Foreign investment in Vietnam – How it is guaranted by law?

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One of the most concern for the foreign investors investing in other countries is the investment guarantee for their business. In order to ensure the foreign investors can safely invest in Vietnam, the laws of Vietnam have provided a number of guarantees for the foreign investors when they invest in Vietnam.

Below are typical guarantees for the foreign investors when they invest in Vietnam

1.       1. Guarantees for assest ownership[1].

Lawful assets of the foreign investors shall not be nationalized or confiscated by administrative measures. Except for being bought or requisitioned by the State for reasons of national defense, security, national interests, state of emergency, natural disaster management, the investors shall be reimbursed or compensated in accordance with the regulations of law.

The price for buying will be determined in the most common price in the market with the same types and technical standards, quality, and origin at the time of the decision of buying these assets. The requisition assets will be returned after the requisition period expires. There will be compensation for the damage caused by the requisition.

2. Guarantees for business investment activities[2]

The foreign investors are not required by the State to exercise to following requirements:

  • Give priority to purchase or use of domestic goods/services; or only purchase or use goods/services provided by domestic producers/service providers;
  • Achieve a certain export target; restrict the quantity, value, types of goods/services that are exported or domestically produced/provided;
  • Import a quantity/value of goods that is equivalent to the quantity/value of goods exported; or balance foreign currencies earned from export to meet import demands;
  • Reach a certain rate of import substitution;
  • Reach a certain level/value of domestic research and development;
  • Provide goods/service at a particular location in Vietnam or overseas;
  • Have the headquarter situated at a location requested by a competent authority.

In additions, depending on the socio-economic conditions and demands for investment attraction in each period, the Prime Minister shall decide to apply forms of guarantee of the State to execute investment projects subject to approval for their investment guidelines by the National Assembly, the Prime Minister, and other important investment projects on infrastructural development.

3. Guarantees for tranfer of foreign’s assests oversea [3].

After all financial obligations to Vietnamese government are fulfilled, foreign investors are permitted to transfer the following assets overseas:

  • Investment capital and proceeds from liquidation of its investment;
  • Their income obtained from business investment activities;
  • Money and other assets under the lawful ownership of the investors.

4. Guarantees for business investment upon changes of laws [4]

Where a new law provides more favorable investment incentives, the foreign investors are entitled to enjoy the new incentives for the remaining period of the incentive enjoyment of the project, except for special investment incentives for the investment projects in the case the investment projects that have been granted an investment certificate, investment registration certificate or investment policy decision before the effective date of the Investment Law 2020 (January 1, 2021);

Where a new law that provides less favorable investment incentives than those previously enjoyed by investor is promulgated, the foreign investors shall keep enjoying the current incentives for the remaining period of the incentive enjoyment of the project.

The aboved regulations do not apply if regulations of a legal document are changed for reasons of national defense and security, social order and security, social ethics, public health, or environmental protection. In this case, the foreign investors will deal with one or more of the following measures:

  • Deduct the damage actually suffered from the foreign investor's taxable income
  • Adjust the objectives of the investment project;
  • Assist the foreign investor in remedying damage.

[1] Article 10, Investment Law 2020

[2] Article 11, Investment Law 2020

[3] Article 13, Investment Law 2020

[4] Article 14, Investment Law 2020

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