Notes on investment capital for foreign investors in Vietnam

by DungTran

Notes on investment capital for foreign investors in Vietnam. Regulations on market access, prohibited lines, investment limited. Let us learn about this topic with LSX law firm as follow:

Regulations on the rate of investment capital in economic organizations for application of conditions and implementation of investment procedures for foreign investors in Vietnam

According to Clause 1, Article 23 and point b, Clause 2, Article 26 of the Law on Investment 2020; Economic organizations must meet the conditions and carry out investment registration procedures like foreign investors if their total foreign investment capital is 50%. 

In addition, the capital contribution, share purchase, purchase of capital contribution; by foreign investors to economic organizations are specified in Point b; Clause 2, Article 26 of the Investment Law 2020 as follows: :

“Foreign investors shall carry out procedures for registration of capital contribution, purchase of shares or investment of contributed capital of an economic organization before changing members or shareholders if they fall into one of the following cases:

b) The contribution of capital, purchase of shares, investment of contributed capital leads to foreign investors; economic organizations specified at Points a, b and c, Clause 1; Article 23 of this Law holding more than 50% of the charter capital of the economic organization in the following cases: increasing the percentage of investors owning charter capital; foreign investment from less than or equal to 50% to over 50%; increase the rate of ownership of charter capital of foreign investors when foreign investors already own more than 50% of charter capital in economic organizations.” 

Regulations on market access, prohibited lines, investment limited in Vietnam

Before investing in Vietnam; Foreign investors need to carefully study the regulations on market access and open new investment projects under the provisions of the Investment Law 2020 and guiding documents.

Accordingly, business investment conditions are conditions that individuals and organizations must meet when conducting business investment activities in conditional investment and business lines. In addition, the market access conditions for foreign investors are conditions that foreign investors must meet; to invest in industries and trades on the list of industries and businesses with restricted market access for foreign investors; the provisions of Clause 2, Article 9 of the Investment Law 2020; specifically, industries and trades that have not yet had market access or have conditional market access. 

Principles and list of industries and trades that have not yet had market access and have market access conditions; guided by Section 2, Chapter II, Decree 31/2021/ND-CP detailing and guiding the implementation of several articles of the Investment Law.

The industries and trades banned from investment listed in Article 6 of the Investment Law 2020 include: Trading in narcotics; Trading in chemicals and minerals; Trading in specimens of wild plants and animals as prescribed in Appendix 1 to the Convention on International Trade in Endangered Species of Wild Fauna and Flora; models of endangered and rare species of wild animals and plants of Group I, originating from nature; Prostitution business; Buying and selling people, tissues and organs; Business activities related to human cloning; Business in firecrackers, Business is trading in human corpses, human fetuses, and Debt collection services. 

Notes on investment capital to avoid depended certificate of investment registration for foreign investors in Vietnam

Investment capital is money and other assets as prescribed by civil law and international treaties; to which the Socialist Republic of Vietnam is a signatory to conduct business investment activities. Specialized legislation regulates legal capital for certain industries and professions, such as industries and occupations in finance, banking, etc. Besides, several agencies that manage and approve investment projects still choose investment capital as a criterion to consider feasibility; profitability, and maintenance of the investment project, the scale of the project and the impact of the project on the local economy and society. 

Specifically, foreign investors will still face the risk of refusal of permits from competent authorities when investing in industries and professions that do not require investment capital as prescribed by law. The licensing agency will calculate the input costs when establishing the project, such as renting the location, procurement of equipment (if any), recruitment and use of labor, salary payment … and the ability to maintain the investment project for a certain period.

So, before investing in Vietnam; Investors need to have capital preparation or capital mobilization plan. Investment capital as well as financial capacity, ability to mobilize capital of investors; or financial guarantee commitment of the parent company, financial institution; etc. will be proven as soon as the investor submits the application for approval of investment policy; or applies for an investment registration certificate. In addition, foreign investors need to calculate and estimate reasonable costs based on industries; occupations, purposes, scale, and project implementation progress. 

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Related questions

What is FDI?

FDI stands for “Foreign Direct Investment” which means foreign direct investment. This is a form of business of one economy enterprise operating in the territory of another economy in order to gain long-term benefits and take over the real management of the enterprise.

The parties in FDI investment?

In essence, FDI is the meeting of the needs of two parties one side is the investor and the other side is the country receiving the investment

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