Law amending the Law on domestic investment promotion, No. 03/1998/QH10

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ATTRIBUTE Law amending the Law on domestic investment promotion

Law No. 03/1998/QH10 dated June 01, 1998 of the National Assembly on domestic investment promotion (amended)
Issuing body: National Assembly of the Socialist Republic of VietnamEffective date:
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Official number:03/1998/QH10Signer:Nong Duc Manh
Type:LawExpiry date:
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Issuing date:20/05/1998Effect status:
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Fields:Investment
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THE NATIONAL ASSEMBLY
-------
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom – Happiness
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No. 03/1998/QH10
Hanoi, May 20, 1998
 
THE LAW
ON DOMESTIC INVESTMENT PROMOTION (AMENDED)
With a view to mobilizing and using effectively all sources of capital, natural resources, labor and other potentials of the country, to contribute to socio-economic development for a prosperous people, a strong country and an equal and civilized society;
Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam;
This Law prescribes the promotion of domestic investment.
Chapter I
GENERAL PROVISIONS
Article 1.- The State protects, encourages, treats equally and creates favorable conditions for organizations and individuals to invest in the socio-economic domains on the territory of Vietnam under the Vietnamese laws.
Article 2.- In this Law, the following terms are construed as follows:
1. "Domestic investment" means the use of capital for production and business in Vietnam by organizations and individuals defined in Article 5 of this Law.
2. "Investors" are organizations and/or individuals using capital to make investment as defined in Article 4 of this Law.
3. A "build-operate-transfer (BOT) contract" is a document signed between a competent State agency and an investor to build and do business with an infrastructure project within a given duration agreed upon by the two sides; when such time-limit expires, the investor shall transfer without indemnity such project to the State.
4. A "build-transfer-operate (BTO) contract" is a document signed between a competent State agency and an investor to build an infrastructure project; upon the completion of the construction, the investor shall transfer such project to the State. The competent State agency that has signed the contract shall reserve for the investor the right to do business with such project for a given duration agreed upon by the two sides.
5. A "build-transfer (BT) contract" is a document signed between a competent State agency and an investor to build an infrastructure project; upon the completion of the construction, the investor shall transfer such project to the State. The competent State agency that has signed the contract shall create conditions for the investor to implement other project(s) in order to recover the capital and earn profits.
6. "Vietnamese residing overseas" are Vietnamese citizens and people of Vietnamese stock residing, working and/or living permanently in foreign countries.
7. "Foreigners permanently residing in Vietnam" are citizens of foreign countries and people without nationality, who reside, work and/or live permanently in Vietnam.
8. "Geographical areas with difficult socio-economic conditions" are areas inhabited by people of ethnic minorities; mountainous areas; areas with underdeveloped infrastructure; and areas with unfavorable natural conditions.
9. "Geographical areas with particularly difficult socio-economic conditions" are high-mountain areas inhabited by people of ethnic minorities; islands; areas with poor infrastructure; and areas with extremely unfavorable natural conditions.
Article 3.- The investors may use capital in the following currencies and property to invest in Vietnam:
1. Vietnamese currency, foreign currencies;
2. Gold, transferable securities;
3. Buildings and workshops, constructions, equipment, machinery and other production and/or business facilities;
4. Land use right value as prescribed by the land legislation;
5. The value of the intellectual property rights, technical secrets and/or technological process;
6. Other lawful assets.
Article 4.- Governed by this Law shall be the following investment activities:
1. Investing in setting up production and/or business establishments of all economic sectors;
2. Investing in the construction of production chain(s), scale expansion, technological renewal, the improvement of ecological environment, removal of production establishment(s) from urban areas, the raising of production and/or business capacity, production restructuring, diversification of production/business lines and/or trades as well as products;
3. Buying stocks of enterprises, contributing capital to enterprises of various economic sectors;
4. Investment in the form of "build-operate-transfer", "build-transfer-operate" or "build-transfer" contracts.
Article 5.-
1. Objects of application of this Law include:
a) Investors being Vietnamese organizations or individuals;
b) Investors being Vietnamese residing overseas;
c) Investors being foreigners permanently residing in Vietnam.
2. The Prime Minister shall decide specific cases where foreign investors shall be permitted to contribute capitals to or buy shares of Vietnamese enterprises at a level not exceeding 30% of the concerned enterprise's statutory capital.
Chapter II
INVESTMENT GUARANTY AND SUPPORT
Article 6.-
1. The State recognizes and protects the rights to ownership over the property, investment capital, income as well as other legitimate rights and interests of investors.
2. Lawful investment property and capital of the investors shall not be nationalized and shall not be confiscated through administrative measures.
In case of utter necessity when, for the reason of national defense, security or national interests, the State decides to compulsorily purchase or requisition the property of investors, the latter shall be paid up or compensated according to the market prices at the time of the announcement of the decision on compulsory purchase or requisition and shall be given favorable conditions to invest in appropriate domains and/or areas.
3. In cases where any change in a legal provision that damages the interests of an investor, the State shall allow the investor to continue enjoying the prescribed privileges for the remaining period or the State shall settle satisfactorily the interests for the investor.
Article 7.- The State shall apply the following measures to create conditions for investors to have or expand their production and/or business grounds:
1. Assigning or leasing land according to the provisions of the land legislation and civil legislation;
2. Making public announcement on each locality's land use planning already approved and funds of land that have not been used and the land that needs to be assigned or leased;
3. The Government shall submit to the National Assembly Standing Committee specific provisions on cases where investors are entitled to transfer, assign, sublease, mortgage or inherit the allocated or leased land.
Article 8.- The State shall support and create favorable conditions in term of infrastructure for investors as follows:
1. Building medium- and small-size industrial parks in geographical areas meeting with difficult socio-economic conditions and areas with particularly difficult socio-economic conditions so that investors may use them as their production and/or business grounds with preferential terms;
2. Building infrastructure projects outside the perimeters of industrial parks or export processing zones so as to create favorable conditions for investment, production and business activities;
3. Encouraging and creating favorable conditions for investors to set up their production and/or business establishments in industrial parks, export processing zones and/or special economic zones.
Article 9.- The State shall contribute its capital to production and/or business establishments of various economic sectors in areas with difficult socio-economic conditions and areas with particularly difficult socio-economic conditions through State enterprises and/or State-run credit institutions.
Article 10.- The State shall set up and encourage the setting up of investment support funds and export support funds from the sources of State budget as well as contributions by credit institutions, enterprises, domestic and foreign organizations and individuals. The investment support funds shall provide medium- and long-term investment loans with preferential interest rates, partial interest rate subsidies for preferential investment projects and/or investment credit guaranty. The export support funds shall provide credits with preferential interest rates in order to support enterprises in developing the production of export goods, the trading in export goods, the expansion of export markets and provide export credit guaranty.
The operation of the investment support funds and the export support funds shall comply with the Law on Credit Institutions.
Article 11.-
1. The State encourages the dissemination and transfer of technologies and create conditions for investors to use with preferential charge levels the technologies created from the State budget sources.
2. The State shall set up the scientific and technological development support fund from the sources of the State budget as well as contributions by credit institutions, enterprises, domestic and foreign organizations and individuals in order to provide loans for investors under favorable terms and at preferential interest rates to conduct scientific research, application of technical and technological advances as well as the transfer and renewal of technologies.
The regulation on organization and operation of the scientific and technological development support fund shall be prescribed by the Government.
Article 12.- The State encourages the following investment support activities:
1. Consultancy on legal matters, investment, business and enterprise administration;
2. Job and technicians' training; professional and economic management skills fostering;
3. Providing information on markets, sciences, techniques and technologies; the protection of intellectual property rights and technology transfer;
4. Marketing and trade promotion;
5. Establishing associations of producers, traders, exporters.
Article 13.- Investment projects of investors defined in Article 5 of this Law are entitled to the same goods and services price levels set by the State, to the same tax levels and the same investment preferences.
Article 14.- In cases where Vietnamese experts and technicians remain unable to meet the professional and technical requirements, investors may hire experts and technicians who are foreigners, overseas Vietnamese or foreigners permanently residing in Vietnam according to their production and/or business demands.
Experts and technicians who are foreigners, overseas Vietnamese or foreigners permanently residing in Vietnam and work for domestic production and/or business establishments shall be entitled to transfer abroad their after-tax income according to Vietnamese law.
Chapter III
INVESTMENT PREFERENCES
Article 15.- Projects of investment in the following fields shall be entitled to preferences:
1. Afforestation, earmarked forest regeneration; planting perennial trees on unused land, bare hills and/or mountains; land reclaimations; salt-making; aquaculture in untapped water areas;
2. Building infrastructure and developing public transportation; developing education, training, public health, national culture;
3. The production of and trading in export goods;
4. Offshore fishing; processing of agricultural, forest and/or aquatic products; technical services directly serving agricultural production, forestry and fishery.
5. Scientific and technological research and development; scientific and technological services; consultancy on legal matters, investment, business, enterprise administration; the protection of intellectual property rights and technology transfer; job and technicians' training and fostering of business management knowhows;
6. Investment in the construction of production chains, scale expansion; improvement of ecological environment and urban hygiene; the removal of production establishments from urban areas, diversification of production/business lines and products; investment in branches and trades that intensively employ domestic labor, first of all labor at the investment localities;
7. Branches and trades that should be given priority in each period of socio-economic development.
Article 16.- Investment projects in the following geographical areas shall be entitled to preferences:
1. Areas with difficult socio-economic conditions;
2. Areas with particularly difficult socio-economic conditions.
Article 17.-
1. Investors having investment projects defined in Article 15 of this Law shall enjoy the 50% reduction of land use levy in case they are assigned land and have to pay levy for the use thereof.
2. Investors having investment projects in areas with difficult socio-economic conditions shall enjoy the 75% reduction of land use levy in case they are assigned land and have to pay levy for the use thereof.
3. Investors having investment projects in areas with particularly difficult socio-economic conditions or investment projects defined in Article 15 of this Law in areas with difficult socio-economic conditions shall be exempt from the land use levy in case they are assigned land and have to pay levy for the use thereof.
Article 18.-
1. Investors having investment projects defined in Article 15 of this Law shall be exempt from land rent for three to six years from the signing of the land-renting contract.
2. Investors having investment projects in areas with difficult socio-economic conditions shall be exempt from the land rent for seven to ten years from the signing of the land-renting contract.
Investors having investment projects defined in Article 15 of this Law in areas with difficult socio-economic conditions shall be exempt from the land rent for 11 to 15 years from the signing of the land-renting contract.
3. Investors having investment projects in areas with particularly difficult socio-economic conditions shall be exempt from the land rent for 11 to 15 years from the signing of the land-renting contract.
Investors having investment projects defined in Article 15 of this Law in areas with particularly difficult socio-economic conditions shall be exempt from the land rent for the whole duration of project implementation.
Article 19.-
1. Investors having investment projects defined in Clause 1, Article 15 of this Law shall be exempt from land use levy in case they are assigned land.
Investors having investment projects defined in Clause 2, Article 15 of this Law shall be entitled to the 50% reduction of land use levy for seven to ten years from the time they are assigned land.
2. Investors having investment projects in areas with difficult socio-economic conditions shall be exempt from the land use levy for seven to ten years from the time they are assigned land.
Investors having investment projects in the fields defined in Article 15 of this Law in areas with difficult socio-economic conditions shall be exempt from the land use levy for 11 to 15 years from the time they are assigned land.
3. Investors having investment projects in areas with particularly difficult socio-economic conditions shall be exempt from the land use levy for 11 to 15 years from the time they are assigned land.
Investors having investment projects defined in Article 15 of this Law in areas with particularly difficult socio-economic conditions shall be exempt from land use levy for the whole duration of project implementation.
Article 20.- Investors having investment projects defined in Article 15 and Article 16 of this Law shall be entitled to enjoy the following enterprise income tax rates:
1. Investing in the fields defined in Article 15 of this Law or investing in areas with difficult socio-economic conditions shall enjoy the tax rate of 25%.
2. Investing in areas with particularly difficult socio-economic conditions or in the fields defined in Article 15 of this Law in areas with difficult socio-economic conditions shall be entitled to the tax rate of 20%.
3. Investing in the fields defined in Article 15 of this Law in areas with particularly difficult socio-economic conditions shall be entitled to the tax rate of 15%.
Article 21.-
1. Investors having projects on setting up production and/or business establishments in the fields defined in Article 15 of this Law shall be entitled to the exemption or reduction of enterprise income tax as prescribed in Point b, Clause 1, Article 17 of the Law on Enterprise Income Tax.
2. Investors having projects on setting up production and/or business establishments in areas defined in Article 16 of this Law or projects of investment in the form of build-operate-transfer or build-transfer-operate contracts shall be entitled to the exemption or reduction of enterprise income tax at the highest preferential level as defined in Point b, Clause 1, Article 17 of the Law on Enterprise Income Tax.
Article 22.- Investors having investment projects defined in Clause 6, Article 15 of this Law shall be entitled to enjoy not only the enterprise income tax exemption or reduction as prescribed in Article 18 of the Enterprise Income Tax Law but also the following additional preferences:
1. The 50% reduction of the enterprise income tax to be paid in two subsequent years on the additional income amount brought about by such investment;
2. The exemption of enterprise income tax for two more years and the 50% reduction of the enterprise income tax amount to be paid in three subsequent years on the additional income amount brought about by such investment, for production and/or business establishments located in areas with difficult socio-economic conditions.
3. The exemption of enterprise income tax for three more years and the 50% reduction of the enterprise income tax amount to be paid in five subsequent years on the additional income brought about by such investment, for production and/or business establishments located in areas with particularly difficult socio-economic conditions.
Article 23.- Investors having investment projects defined in Article 15 or Article 16 of this Law shall not have to pay the income surtax defined in Clause 1, Article 10 of the Law on Enterprise Income Tax.
Article 24.-
1. Investors being individuals shall be exempt from income tax on the amount of income earned from their capital contribution to and/or purchase of shares of enterprises for a period of five years from the time the investors are obliged to pay tax according to the law on personal income tax.
2. Investors being individuals shall be exempt from the income tax on the income amounts earned from their capital contribution to and/or purchase of shares of enterprises in areas defined in Article 16 of this Law for a period of 10 years from the time the investors are obliged to pay tax according to the law on personal income tax.
3. Investors contributing capital with their intellectual property rights, technical secrets and/or technological process shall be exempt from income tax on the amounts of income earned from such capital contribution.
Article 25.- Investors having investment projects defined in Article 15 or Article 16 of this Law shall be exempt from import tax on the following commodities which have not yet been produced at home or have been produced at home but failed to meet the prescribed requirements:
1. Equipment, machinery, specialized transport means included in the technological lines, which are imported to create the enterprise's fix assets or expand investment scale, or renew technology;
2. Specialized transport means for the transportation of workers.
Article 26.- Apart from the enterprise income tax preferences defined in this Law, the investors engaged in the production of and/or trading in export goods shall also be entitled to enjoy additional enterprise income tax preferences as follows:
1. The 50% reduction of the payable enterprise income tax on the income amount earned from the export in the fiscal year, for investors who export the goods for the first time, export new kinds of goods or export goods to new markets;
2. The 50% reduction of the payable enterprise income tax on the amount of additional income from the export in the fiscal year, for investors having export turnover higher and higher from year to year.
3. The 20% reduction of the payable enterprise income tax on the income amount earned from the export in the fiscal year, for investors having export turnover accounting for more than 50% of the total turnover or having export market stable for three consecutive years;
4. Investors engaged in the production of and/or trading in export goods defined in Clause 1, 2 or 3 of this Article; if implementing their investment projects in areas with difficult socio-economic conditions, they shall enjoy the additional 25% reduction of the payable enterprise income tax on the income earned from the export in the fiscal year; if implementing their investment projects in areas with particularly difficult socio-economic conditions, they shall be exempt from the payable enterprise income tax on the income earned from the export in the fiscal year.
Article 27.- When transferring their income abroad, the investors being overseas Vietnamese, foreigners permanently residing in Vietnam and foreigners contributing capital or purchasing shares as prescribed by this Law shall have to pay a tax amount equal to 5% of the income amount transferred abroad.
Article 28.-
1. Investors having investment projects defined in Article 15 or Article 16 of this Law shall be considered by the State's Investment Support Fund for medium- and long-term credit loans or partial interest rate subsidies for loans from credit institutions.
2. Investors having investment projects for removing production establishments from urban areas, or for the improvement of ecological environment and urban hygiene shall be considered by the Investment Support Fund for medium- and long-term loans with preferential interest rates to meet up to 70% of their investment capital demand.
3. Investors having investment projects in areas with difficult socio-economic conditions shall be considered with priority by the State's Investment Support Fund for medium- and long-term credit loans with preferential interest rates to meet up to 50% of their investment capital or for the guaranty of up to 70% of the loans for investment.
4. Investors having investment projects in areas with particularly difficult socio-economic conditions shall be considered with priority by the State's Investment Support Fund for medium- and long-term credit loans with preferential interest rates to meet up to 70% of their investment capital or for a guaranty of up to 80% of the loans for investment.
5. Investors having investment projects for the production of and/or trading in export goods shall, apart from the investment credit preferences defined in Clauses 1 and 2 of this Article, be considered by the Export Support Fund for export credit loans with preferential interest rates, covering up to 80% of the export credit on the basis of the export contract already signed or considered by this Fund for a guaranty of up to 80% of the export credit.
Article 29.- On the basis of the planning and orientation for national socio-economic development in each period, the Government shall stipulate the list of branches and trades in each field earmarked for investment preferences; the list of areas eligible for investment preferences; criteria on the technological level; the labor-employing scale in order to enjoy the investment preferences; the specific investment preference levels prescribed in Chapter III of this Law.
Chapter IV
RIGHTS AND DUTIES OF INVESTORS
Article 30.- The investors shall have the following rights:
1. To select branches, trades and geographical areas for investment on the Vietnamese territory;
2. To select forms of investment; to change or transfer investment projects in accordance with the provisions of law;
3. To register preference forms and levels in accordance with the provisions of this Law;
4. To be self-determined in investment, production and business activities which have already been registered;
5. To hire labor without any limits on quantity; to pay remuneration based on agreement with the laborers in accordance with the provisions of labor legislation;
6. To directly export and/or import registered products, except for those banned or restricted from export and/or import;
7. To be on exit and entry for the implementation of investment projects;
8. To complain, denounce or initiate lawsuit to competent State agencies against acts of law offenses committed by State bodies, cadres or officials in accordance with the provisions of law.
Article 31.- The investors shall have the following duties:
1. To conduct production and/or business activities in strict accordance with their registration; fully observe all law provisions on accountancy and statistics; and take responsibility before law for the truthfulness and accuracy of the registration of preference forms and levels;
2. To pay tax and fulfil other financial obligations according to law;
3. To abide by the law provisions on national defense, security, order and social security;
4. To abide by law provisions on political organizations and socio-political organizations at enterprises, create favorable conditions for such organizations to operate.
5. To fulfill all obligations prescribed by the labor legislation;
6. To abide by law provisions on the protection of environment, historical and cultural relics, scenic places.
Article 32.- In cases where there is a change of investor during the grace period and the new investor still continues implementing such project, the new investor shall be entitled to the preferences and have to fulfill the obligations in order to enjoy the preferences of the registered project for the remaining period.
Article 33.- In cases where an investor who is implementing an investment project is no longer qualified to continue enjoying the preferences prescribed by this Law, the State agency competent to grant the investment preferences shall consider the partial readjustment or cancellation of the approved preferences.
Article 34.- The investors being overseas Vietnamese and foreigners contributing capital or buying shares according to the provisions of this Law shall be entitled to transfer abroad:
1. Their income earned during the production and/or business process, income earned from reinvestment and income earned from share buying;
2. The principals and interests of foreign loans during the process of production and/or business activities;
3. Investment capital;
4. Monies and other property under their lawful ownership.
Chapter V
STATE MANAGEMENT OVER DOMESTIC INVESTMENT PROMOTION
Article 35.- The Government performs the uniform State management over the investment and investment promotion throughout the country. The Government shall promulgate regulations on the order, procedures and competence for granting investment preferences to investment projects under this Law.
Article 36.- The Ministry of Planning and Investment shall perform the function of State management over the domestic investment promotion and have the following tasks and powers:
1. To assume the main responsibility and coordinate with concerned ministries and branches in formulating, supplementing or altering specific lists of investment preferences provided for in Article 29 of this Law and submit them to the Government for decision;
2. To disseminate, guide, oversee and supervise the application of investment support measures and preference regimes;
3. To grant or refuse to grant investment preference certificates to enterprises set up by the Prime Minister's decisions and enterprises set up by ministers authorized by the Prime Minister, within 30 days from the day of receiving the preference registration application; to propose to the Prime Minister measures of investment preferences for enterprises newly set up by the Prime Minister's decisions; to reach agreement on investment preference measures with the ministers authorized by the Prime Minister to decide the setting up of new enterprises. The investment preference measures shall be at the same time stated in the business registration certificates.
Article 37.- The People's Committees of the provinces and cities directly under the Central Government shall have the following tasks and powers:
1. To perform the function of State management over the domestic investment promotion in their respective localities according to the provisions of law;
2. To grant or refuse to grant investment preference certificates to already set-up production and/or business establishments within 30 days from the date of receiving the application for investment preference registration; to decide measures of investment preferences for newly set up production and/or business establishments. The investment preference measures shall be at the same time stated in the business registration certificates.
Article 38.- The inspection of activities of production and/or business establishments are provided for as follows:
1. The inspection of activities of production and/or business establishments must be conducted according to functions and competence and in compliance with the provisions of law.
The economic-financial investigation shall be conducted not more than once a year for an enterprise. The inspection duration shall not exceed 30 days; for exceptional cases the investigation duration may be prolonged under decisions of the competent higher-level agency, but must not exceed 30 days.
The extraordinary and specialized investigation shall be conducted only when there are grounds to believe that production and/or business establishments have violated laws.
2. When conducting an investigation there must be a decision of the competent person; upon the completion of an investigation there must be the conclusion and report thereon; the person in charge of the investigation team shall take responsibility for the investigation conclusion and report;
3. Persons who decide unlawful investigation or misuse the investigation to seek personal profits, to harass for bribes or cause troubles to activities of production and/or business establishments shall, depending on the nature and seriousness of their violations, be disciplined or examined for penal liability; if damage is caused, compensation must be made to investors according to the provisions of law.
Chapter VI
COMMENDATION AND HANDLING OF VIOLATIONS
Article 39.- Investors having achievements in production and business activities and/or contributing to the promotion of production and the improvement of people's living conditions shall be commended in accordance with the provisions of law.
Article 40.- Investors committing acts of violation of the provisions of this Law shall, depending on the nature and seriousness of their violations, be administratively sanctioned or examined for penal liability according to the provisions of law and shall have to repay all preferences they have already enjoyed; if damage is caused, compensation must be made.
Article 41.- Any persons who abuse their positions and power, obstructing investment, granting investment preferences not in accordance with regulations, committing acts of harassment, causing troubles to investors or violating provisions of this Law shall, depending on the nature and seriousness of the violation, be disciplined or examined for penal liability; if damage is caused compensation must be made according to the provisioins of law.
Chapter VII
IMPLEMENTATION PROVISIONS
Article 42.-
1. The investors who are enjoying preferences under the Law on Domestic Investment Promotion of June 22, 1994 shall continue enjoying the investment preferences till the end of the remaining duration according to the already granted investment preference certificates.
2. Additional preferences on the exemption and/or reduction of land use levy or land rent, the enterprise income tax preferences, the preferences regarding the import tax, investment credit, export credit, the investment credit guaranty, the export credit guaranty as prescribed in this Law for investors who have the investment preference certificates granted before the effective date of this Law shall be readjusted for application in the remaining grace period.
3. Production and/or business establishments operating in the fields defined in Article 15 or in areas defined in Article 16 shall be entitled to enjoy preferences in accordance with the provisions of this Law from the time it takes effect.
4. The State shall not return all tax amounts and other financial obligations which the investors have fulfilled during the period before this Law comes into force.
Article 43.- This Law takes effect from January 1st, 1999.
This Law shall replace the Law on Domestic Investment Promotion passed by the IXth National Assembly on June 22, 1994 at its fifth session.
The previous stipulations contrary to this Law are hereby annulled.
Article 44.- The Government shall stipulate in detail and guide the implementation of this Law.
This Law was passed by the Xth National Assembly of the Socialist Republic of Vietnam, on May 20, 1998 at its 3rd session.
 

 
THE NATIONAL ASSEMBLY
CHAIRMAN




Nong Duc Manh
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