What Is the Investment Act in Vietnam?
The Investment Act of Vietnam (commonly referred to as the Law on Investment) is the primary legal framework governing investment activities in the country. It outlines the rights, obligations, and protections for both domestic and foreign investors, and serves as a roadmap for establishing and operating businesses in Vietnam’s rapidly growing economy. The most recent version, the Law on Investment 2020, effective from January 2021, modernizes procedures and enhances transparency to attract global capital.
Key Objectives of the Investment Act
The law was designed to promote stability and predictability in the investment environment. Its major objectives are:
- Attracting foreign direct investment (FDI) in highly prioritized sectors
- Reducing administrative procedures to make them more efficient
- Ensuring investor rights and protecting their assets
- Contributing to regional and sectoral balanced economic development
The law includes
1. Business Sectors and Investment Conditions
The Law on Investment classifies business activities into prohibited sectors and conditional sectors, while also listing business lines that are subject to market access conditions for foreign investors.
Certain sectors such as finance, education, or telecommunications may be subject to market access conditions or foreign ownership limitations under Vietnamese law and international commitments.
2. Investment Forms
Under the Law on Investment, investors may invest through the following forms: establishing a new economic entity, contributing capital or purchasing shares/capital contributions, executing investment projects, entering into BCC (Business Cooperation Contracts), or participating in PPP projects.
3. Investor Protections
The Law ensures that investors’ assets are not nationalized or confiscated unlawfully, except in cases of national defense or security reasons where lawful compensation must be provided.
Depending on the nature of the dispute, investors may resolve conflicts through negotiation, Vietnamese courts, domestic arbitration, or international arbitration if permitted under treaties or contractual agreements.
4. Incentives and Preferential Policies
Incentives may include corporate income tax reductions, import duty exemptions, or land rental incentives, as provided under the Investment Law and guiding regulations.
The law on investment in Vietnam sets out a well-defined legal base for investors who want to enter the Vietnamese market. It achieves this through openness, uniformity of procedures, and strong protections, thereby enhancing investors' confidence. Those companies that are considering venturing into Vietnam's market and result in exploring the potential with the Investment Law professionals like One IBC Vietnam will be a good step towards ensuring compliance and optimum market-entry strategy.
