Law on promotion of domestic investment, No. 35-L/CTN

LAW

ON PROMOTION OF DOMESTIC INVESTMENT

With a view to mobilizing and using effectively all sources of capital, national resources, labor and other potentials of the country to contribute to socio-economic development, to bring prosperity to the people and strength to the country and build and equitable and civilized society;

Pursuant to Article 84 of the 1992 Constitution of the Socialist Republic of Vietnam;

This law provides for the promotion of domestic investment.

Chapter I

GENERAL PROVISIONS

Article 1.- The State protects and encourages Vietnamese organizations and citizens, Vietnamese residing abroad, foreigners residing for a long time in Vietnam, to invest in socio-economic fields on Vietnamese territory according to provisions of Vietnamese law.

The Government shall issue concrete regulations concerning investment by Vietnamese residing abroad and foreigners residing for a long time in Vietnam.

Article 2.- In this Law, the expressions herebelow are understood as follows:

1- "Domestic investment" is the commitment of capital to production and for business in Vietnam, by an organization or individual as provided for in Article 1 of this Law.

2- "Investor" is an organization or individual, as provided for in Article 1 of this Law, who directly invests capital as provided for in Article 4 of this Law.

Article 3.- Investment capital includes: Vietnamese currency, convertible foreign currencies, gold, silver, gems, transferable stock, factory buildings, construction, equipment, machinery, other production means or land use value, industrial property used for investment in Vietnam.

Article 4.- Investment under this Law may assume one of the following forms:

1- Investment for establishing production and business in any economic sector;

2- Investment for enlarging the scale, raising the production capacity, research on the development and renovation of technology utilized by existing production and business establishments:

3- Purchase of shares in companies, capital contributions to businesses, including State businesses allowed to diversify their form of ownership.

Chapter II

ASSURANCE AND ASSISTANCE OF INVESTMENT

Article 5.- The State recognizes and protects the right to ownership of property, investment capital, profit as well as other legal rights and interests of investors.

Article 6.- Lawful property, investment capital and profits of investors shall not be nationalized.

In case of utter necessity when, for reason of national defense, security or national interest, the State decides to purchase or requisition the property of an investor, the investor shall be compensated or indemnified according to current market prices and shall be afforded favorable conditions to invest in an appropriate field and area.

Article 7.- The State shall undertake the following measures to assist domestic investment activities:

1- Allotting or renting land as provided for in the land legislation;

2- Building the infrastructure of industrial zones for renting them as the ground to build production and business establishments;

3- Establishing and encouraging investment support funds for mid-term and long-term investment loans. The Government provides regulations for the organization and activities of investment support funds;

4- Contributing capital, via investment support funds, commercial banks, financial companies, to production and business ventures belonging to various economic sectors on the basis of mutual benefit;

5- Providing for investment credit guarantee for banks, credit organizations and financial companies;

6- Supporting the implementation of programs and services for encouraging investment. This includes:

a/ Management and business consultation;

b/ Legal consultation;

c/ Organizing job-training and the training of technical workers;

d/ Training and raising management skills;

e/ Supplying economic information.

7- Disseminating and transferring technology along with creating conditions for investors to use, at preferential fees, new technology created by State funds.

Article 8.- Investors are entitled to hire experts, who are foreigners or Vietnamese residing abroad to work in domestic investment projects. The order and procedure of exit and entry are the same as for foreigners working in enterprises with foreign invested capital.

Experts who are foreigners or Vietnamese residing abroad working in domestic investment projects, after paying their income tax according to the regulations of Vietnamese law, are entitled to transfer abroad their income according to the foreign exchange management regulation of the Vietnamese State.

Chapter III

PREFERENTIAL AREAS OF INVESTMENT

Article 9.- The following investment project are eligible for preferential treatment:

1- Investment in the fields of:

a/ Afforestation, growing perennial trees on unused land, bare lands, bare hills and mountains, practicing aquaculture in unexploited waters, fishing in sea areas far from the shore;

b/ Building infrastructure: developing urban public transportation; developing education, training, health care, national culture, scientific and technological research;

c/ Processing agricultural, forest and aquaculture products; different technical services of direct benefit to agriculture, forestry and fishery;

d/ Production of export goods;

e/ Industrial branches which need priority development in each period of socio-economic development; traditional branches and skills.

2- Investment in ethnic minority areas, mountain areas, islands and other difficult areas;

3- Investment in setting up production establishments using modern technology or production ventures using a large labor force.

The Government shall draw up a list of branches and skills for each field and each territorial area, technological norms and labor force employment for priority investment according to the plan and orientation of the State.

Article 10.- Apart from preferential systems prescribed by the law and ordinances on current taxes, investment projects defined in Article 9 of this Law are entitled to additional tax preferences as follows:

1- Newly set up production and business establishments shall receive a reduction of 50% (fifty percent) of revenue tax for one to two years; investments in ethnic minority areas, mountain areas, islands and other difficult areas, are exempt from revenue tax for one to two years, and an additional 50% (fifty percent) of revenue tax from one to five years and an additional 50% (fifty percent) of income tax from one to two years;

2- Production and business establishments which augment their investment capital or reinvest their remaining profit in enlarging production and raising productivity or renovating technology, are exempt from revenue tax on the increased profit of the subsequent year brought about by this new investment;

3- Investment projects which need special encouragement are exempt by the Government from import tax on the equipment, machinery and spare parts, that investors directly import or import through an agency, for building production establishments. In case the equipment, machinery and spare parts exempted from import tax are used for an unauthorized purpose, the investor shall have to reimburse the exempted import tax and be penalized as prescribed by law.

4- A dividend from the form of investment defined in Item 3 of Article 4 from this Law is exempt from income tax or revenue tax during a period of three years from the first dividend.

The Government shall provide concrete levels of investment preference.

Article 11.- An investor who forms and efficiently runs a new production and business establishment, as provided for in Article 9 of this Law, shall be given priority consideration for mid-term and long-term credit loans from the investment support fund; if such an establishment is located in an ethnic minority area, mountain area, island or other difficult areas, it shall be considered for preferential interest rates from the investment support fund.

Ventures producing export goods, in the aforementioned priority categories, shall receive a credit guarantee and export credit.

Chapter IV

RIGHTS AND OBLIGATIONS OF INVESTORS

Article 12.- Under the law, the investor is entitled to:

1. Choose any branch, occupation and investment domain on Vietnamese territory;

2. Choose the form of investment;

3. Enjoy investment preferences as stipulated in this Law;

4. Take the initiative in investment, production and business;

5. Hire labor in unlimited numbers; pay salaries as agreed with the workers but the salary must not be lower than the minimum wage defined by the Government;

6. Travel abroad to execute an investment project, as provided for by the Government.

Article 13.- The investor has the obligation to:

1- Conduct business according to licenses and seriously execute the prescriptions of the Law in Accounting and Statistics;

2- Pay taxes and fulfill other financial obligations as prescribed by law;

3- Observe provisions of the law regarding the defense of the Fatherland, national security, social safety and public order;

4- Observe provisions of law regarding trade unions and other mass organizations in business, and create favorable conditions for these organizations to carry out their activities;

5- Accomplish all obligations as defined in the Labor Code;

6- Observe the Law on Protection of the Environment, Protection of Historical and Cultural Relics and Sites of Scenic Beauty.

Article 14.- In case the investor changes in the period covered by the preferences, if the new investor continues the investment project, he shall automatically receive the preferences from the remaining period and shall have the responsibility to implement strictly the obligations under the preferences of the licensed investment project.

Article 15.- When the investor is no longer eligible for preferences under this Law, the preferences shall be withdrawn partly or entirely.

Article 16.- Vietnamese residing abroad, who are investors under this Law, are entitled to transfer abroad:

1- Profit obtained during the course of production and business with the investment capital legally transferred from abroad;

2- Principal and interest from foreign loans in the process of production and business;

3- Investment capital legally transferred from abroad;

4- Other sums of money and property under their lawful ownership.

The Government shall define the procedures for transferring abroad sums of money and property stipulated in this Article.

Article 17.- When transferring profit abroad, according to Point 1 of Article 16 of this Law, Vietnamese residing abroad shall pay a tax representing 5% (five percent) of the amount transferred.

Chapter V

STATE MANAGEMENT OF THE PROMOTION OF INVESTMENT

Article 18.-

1- The Government exercises unified State management of investment and promotion of investment.

The Government appoints competent agencies to assist the Government achieve its function of State management of the promotion of investment.

2- The State management agency for the promotion of investment has the following tasks and authority:

a/ To elaborate and submit to the Government for adoption a list of branches, occupations and territorial areas eligible for investment preferences;

b/ To guide and supervise the implementation of support measures and the regime of investment preferences;

c/ To receive applications for investment preferences. Within 30 days from the day the application is received, the agency must decide whether or not to issue the investment preference warrant, as prescribed by law to the business licensed by the Prime Minister.

Article 19.- The People's Committee of the provinces or cities directly under the Central Government have the following tasks and authority:

1- To exercise State management in the promotion of domestic investment in the localities according to the provisions of the law;

2- To elaborate and publish a list of projects in which investment needs to be encouraged with an eye to the orientation for socio-economic development in the localities;

3- To receive applications for investment preferences. Within 30 days from the day the application is received, they must decide whether or not to issue the investment preference warrant pursuant to the provisions of the law.

Chapter VI

HANDLING OF VIOLATIONS

Article 20.- The investor who commits fraudulent acts to enjoy investment preferences or violates other provisions of this Law, shall have to reimburse the money he receives from the preferences and depending on the degree of violation, be subjected to administrative sanction or be investigated for penal liability as prescribed by law.

Article 21.- Those taking advantage of their position and authority to impede investment, to grant investment preferences contrary to the law, engage in acts of harassment againt investors or violate other provisions of this Law, shall be liable for damages and depending on the degree of violation, shall be disciplined or investigated for penal liability as prescribed by law.

Chapter VII

PROVISIONS FOR IMPLEMENTATION

Article 22.- This Law takes effect from the 1st of January, 1995.

Any previous provisions contrary to this Law are now annulled.

Article 23.- Production and business establishments in the categories of investment preferences, provided in Article 9 of this Law, and set up before the Law on Promotion of Domestic Investment took effect, shall enjoy investment preferences for the remaining period, as provided for by this Law.

The State shall not reimburse the amounts of tax and other obligatory contributions made by the businesses during the period prior to this Law becoming effective.

Article 24.- The Government shall issue detailed provisions for the implementation of this Law.

This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, Ninth Legislature, Fifth Session, on June 22, 1994.