Vietnam’s Key Investment Laws
Jun. 28 – Vietnam has been carrying out economic reforms since 1986, with the encouragement of domestic and foreign private investment as one of its main points of focus. In order to provide an open and stable investment environment, Vietnam has enacted many laws and regulations to establish a framework for investment.
Some of the most important laws include:
- The Law on Enterprises
- The Law on Investment
- The Commercial Law
The Law on Enterprises and the Law on Investment are the main legislation governing foreign direct investment (FDI) activities in Vietnam. Both laws were adopted by the National Assembly on November 29, 2005 and entered into force on July 1, 2006. They apply to all enterprises established by foreign as well as Vietnamese investors. Together with their lower-level legal provisions and decrees guiding the implementation, they cover most aspects of the investment procedures in Vietnam, from business registration to operation start-up.
The Law on Investment provides for three basic forms of direct investment by foreign investors: joint ventures enterprises (JVE), 100 percent foreign-owned enterprises (100 percent FOEs) and various contractual forms. The contractual forms include business cooperation contracts (BCCs), build-operate- transfer contracts (BOTs), build-transfer-operate contracts (BTOs) and build-transfer contracts (BTs). BCCs are agreements between foreign investors and Vietnamese partners to cooperate on specific business activities. BOT-BTO-BT contracts are signed with a competent state body to implement infrastructure construction projects in Vietnam.
According to the Law on Enterprises, a foreign-invested enterprise (i.e., JVE or 100 percent FOE) can be established as a limited liability company (LLC) consisting of a single member or multiple members, a joint-stock company (JSC), or a partnership.
The Commercial Law also allows foreign investors with ongoing business relations and interests in Vietnam to set up representative offices (ROs) and commercial branches in Vietnam and stipulates the necessary conditions and procedures for doing so. Foreign investors can also buy interest in existing domestic enterprises.
Foreign investors operating in Vietnam for the first time are required to combine the establishment of an LLC or JSC with a legitimate investment project, the licensing of which takes place simultaneously with the incorporation of the Vietnamese company. Subsequent to the first project, foreign investors can carry out additional projects either using the established corporate vehicle or by setting up new corporate vehicles.
Content for this article was taken from our recent publication, titled “Doing Business in Vietnam.” This inaugural edition of Asia Briefing’s regional business guide for Vietnam offers business-minded individuals an up-to-date reference source for all of the key issues concerning setting up and successfully operating a business in the country.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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