Currently, with Vietnam’s investment attraction policies, annual
foreign direct investment (FDI) into Vietnam is constantly increasing, after
Covid time. According to the report on foreign direct investment in nine months
of 2021 of the Ministry of Planning and Investment, as of September 20th,
2021, the total newly registered capital, adjusted and contributed capital to
buy shares, purchase capital contribution (GVMCP) of foreign investors reached
22.15 billion USD, up 4.4% over the same period last year 2020. Realized
capital of foreign investment projects is estimated at 13.28 billion USD, down
3.5% over the same period in 2020.
However, when entering a new market, especially the business
environment of a developing country like Vietnam, foreign company always have
to be cautious and should undertake research investment environment and target
company for M&A, or business cooperation carefully. Besides socio-cultural
factors, the differences in political and legal factors are important issues.
In particular, it is really necessary to study policies and legal regulations
before investing in order to mitigate risks when operating in the Vietnam
market.
Each country has its own policies and independent legal system to
manage domestic company as well as foreign company. Therefore, when foreign
investors wish to invest in Vietnam, they need to learn about legal policies
that affect their expected business activities. Specifically, through the study
of laws, economic policies… investors will identify constraints as well as
incentives for their expected type of investment. Foreign investors will have
more proactive preparation steps and have a basis to consider the benefits and
potential risks when making an investment in Vietnam.
Firstly, on the legal system related to investment activities,
Vietnam has a fairly complete but complex regulatory legal system. Due to too
many types of legal documents being issued, overlapping, inconsistent and
inconsistent jurisdictions are quite difficult obstacles for foreign investors
when penetrating the Vietnamese market. Therefore, studying the regulatory is
necessary and really a big challenge for foreign investors.
Specifically, for the investment, Vietnam law only allows foreign
investors to do business in a number of industries that satisfy market access
conditions. Therefore, foreign investors need to learn specific regulations on
conditions of establishment, capital contribution, capital contribution ratio,
etc. to have a plan to prepare capital, and to choose the type of investment in
accordance with the regulations of Vietnam law and expected investment scale.
In addition, foreign investors also need to learn about the
regulations on the organization of different types of businesses in Vietnam. It
will be the basis for foreign investors to determine the level of capital
contribution, rights and obligations when participating in investment. From
there, foreign investors will have reasonable considerations and considerations
in line with the investment plan, avoiding passive situations or the
establishment and capital contribution not achieving the set goals before
investing.
Second, about policies for foreign investors, investors need to
study policies related to tax i.e. corporate income tax rates, tax rates for
personal income taxes, and policies. avoid double taxation between Vietnam and
other countries in order to comply with tax obligations and ensure its
interests in the process of conducting investment in Vietnam.
Furthermore, to ensure cash flow transactions, foreign investors
need to have an understanding of Vietnam’s foreign exchange policy.
Understanding the bank’s foreign currency buying and selling policies will help
foreign investors flexible in implementing project activities. Policies and
regulatory understanding in international bidding or bidding or goods or
service supply service for state owned company are also matter of
concern. Labor policy is also an information that foreign investors need
to know to ensure that the recruitment and payment of salaries and benefits are
consistent with the policies of the state. Economic and financial policies are
regulated by the State in each period such as policy on funding or lending
capital, tax policy of the State, economic policy on foreign relations, foreign
policy.
Policies, laws and politics have a great influence on investment
activities in Vietnam. Through legislation, the state institutionalizes
economic undertakings and policies into law, with provisions that are
universally binding for all business activities. The legal regulations and
policies related to foreign investors in Vietnam are very complicated and
changing over different periods. Therefore, before investing in Vietnam,
investors need to learn, check the information and the authenticity of the
information collected to ensure the authenticity and validity of those
regulations and policies.
Finding the right business partner in Vietnam is also important.
We recommend doing research on the
reputation of the company and individual shareholders,
corporate or individual, gathering publicly available company information, and
performing background checks on key personnel to find potential risks in
cooperation. Working with a reliable partner can help achieve economic
benefits, saving time and money in business.
ANT
Lawyers – A Law
Firm in Vietnam with
international standard, local expertise and strong international network. We
focus on customers’ needs and provide clients with a high quality legal advice
and services. For advice or services request, please contact us via email
ant@antlawyers.vn, or call us +84 24 730 86 529.
