Notable changes of Investment Law 2020 in Vietnam for foreign investors

On June 17th, 2020, the Vietnamese National Assembly passed a new Law on Investment, which will take effect on January 1st, 2021 and replace Law on Investment 2014. Here are some notable changes of Investment Law.

Market entry conditions – Investment Law 2020

For the first time, investment law 2020 distinguishes between market entry conditions and investment conditions. Regarding market entry conditions, foreign investors are entitled to the same market entry conditions as applicable to domestic investors except for the areas subject to market entry conditions and are to be published by the Government (Market Entry List). Investment conditions apply to all investors.

Negative list

To include debt collection service business in the list of industries and trades banned from business investment and business, specified in Article 6.

The number of sectors and trades subject to conditional business investment decreased to 227

From January 1, 2021, the number of sectors and trades subject to conditional business investment has been reduced from 243 to 227 sectors and trades. In which, a number of industries and occupations no longer require conditions such as franchising, logistics services, shipping agency services… and some additional occupations such as clean water trading (domestic water), architectural services, data center services, electronic identification and authentication services….

Forms of investment incentives and who are entitled to investment incentives

The Investment Law 2020 includes the following new business sectors and projects, which are encouraged for investment or are entitled to investment incentives:

  • college education;
  • manufacture of medical equipment and all pharmaceutical products;
  • manufacture of products in supporting industries on the list of industries eligible for development promotion provided in Government Decree 111 dated November 3rd, 2015;
  • manufacture of products and provision of services that create or participate in the value chain or associated industries;
  • social housing projects;
  • innovative start-up projects;
  • research and development centers;
  • small- or medium-sized business incubators; and
  • co-working space for small- or medium-sized businesses.

The Government can decide to apply special incentives and investment support to encourage projects that have material impacts on the socio-economic development falling within the following types:

  • investment projects of establishing innovative centers, research and development centers with the total investment capital of VND 3,000 billion or more and disbursing at least VND 1,000 billion within three years since the issuance date of relevant investment registration certificate (IRC) or in-principle approval;
  • investment project of establishing the national innovative center under a decision of the Prime Minister; and
  • investment projects in the especially encouraged sectors that have the total investment capital of VND 30,000 billion or more, and disburse at least VND 10,000 billion within three years since the issuance date of relevant IRC or in-principle approval.

The new Investment Law excludes the following cases from the application of special incentives and investment support:

  • mining projects;
  • manufacturing or trading of goods/services liable to excise tax (except manufacturing of car, plane, boat);
  • commercial housing projects; and
  • projects having IRCs or in-principle approvals issued before January 1st, 2020.

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