Chinese investment in Vietnam: 5 popular investment forms
Chinese investors who wish to do business in Vietnam can carry out procedures to invest according to the forms and mechanisms specified in Article 21 of the Investment Law 2020 through the establishment of new enterprises, investment investing in existing businesses, implementing investment projects, to business cooperation through BCC contracts, and new forms of investment and types of economic organizations according to the regulations of the Vietnamese government. KENFOX IP & Law Office introduces 5 popular investment forms of Chinese investors in Vietnam .
1. Invest in establishing economic organizations with Chinese investment in Vietnam
Chinese investors (whether individuals or organizations) have the right to invest in establishing new businesses or economic organizations in Vietnam according to the provisions of the Investment Law 2020 ( including Joint Stock Companies, Corporations). LLC with one member or two or more members, Partnership Company, Private Enterprise, Cooperative, Union of Cooperatives ).
1.1. Determine the conditions for establishing an economic organization
To make investments in Vietnam through the establishment of “economic organizations” with investment capital from China, Chinese investors need to comply with specific investment conditions according to the provisions of the Investment Law. 2020, including:
[1] Market access conditions : Need to consider “List of industries and occupations with limited market access” ( 84 industries and occupations with limited market access for foreign investors according to Decree 31/2021/ ND-CP, including: 25 industries and occupations that do not have market access; and 59 industries and occupations that have conditional market access ) to determine whether the expected field of activity of Chinese investors falls under the List of item mentioned above or not. In the List, investors need to meet the conditions on investment form, charter capital ownership ratio, financial capacity, and other conditions as prescribed by law. If not on the List, Chinese investors will be subject to the same market access conditions as domestic investors.
[2] Conditions for ensuring security and national defense : Investors need to comply with regulations on ensuring national security and defense ( Article 7, Appendix 4, Article 66.4 of Decree 31/2021/ND-CP )
[3] Regulations on land use : Investors need to comply with land use conditions and conditions for receiving land use rights in sensitive areas such as islands, communes, wards, border towns, communes, coastal wards and towns, according to the provisions of the Land Law.
1.2. Process of establishing an economic organization
After ensuring full compliance with investment conditions, the process of establishing an economic organization with Chinese capital takes place through three main steps:
Step 1 : Determine the type of project that requires an investment policy decision
Foreign investment projects can be divided into two types: one type requires an investment policy decision, the other type does not require an investment policy decision. Therefore, if investors want to carry out an investment project in Vietnam, the first thing is to see if the project is subject to an investment policy decision or not. Investment projects not subject to investment policy approval are projects outside of the cases requiring investment policy approval from the National Assembly, the Prime Minister, the Provincial People’s Committee or the Regional Management Board. industrial zones, export processing zones, high-tech zones, and economic zones are specified in Article 30, Article 31 and Article 32 of the Investment Law 2020. Procedures for approving investment policies are specified in Articles 34, 35 and 36 Investment Law.
Step 2 : Submit documents to apply for an Investment Registration Certificate (“ IRC ”), this document certifies that the investor has been approved for the project and is allowed to invest in Vietnam.
Cases where IRC issuance procedures must be carried out according to the provisions of Articles 37.1 and 23.1 of the Investment Law. Specifically, the following 2 cases must apply for an IRC: (a) Investment projects of foreign investors; (b) Investment projects of economic organizations ( including 3 cases: (i) With foreign investors holding more than 50% of charter capital or with the majority of partners being foreign individuals for The economic organization is a partnership; (ii) Having a business organization (with foreign investment capital) holding more than 50% of charter capital; and (iii) There are foreign investors and regulated economic organizations (with foreign investment capital) holding more than 50% of charter capital ).
Documents to provide:
*** For IRC applications for investment projects that are not subject to investment policy approval
Required documents : Documents as prescribed in Article 36.1 of Decree 31/2021/ND-CP [ Article 36. Procedures for granting and adjusting Investment Registration Certificates for investment projects not subject to mortgages Investment policy agreement : first . The investor submits 01 set of application documents for an Investment Registration Certificate including the contents specified in Article 33.1 of the Investment Law to the investment registration agency .
Where to submit application : Submit to two agencies, the Department of Planning and Investment or the Industrial Park Management Board as prescribed in Article 34 of Decree 31/20021
*** For IRC issuance documents for investment projects, it is under the decision of the Prime Minister
Required documents : Similar to the application file for an Investment Certificate for investment projects under the authority to decide investment policies of the Provincial People’s Committee.
Place of application : Ministry of Planning and Investment
Number of documents : 08 sets of documents
Processing Time :
Please approve the investment policy:
- Within 03 working days from the date of receipt of complete dossier, the Ministry of Planning and Investment sends the dossier to get appraisal opinions from state agencies related to the appraisal content.
- Within 15 days from the date of receipt of the dossier, the consulted agency shall have an appraisal opinion on the content within the scope of its state management and send it to the Ministry of Planning and Investment.
- Within 40 days from the date of receiving the dossier, the Ministry of Planning and Investment organizes the appraisal of the dossier and prepares an appraisal report including appraisal contents, and submits it to the Prime Minister for approval of the investment policy.
Apply for Investment Registration Certificate: 05 working days from the date of receiving the investment policy approval document concurrently with investor approval for investment projects subject to Investment Registration Certificate .
Note: Investment projects are simultaneously under the investment policy approval authority of 02 or more provincial People’s Committees, the Prime Minister shall designate the investment registration agency of a province or affiliated city. The central government issues Investment Registration Certificates for the entire project.
*** For IRC application documents for investment projects subject to investment policy approval of the National Assembly
Required documents : Similar to the application file for an Investment Certificate for investment projects under the authority to decide investment policies of the Provincial People’s Committee.
Place of application : Ministry of Planning and Investment
Number of documents : 20 sets of documents
Processing Time :
Please approve the investment policy:
- Within 15 days from the date of receiving complete documents, the Ministry of Planning and Investment reports to the Prime Minister to establish the State Appraisal Council.
- Within 90 days from the date of establishment, the State Appraisal Council organizes the appraisal of documents and prepares an appraisal report including appraisal contents to submit to the Government.
- No later than 60 days before the opening day of the National Assembly session, the Government shall prepare and send a dossier requesting approval of the investment policy to the inspection agency of the National Assembly.
- The National Assembly considers and passes a resolution approving the policy.
Apply for investment registration certificate: 05 working days from the date of receiving the investment policy approval document concurrently with investor approval for investment projects subject to investment registration certificate.
Step 3 : Carry out procedures to apply for an Enterprise Registration Certificate (ERC), which is the final step to be officially licensed to do business in Vietnam.
After being granted an IRC, investors can choose the type of business to apply for an ERC. Accordingly, the dossier includes: (i) Application for business registration; (ii) Charter of the company; (iii) List of members or list of shareholders; (iv) List of authorized representatives; (v) Copy of personal identification documents if the founding member is an individual; (vi) In case the investor is an organization: Copy of Business Registration Certificate or establishment decision; Document appointing an authorized representative with a copy of one of that person’s authenticated documents; (vii) Investment registration certificate issued.
The investor submits 01 set of above documents to the Department of Planning and Investment. After 03 working days from the date of receiving valid documents, the Department of Planning and Investment will issue ERC to the investor.
2. Contribute capital, buy shares, or contribute capital to economic organizations in Vietnam
For all types of investment, capital contribution, share purchase, capital contribution purchase, foreign investors in general and Chinese investors in particular need to comply with the provisions of Article 24 of the Investment Law.
The first step, investors need to determine whether they are suitable for investment conditions according to Vietnamese law or not. The investment conditions for Chinese investors in this form of investment are similar to the conditions for investment in establishing economic organizations in Vietnam (ie meeting the 3 conditions according to Article 24.2 Investment Law on: (i) Market access conditions for foreign investors; (ii) Ensuring national defense and security and (iii) Land law regulations on conditions for receiving and use rights land use…).
In case a Chinese investor contributes capital, buys shares, or purchases a capital contribution of 50% or less in a Vietnamese enterprise and conducts business in sectors without conditions, the investor only needs to carry out Show the transfer/capital contribution, declare income tax from the transfer if any. The enterprise then registers to change business registration information with documents according to the provisions of law.
In case Chinese investors contribute capital/acquire more than 50% of charter capital , the following procedures need to be carried out:
(1) Register to contribute capital, buy shares, or contribute capital to Vietnamese enterprises at the Investment Registration Authority;
(2) Make capital contributions, buy shares and capital contributions;
(3) Carry out procedures to change business registration information;
(4) Carry out IRC application procedures for business lines that require an Investment Registration Certificate.
Procedures for implementing investment activities in the form of capital contribution, share purchase, capital contribution purchase for foreign investors, investors need to comply with regulations in Article 66 of Decree 31/2021/ND-CP .
3. Investment in the form of BCC contract
According to the provisions of the Investment Law 2020, investment in the form of BCC contracts by Chinese investors in Vietnam means that Chinese investors sign business cooperation contracts with Vietnamese enterprises to profit division, product division without establishing an economic organization. This is considered a form of business cooperation without establishing a new legal entity.
After both parties agree to all terms in the contract and complete the signing of the BCC contract, the enterprise needs to carry out procedures to apply for an Investment Registration Certificate for investment projects under the BCC Contract.
4. Implement investment projects
To implement investment projects, Article 23 of the Investment Law stipulates: Economic organizations need to meet the conditions and carry out procedures as prescribed for foreign investors when investing in establishing economic organizations. other; Investing in capital contribution, purchasing shares, purchasing capital contributions from other economic organizations; Invest in the form of BCC contract if that economic organization falls into one of the following cases:
(i) There are foreign investors holding more than 50% of the charter capital or the majority of partners are foreign individuals for economic organizations that are partnerships;
(ii) There is an economic organization (with foreign investment capital) holding more than 50% of charter capital;
(iii) There are foreign investors and economic organizations (with foreign investment capital) holding more than 50% of charter capital.
Investors who want to make investments in Vietnam with Chinese capital can also make investments through the form of “Implementing investment projects”
According to the provisions of Section 2 and Section 3, Chapter IV of the Investment Law 2020, to implement an investment project in Vietnam, investors need to take the following steps:
Step 1 : Select investors to implement investment projects through forms such as: (1) Bidding to select investors according to the provisions of bidding law; (2) Auction of land use rights according to the provisions of land law; (3) Approval of investors in the cases specified in Clauses 3 and 4, Article 29 of the Investment Law 2020.
Step 2 : Determine the entity with the authority to approve the investment policy (the Prime Minister or the National Assembly has the authority to approve the investment policy)
Step 3 : Prepare documents to request investment policy approval. Documents are specified in Article 33 of the Investment Law 2020
Step 4 : Wait for the decision to approve the investment policy
Step 5 : Implement the investment project after approval
5. Investment in the form of PPP contracts
Chinese investors can also invest in Vietnam through signing PPP contracts.
PPP contract ( Public – Private – Partnership ), also known as public-private partnership contract, is a type of contract signed between a competent state agency and a private investor (domestic or foreign) to manage manage, implement and operate infrastructure development projects and provide public services.
Chinese investors can participate in PPP projects through many different forms such as: (1) Build-Transfer contract (Build-Transfer – BT); (2) Build – Transfer – Operate Contract (Build-Transfer-Operate – BTO); (3) Build – Operate – Transfer Contract (Build-Operate-Transfer – BOT); (4) Build-Transfer-Lease – BTL contract; (5) Build-Own-Operate – BOO Contract; (6) Build-Lease-Transfer – BLT Contract; (7) Business – Management Contracts (Operate-Maintain – O&M) and other types of contracts depending on the Prime Minister’s decision.