WHAT ARE REGULATIONS ON BUSINESS LINES RESTRICTED TO FOREIGN INVESTORS?
QUESTION
Dear TLK Law Firm, I would like to ask your company to answer the following question: I am Japanese, and I’m looking to invest in Vietnam, but I’m having trouble understanding the provisions of Vietnamese law that apply to foreign investors, particularly the regulations on business lines that are restricted to foreign investors. I await your answer. Thanks in advance!
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Thank you for entrusting your queries to TLK Law Firm. Based on legal regulations and practical experience, we would like to offer the following advice to you:
LEGAL BASIS
1. Investment Law No. 61/2020/QH14 was passed by the National Assembly on June 17, 2020;
2. Decree No. 31/2021/ND-CP issued by the Government on March 26, 2021, detailing and guiding the implementation of some articles of the Investment Law;
3. Some other relevant guidance documents.
CONSULTATION CONTENT
Under current Vietnamese law, foreign investors investing in Vietnam will be restricted from accessing the market for certain business lines. So what conditions do foreign investors need to meet to access the market? To which subjects will the list of business lines be restricted? How will the application of restrictions on market access for foreign investors be implemented? TLK Law Firm will elucidate these issues through the following article so that you can get a more comprehensive view of the regulations on business lines restricted to foreign investors.
Photo 1. What are regulations on business lines restricted to foreign investors?_Hotline: +(84) 97 211 8764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO BUSINESS LINES RESTRICTED TO FOREIGN INVESTORS
1. Which document stipulates business lines restricted to foreign investors?
Business lines restricted to foreign investors are specified in the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government and international agreements to which the Socialist Republic of Vietnam is a signatory.
The list of business lines restricted to foreign investors is stipulated in Appendix I of Decree 31/2021/ND-CP.
2. What are the market access conditions for foreign investors?
Under the Investment Law 2020, market access conditions applied to foreign investors mean those that must be satisfied by foreign investors to make an investment in the business lines on the List of business lines restricted to foreign investors, including:
- Ratio of the foreign investor’s charter capital in a business entity;
- Investment method;
- Scope of investment;
- Capacity of the investor; partners participating in the investment activities;
- Other conditions as prescribed by law.
3. To which subjects will the list of business lines be restricted?
The list of business lines restricted market access will be applied to the following subjects:
1. Foreign investor means an individual holding a foreign nationality or an organization established under foreign laws and carrying our business investment activities in Vietnam.
2. Business entities, after investment in the establishment of other business entities, investment in the form of capital contribution or purchase of shares or stakes, or investment in the form of a business cooperation contract, are in the following cases:
- Over 50% of its charter capital or more is held by foreign investors or the majority of the general partners are foreigners if the business entity is a partnership
- Over 50% of its charter capital or more is held by a business entity mentioned in Case 1;
- Over 50% of its charter capital or more is held by foreign-invested business entities and business entities belonging to case 1.
=> See more: Business lines restricted to foreign investors
4. How will the application of restrictions on market access for foreign investors be implemented?
Decree 31/2021/ND-CP stipulates rules for the application of market access restrictions, as follows:
1. Except for the business lines on the Negative List for Market Access in Appendix I hereof, foreign investors have the same market access as that domestic investors.
2. Foreign investors must not invest in the prohibited business lines specified in Section A of Appendix I hereof.
3. For restricted business lines specified in Section B of Appendix I hereof, foreign investors shall fulfill the conditions that are published in accordance with Article 18 hereof.
4. Conditions for market access by foreign investors in business lines without market-access commitment of Vietnam shall be applied as follows:
- In case the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of Standing committee of the National Assembly, Decrees of the Government (hereinafter referred to as “the law of Vietnam”) do not restrict market access in those business lines, foreign investors have the same market access as that of Vietnamese investors;
- In case the law of Vietnam has restrictions on market access by foreign investors in those business lines, the law of Vietnam shall apply.
5. In case new Law or Resolution of the National Assembly, Ordinance or Resolution of Standing committee of the National Assembly, or Decree of the Government (hereinafter referred to as “new legislative document”) contains regulations on market access by foreign investors in the business lines without the market-access commitment of Vietnam mentioned in Clause 4 of this Article:
- Foreign investors to whom the conditions for market access mentioned in Clause 4 of this Article have been applied before the new legislative document takes effect make carry on their investment activities under the said conditions. In case of establishment of a new business organization, execution of a new investment project, receipt of an investment project, purchase of stakes/shares of another business organization under a contract, or change to the objectives or business lines that is subject to fulfillment of market access conditions prescribed by the new legislative documents, such conditions must be fulfilled. In this case, the competent authority shall not reconsider the conditions for market access in the business lines that have been granted to the investor previously;
- Foreign investors that carry out investment activities after the effective date of the new legislative document shall fulfill the market access conditions prescribed by such document.
6. A foreign investor that carries out investment activities in different business lines specified in Appendix I hereof shall fulfill all market access conditions applied to those business lines.
7. Foreign investors from countries that are not WTO members shall apply the same conditions for market access by investors from countries that are WTO members unless otherwise prescribed by the law of Vietnam or international treaties between Vietnam and those countries.
8. Foreign investors that are regulated by an investment-related international treaty that prescribes more favorable conditions for market access than those prescribed by the law of Vietnam, the former may be applied.
9. A foreign investor that is regulated by investment-related international treaties which prescribe different market access conditions may apply the conditions prescribed by any of those treaties to all of the investor’s business lines. Once the conditions prescribed by one of the international treaties have been chosen (including new treaties and treaties that are revised after their effective dates which include the investor in their regulated entities), the foreign investor shall perform their rights and obligations in accordance with the chosen treaty.
10. Restrictions on holdings of foreign investors prescribed by investment-related international treaties:
- In case multiple foreign investors contribute capital to, purchase shares or stakes in a business organization that is regulated by one or some investment-related international treaties, the total holdings of the foreign investors in the business organization must not exceed the highest limit imposed by one of those international treaties on holdings of foreign investors in a specific business line;
- In case multiple foreign investors from the same country contribute capital to, purchase shares or stakes in a business organization, the total holdings of these investors must not exceed the limit prescribed by the international treaty applied to these investors;
- Securities laws that provide for foreign investors’ holdings differently shall apply to public companies, securities companies, securities investment fund management companies, securities investment funds or securities investment companies.
- In case a business organization has multiple business lines that are regulated by investment-related international treaties that provide for foreign investors’ holdings differently, the foreign investors’ holdings in such business organization must not exceed the limit on foreign investors' holding in the business line with the lowest limit.
Photo 2. What are regulations on business lines restricted to foreign investors?_Hotline: +(84) 97 211 8764
II. HOW SHOULD YOU CHOOSE THE BEST LEGAL SERVICE PROVIDER?
An organization of high-quality and renowned legal services should meet the following criteria:
First, they must be an official legal organization with a legal operating license;
Second, their board of directors must be lawyers with extensive experience and it will be better if they have a high degree.
Third, they have a team of lawyers, a professional and well-trained human resource system;
Fourth, they are friendly and dedicated. They make every effort for the benefit of customers and consider customer satisfaction and work quality as their honor;
Fifth, their professional, thoughtful, flexible, and logical service delivery process to optimize work performance and maximize customer time savings;
Sixth, reasonable and competitive service prices;
Seventh, wide range of services in both the field of providing service packages in the same field for customers to choose the appropriate service package, as well as being able to provide comprehensive support to customers throughout the process.
Eighth, they have capable of connecting – promoting commercial relationships for customers who have specific requirements.
=> Any client wants to choose a professional and reputable legal service provider because no one wants to take the chance of losing money or time, coupled with the results that aren't what they were expecting. Finding such an organization, however, is difficult due to an available large number of service providers of varying quality.
TLK Law Firm does not claim to be the best legal service provider on the market, but we meet all of the above criteria and more. Therefore, TLK Law Firm will unquestionably provide a good service for you.
=> See more: Transfer of contributed capital to foreign investors
III. SOME QUESTIONS RELATED TO REGULATIONS ON BUSINESS LINES RESTRICTED TO FOREIGN INVESTORS
Question 1: Except for market access conditions for business lines restricted to foreign investors, what additional conditions must foreign investors meet when investing in Vietnam?
Answer:
In addition to market access conditions for business lines restricted to foreign investors, foreign investors must meet the following additional conditions when investing in Vietnam:
- Conditions on land use, labor; natural resources, minerals (if any);
- Conditions on manufacture, supply of public services, goods or goods and services under state monopoly (if any);
- Conditions on ownership and trade of houses and real estate (if any);
- Conditions for the application of forms of support and subsidies of the State to several sectors, fields, or development of regions and territories (if any);
- Conditions for participation in state-owned enterprise equitization programs or plans (if any);
- Other conditions as prescribed by Vietnamese law and international treaties on investment that prohibit or restrict market access for foreign-invested business entities (if any).
Question 2: What website is used to post and update market access conditions for foreign investors, and what content is included there?
Answer:
Market access conditions for foreign investors will be posted on the National Investment Portal and include the following contents:
- Business lines are restricted to foreign investors ;
- Grounds for applying market access conditions to foreign investors;
- Market access conditions for foreign investors.
The List of business lines restricted to foreign investors is promulgated in Appendix I attached to Decree 31/2021/ND-CP, including 25 business lines not allowed for market access, and 59 business lines subject to conditions for market access for foreign investors investing in Vietnam.
The above information is broad consulting content that we would like to provide to customers. As a service provider, we are always aware of and ready to assist customers with their needs and problems. If you have any further questions or require more detailed guidance, please contact the hotline: +(84) 97 211 8764/ +(84) 969 760 195 (Tel/ Whatsapp/ Zalo) for direct advice from a lawyer (free consultation).
Thank you very much!
Business and Investment Department – TLK Law Firm
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