participate in production networks and value chains in the world market, and affirm its position in the world market. Thanks to this orientation, exports of the foreign investment sector have increased rapidly, contributing to balance the trade balance, reducing exchange rate pressure and improving the balance of international payments.
The concept of foreign-invested enterprises
Foreign-invested enterprise is an enterprise established in the territory of another country by an investor of one country with all or part of its capital to conduct profit-making business activities.
“Many countries around the world do not distinguish between domestic investment capital and foreign investment capital and therefore, there is no concept of foreign-invested enterprises; they call enterprises established on the basis of capital contribution. of foreign investors according to their form of legal organization, for example: limited liability company, joint stock company…
The term foreign-invested enterprise is officially used in the 1996 Law on Foreign Investment in Vietnam (previously referred to as foreign-invested enterprises). Accordingly, foreign-invested enterprises have the following characteristics: 1) Enterprises wholly or partly owned by foreign investors; 2) Being established and operating under Vietnamese law on the basis of an investment license issued by a state management agency in charge of foreign investment; 3) Having legal status under Vietnamese law; 4) Organized as a limited liability company. Currently, Vietnam is piloting the transformation of a number of foreign-invested enterprises into joint stock companies.
The Investment Law 2020 does not directly mention this type of enterprise, but rather defines it in a general way in Clause 17, Article 3 as follows: “Foreign-invested economic organization is an economic organization with foreign investors. foreign members or shareholders.”
Thus, according to this regulation, we can understand basically, FDI enterprises are enterprises with foreign direct investment capital, regardless of the percentage of capital contributed by foreign parties. Foreign direct investment enterprises include:
- Enterprises with 100% foreign capital.
– Enterprises with foreign nationals, organizations established under foreign law investing (contributing capital for establishment, buying contributed capital).
Benefits of foreign-invested enterprises under Vietnam
– First, supplementing domestic capital:
Foreign investment is a source of capital transferred from foreign currency capital to Vietnam. Thereby, contributing to economic growth and maximizing available capital.
– Second, Acquiring technology and management know-how
Attracting foreign investment from multinational companies will give a country the opportunity to absorb new technologies and business management know-how that these companies have accumulated and developed over the years and with large sums of money. great cost. Because companies in countries around the world have higher experience and thinking, we can learn and promote the creative and technological capabilities of Vietnamese businesses.
– Third, Join the global production network
When attracting FDI from multinational companies, not only enterprises with investment capital of multinational companies, but also other domestic enterprises that have business relations with that enterprise will also participate in the regional division of labor. Therefore, the country attracting investment will have the opportunity to join the global production network, which is convenient for boosting exports and increasing trade with many countries in the region and the world.
– Fourth, Increase the number of jobs and train workers
Since one of the purposes of FDI is to exploit conditions to achieve low production costs, foreign-invested enterprises will employ many workers in Vietnam. At the same time, the fact that foreign businesses pay most of them have a higher minimum wage, thereby helping to improve the income of a part of the population, which will contribute positively to the economic growth of the country. In the hiring process, vocational skills training, which in many cases is new and progressive in FDI-attracting developing countries, will be provided by the enterprise. This creates a skilled workforce for the country while also attracting FDI. Not only ordinary workers, but also local professionals have the opportunity to work and receive professional training in foreign-invested enterprises.
– Fifth, Large source of budget revenue
When any foreign investor invests in Vietnam, they have to pay tax rate for their business activities. Therefore, the collection of tax from foreign enterprises is an important source of budget revenue, accounting for a large part in the development of cash flow and the economy in Vietnam.
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Frequently asked questions
Pursuant to the provisions of Article 53 of the Law on Investment in 2020, the following industries are prohibited from investing abroad:
“Article 53. Industries and trades banned from offshore investment
Lines and trades banned from business investment are specified in Article 6 of this Law and relevant international treaties.
Industries and trades with technologies and products banned from export according to the provisions of law on foreign trade management.
Lines and trades banned from investment and business in accordance with the law of the host country”.
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 the 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 ownership according to regulations. provisions of the law on securities, equitization and transformation of state-owned enterprises and the conditions prescribed by law and international treaties to which Vietnam is a contracting party.
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 to 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 issuance of an investment registration certificate must be carried out.
Conclusion: So the above is Benefits of foreign-invested enterprises under Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
