Vietnam - Legal Issues To Be Noted On Outbound Investment.

Legal News & Analysis - Asia Pacific - Vietnam - FDI

Vietnam - Legal Issues To Be Noted On Outbound Investment.

 

8 January 2021

 

Asia Pacific Legal Updates
 

Writer: Quang Nguyen & Linh Nguyen

 

In an integrated economy, not only foreign investors conduct investment activities in Vietnam, but also Vietnamese investors seek opportunities to exploit, develop and expand into the foreign market. Currently, many Vietnamese enterprises with enormous potential have expanded their business activities and carried out outbound investment in search of new profit sources, a new business environment as well as the development of new strategies, approaching the world business culture. Thus, what should Vietnamese enterprises consider when carrying out outbound investments?

 

Through this article, BLawyers Vietnam would like to present 08 legal issues that Vietnamese enterprises should consider when carrying out outbound investments.

 

  1. Forms of outbound investment

 

According to Vietnamese law, investors can make outbound investments in the following forms:

 

  1. Establishment of a business organization in accordance with the law of the host country;

 

  1. Investing based on an overseas contract;

 

  1. Contribution of capital to, purchase of shares or stakes of an overseas business organization to participate in the management of such business organization;

 

  1. Trading in securities, other financial instruments, or investing in securities investment funds and other intermediary financial institutions in a foreign country;

 

  1. Other forms of investment as prescribed by the law of the host country.

 

Note: Depending on the selected investment form, the investor must submit the corresponding document to prove his outbound investment activities.

 

  1. Conditions for issuance of the Outbound Investment Registration Certificate (“OIRC”)

 

To be granted the OIRC, a foreign investor must satisfy the following conditions:

 

  1. The outbound investment activities are consistent with the principles of direct outbound investment;

 

  1. The outbound investment activities do not fall into the banned business lines categories;

 

  1. The outbound investment which falls into the conditional business lines categories must satisfy the conditions as regulated by law;  

 

  1. The investor commits to preparing foreign currencies themself or obtains a commitment to prepare foreign currencies from an authorized credit institution to conduct outward investment activities;

 

  1. Having a decision to carry out outbound investment as regulated by law;

 

  1. There is a tax authority’s certification of the fulfillment of tax obligation by the investor. Such certification must be issued by the tax authority within the last 03 months.

 

  1. Opening of outbound investment capital accounts

 

One of the conditions for an investor to be granted the OIRC is to have an outbound investment capital account at a licensed credit institution in Vietnam. 

 

All money transfer transactions from Vietnam to abroad and from abroad to Vietnam related to the outbound investment activities must be done through the above-mentioned investment capital account.

 

  1. Transferring the outbound investment capital

 

Investors may transfer outbound investment capital to carry out investment activities when meeting the following conditions:

 

  1. Having granted the OIRC (except for the case that the investor transfers foreign currency, or goods, machinery, and equipment abroad to serve the survey, research, and market exploration activities);

 

  1. The investment activities have been approved or licensed by the competent authority of the host country. In case the law of the host country does not require the obtainment of investment licensing or investment approval, the investor must have documents proving the right to invest in the host country;

 

  1. Having an account for outbound investment capital.

 

  1. Transferring the profits back to Vietnam

 

Within 6 months from the date of annual tax finalization, the investor must transfer all profits earned and other incomes from the outbound investment to Vietnam. In cases where profits are used to increase investment capital, expand the business, or implement new outbound investment projects, the investors are allowed to keep profits earned from outbound investments for re-investment. 

 

If the investor can not transfer the profits and revenues to Vietnam in a limited time as regulated, he must notify in writing the competent authority in advance. The extended time limit for transferring the profits back to Vietnam may not exceed 12 months from the date of expiration of the prescribed time limit mentioned above. 

 

In case the time limit expires, and the investor has not yet transferred the profits to Vietnam without advance notification, or in case the time limit is extended but the investor has not yet transferred the profits to Vietnam, the investor shall be handled in accordance with the law.

 

  1. Protection of intellectual property rights

 

Intellectual property rights are global and are playing an increasingly important role. Some Vietnamese brands have been registered by foreign enterprises before investing in that country, making it very expensive to regain the trademarks. Therefore, registering and having a good plan to protect intellectual property should be a priority to start a business in a foreign country.

 

  1. Using foreign workers

 

Each country has policies to protect workers working for enterprises. Some countries have adopted standard labor policies according to the International Labor Organization (ILO), so the conditions are stricter than in Vietnam. When employing foreign workers, Vietnamese enterprises must comply with the Labor Law of that country, especially the issue of insurance and tax payment for employees.

 

  1. Report regime on the outbound investment activities

 

Outbound investment activities will be monitored by the state through the reporting of investors in. Currently, the investor's reporting regime is implemented as follows: 

 

  1. Within 60 days from the date the investment project is approved or licensed in accordance with the law of the host country, the investor shall submit a notice on the implementation of outbound investment activities together with documents proving the right to invest in the host country;

 

  1. Investors shall submit quarterly and annual reports on the operation of their investment projects; 

 

  1. Within 06 months from the date of issuance of a tax finalization statement or another document of equivalent legal validity as prescribed by the law of the host country, investors shall submit a report on the operation of the investment project for the fiscal year together with financial statement and tax finalization statement.

 

To conclude, when carrying out outbound investment activities, Vietnamese enterprises need to comply with the provisions of Vietnamese law and the law of the host country where they conduct investment activities. Therefore, enterprises need to pay attention to these issues to avoid legal risks in the process of outbound investment.

 

IPLINK ASIA
 

For further information, please contact:
 

Minh Ngo Nhat, Managing Partner, BLawyers