Nowadays, there are a lot of enterprises in Vietnam, choosing offshore investment in order to exploit human and natural resources of investment receipt countries as well as expanding market share in many fields out Vietnam. However, in comparison to other countries, the offshore investment of Vietnamese enterprises is still a relatively new issue. Therefore, there will be a lot of difficulties for the Vietnamese investors. This Article will present regular troubles of offshore investment of Vietnamese enterprises.
Regular troubles of offshore investment relating to legal procedures for offshore investment
“The Law on Investment 2014” currently provides in relatively detailed rules on the legal procedures for the offshore investment. This is a significant legal basis for the Vietnamese enterprises to expand their investment abroad. However, the current laws on offshore investment are still creating a lot of regular troubles of offshore investment to the enterprises. Below is regular troubles of offshore investment on the legal procedures for obtaining an offshore investment registration certificate (“offshore IRC”), amending the offshore IRC or remitting the investment capital abroad.
Regular troubles of offshore investment relating to the legal procedures for obtaining the offshore IRC
Currently, the procedures for offshore investment are much more difficult to be carried out than those for foreign investor. First, with respect to procedures for decision of offshore investment policies, the offshore investment project having 800 billion Dong or more (400 billion with respect to some fields such as banking, insurance, telecommunication) must be decided the offshore investment policy by the Prime of Minister of the Government while regarding foreign investment in Vietnam, the IRC may be issued by the Department of Plan and Investment (the “DPI”) and in case of the capital is 5000 billion Dong or more, the project must be decided its investment policy by the Prime Minister of the Government. Secondly, many offshore investment projects are required to be granted documents confirming location of implementation of investment project from the invested countries, such as the projects in fields of energy, sea food, construction of manufacture facility…. In order to have such documents, the investors must gain approvals from competent authorities of the invested countries as investment licence, decision of land allocation, or must have agreement of purchase or rent of land or business location. This is one of the regular troubles of offshore investment because the investors must spend a lot of expense to have investment location whereas they are not allowed to purchase or deliver much foreign exchange abroad before being granted the offshore IRC.
In addition, because the offshore IRC is issued only by the Ministry of Plan and Investment (the “MPI”), the investors have to face the regular troubles of offshore investment relating to the legal position of the MPI. It is the highest administrative authority managing investment in Vietnam, which is responsible for a lot of fields. Therefore, it is very hard for the MPI to consider and issue the offshore IRC in time provided in law. In addition, the headquarters of the MPI locating in Ha Noi City also makes difficulties for the investors in other provinces in case of summiting, amending, supplying the application dossier.
Regular troubles of offshore investment relating to the amendment of the offshore investment project
In case the investor wants to amend the contents of the offshore investment project, he/she must carry out procedures for amending the offshore IRC. These procedures are as complicated as those for issuance of the offshore IRC. In case of minor adjustment such as change of name and code of enterprise, the investors must carry out these procedures which cause them lost expense and time. In comparison, it takes the investors at least 15 days and 3 sets of dossier to adjust the offshore IRC in case of change company’s name, whereas those of for procedures for foreign investment are only 3 working days and 1 set of dossier.
Regular troubles of offshore investment regarding remittance of the offshore investment capital
The investor may have troubles when remitting the investment capital oversees. In case the investment capital in foreign currency is equivalent to 20 billion Dong or more, the MPI must obtain the written opinion of the State Bank of Vietnam before issuing the offshore IRC. In order to remit the investment capital abroad, the investors must open a capital account at an authorized credit institutions and register the foreign exchange transaction relating to offshore investment activity to the State bank. In addition, the investor is not allowed to remit an amount of money equivalent to more than 5% of the total investment capital or 300.000 USD to pay the expenses relating to investment project establishment, before issuance of the offshore IRC. The remittance is subject to the inspection of the credit institutions as the investors must provide documents proving the accuracy of the money remittance purpose.
Regular troubles of offshore investment regarding transfer of profits to Vietnam
Under the Investment Law, within 06 months from the day on which the annual tax declaration or an equivalent document is available as prescribed by the host country’s law, the investor liable for transferring the entire profit and other incomes derived from overseas investment to Vietnam. Thus, if the investor does not have a specific plan of re-investment or expansion of investment and make a report to the State Bank of Vietnam, the investor is liable to transfer all profits to Vietnam, regardless of their intention. Such regulation causes difficulties to the investors, particularly to those who has a plan of new investment in the future.
Regular troubles of offshore investment regarding compliance with laws of an investment receipt country
In addition to the complex procedures for offshore investing, the law of the country invested is also a big problem for the Vietnamese investors. The legal systems of each country is often different. Therefore, the investor’s behavior as habit in Vietnam instead of studying carefully and complying with the law of the country invested is not a rare case. This may cause the investor to be fined, or interfere the implement of the investment project or even cause the investment project to be cancelled in case of violation of the invested country’s law. These are regular troubles of offshore investment which cause adverse effect to Vietnamese investors.
The troubles relating to the invested country’s law often appears under 2 forms: (i) the legal system is too simple, so there is a lack of regulations governing on the issues relating to the investment project, or (ii) the legal system is too complicated which lead the investor to be unable to totally comply with. In addition, offshore investment is often subject to government scope of international treaties, especially WTO commitments and regional commitments as ASEAN Comprehensive Investment Agreement (ACIA). These treaties are usually giant and complex. Moreover, some treaties being entered into since a long time ago are not updated new business line. Therefore, regular troubles of offshore investment is hard for the investors to determine whether the business lines they intend to invest are allowed to do in the invested countries.
Regular troubles of offshore investment relating to acknowledgment of custom, behaviour and habit of the people at the investment receipt country
Regular troubles of offshore investment with law are very complex, but almost of them are regulated clearly in writing. On the contrary, regular troubles of offshore investment involving in custom, behaviour and habit of the local people of the invested country greatly affect the success or failure of the investment project. Thus, the Vietnamese investor must research deep market and deal with them by their experience or local consultations.
We hope that this article may actually provide helpful information to the investor have been intending to do the offshore investment.
If you face regular troubles of offshore investment, please contact us.
Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specializing in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective civil litigation service.