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Vietnam: Proposed Changes in Investment Law

(May 11, 2009) It was reported on May 1, 2009, that Vietnam is finalizing the draft of a new law that would amend several of the country's laws on investment, construction, the environment, and taxation, among others. The purported purpose of the government in revising the laws is not only to improve Vietnam's investment climate, but also to help the country cope with the global economic crisis. Highlights of some of the proposed changes related to foreign investment are:

  • Removal of the re-registration deadline of July 1, 2008, for foreign-invested enterprises that were incorporated before July 1, 2006. Many companies have reportedly failed to re-register to conduct operations under the Enterprise Law (in force since July 1, 2006), with the result that their project life or scope of expansion may be curtailed. (Law on Enterprises, Vietnam Laws Online Database,[10Apr06].pd
    (last visited May 6, 2009).)
  • New definition of a foreign-invested enterprise as “a company in which a foreign investor owns 30% or more of the charter capital or equity.” If adopted, this change could affect a number of investment conditions for such enterprises. The current Investment Law (in force since July 1, 2006) defines such entities as those established by a foreign investor “to carry out investment activities in Vietnam or a Vietnamese enterprise in which a foreign investor purchases shares, with which it merges or which it acquires,” with the result that some Vietnamese officials “have treated companies with 1% foreign ownership as foreign invested companies.” (Vietnam: Draft Investment Law, INTERNATIONAL FINANCIAL LAW REVIEW, May 2009, available at Under the proposed new definition, companies with under 30% of the charter capital owned by a foreign investor would not be considered a foreign-invested enterprise and would therefore not be subject to the current “rigorous and time-consuming” procedures required to obtain an investment license, nor would they be subject to the current economic needs test for their distribution business in Vietnam. (Id.; Law on Investment, Vietnam Laws Online Database,[10Apr06].pdf (last visited May 7, 2009).)
  • Revision of the Law on Corporate Income Tax (as amended on June 3, 2008) to allow tax incentives for existing companies that implement new investment projects. At present, only newly established companies enjoy these incentives. (Vietnam: Draft Investment Law, supra; Vietnam's Revised Corporate Income Tax, VIETNAM BRIEFING, Sept. 26, 2008, available at