DECREE No DECREE No.7/1998/ND-CP OF JANUARY 15, 1998 DETAILING THE IMPLEMENTATION OF THE LAW ON PROMOTION OF DOMESTIC INVESTMENT (AMENDED) THE GOVERNMENT Pursuant to the Law on Organization of the Government of September 9, 1992; Pursuant to the Law on Promotion of Domestic Investment of June 22, 1994; At the proposal of the Minister of Planning and Investment, DECREES: Chapter I GENERAL PROVISIONS Article 1.- To encourage various economic sectors to invest in production and business for socio-economic development, the State creates a uniform and stable legal framework, a liberal and favorable environment for investment, business and equal competition by enterprises of all types in all economic sectors, adopts a "one door" mechanism in the relationship between investors and State agencies, and ensures the regime of investment preferential treatment for investment projects to be encouraged under the Law on Promotion of Domestic Investment. Article 2.- Forms of investment to be encouraged under the Law on Promotion of Domestic Investment: 1. Investment projects on the establishment and development of production and business establishments, including: a/ Investment in setting up production and business establishments; b/ Investment in developing new production and business lines and trades or manufacturing new products at the same location; c/ Investment in developing the manufacture and trading of the existing products or new products in new places; Forms of investment mentioned in Points b and c, Clause 1 of this Article shall not require permits for the establishment of enterprises but shall only require additional registration of new business lines and trades. 2. Investment projects on the expansion of production scale and increase of production acity, on research, development and renewal of technologies of the existing production and business establishments. 3. Share purchase to mobilize or increase ital of enterprises, contribution of ital to enterprises. 4. Investment in the form of Build- Operate- Transfer (BOT) contracts. Article 3.- Subject to the regulation of the Law on Promotion of Domestic Investment shall include: 1. Enterprises set up under the Law on Companies, the Law on Private Enterprises, the Law on Cooperatives and the Law on State Enterprises; enterprises of political organizations, socio-political organizations, professional societies, individuals and business groups operating under Decree No.66-HDBT of March 2, 1992 of the Council of Ministers (now the Government). 2. Vietnamese organizations and citizens, Vietnamese residing abroad and foreigners permanently residing in Vietnam that buy shares or contribute ital to domestic enterprises, including State enterprises allowed to diversify forms of ownership or investment funds with financial autonomy. 3. Vietnamese enterprises which are directly invested in by Vietnamese residing abroad. 4. Vietnamese enterprises which are directly invested in by foreigners permanently residing in Vietnam. 5. Enterprises established jointly by Vietnamese citizens and Vietnamese residing abroad or foreigners permanently residing in Vietnam. Article 4.- Production and business lines and trades, fields of culture, education, training, health care and social affairs shall be entitled to investment promotion under the provisions of List A issued together with this Decree; districts of ethnic minorities, mountain and island areas shall be entitled to investment promotion under the provisions of List B issued together with this Decree; other difficult areas shall be entitled to investment promotion under the provisions of List C issued together with this Decree (hereafter referred to as List A, List B and List C for short). Article 5.- Vietnamese residing abroad (hereafter referred to as overseas Vietnamese for short) include people with Vietnamese citizenship who reside abroad and people of Vietnamese origin but with foreign citizenship. Overseas Vietnamese directly investing into the country shall be entitled to opt for the application of either the Law on Foreign Investment in Vietnam or the Law on Promotion of Domestic Investment, but each investment project shall be entitled to apply only one of these two laws. Investors being overseas Vietnamese that meet conditions prescribed in Article 9 of this Decree shall be entitled to set up enterprises in the form of company or private enterprise and have the rights and obligations as defined in the Law on Companies or the Law on Private Enterprises as well as relevant legal documents. Article 6.- To make direct investment in Vietnam under the Law on Promotion of Domestic Investment, persons with Vietnamese stock and with foreign citizenship shall have to obtain written certification of their Vietnamese origin from one of the following agencies: the overseas Vietnamese diplomatic mission; the Committee for Overseas Vietnamese; or the competent agency of the foreign countries where their passports are issued. Article 7.- Foreigners permanently residing in Vietnam are those who have registered their permanent residence in Vietnam. Investors being foreigners permanently residing in Vietnam who meet conditions prescribed in Article 9 of this Decree shall be entitled to set up enterprises in the form of company or private enterprise and have the rights and obligations as defined in the Law on Companies or the Law on Private Enterprises as well as the relevant documents. Article 8.- The percentages of shares or contributed ital owned by Vietnamese organizations and citizens, overseas Vietnamese and foreigners permanently residing in Vietnam that buy shares or contribute ital to domestic enterprises, including State enterprises allowed to diversify forms of ownership or State investment funds, shall be specified by the Government in each period depending on each production or business line or trade, each field and geographical area for investment. Article 9.- To be allowed to directly invest in the establishment of enterprises in Vietnam, overseas Vietnamese and foreigners permanently residing in Vietnam shall have to fully meet the following conditions: 1. Having full acity for civil acts according to Vietnam's Civil Code. 2. Having enough legal ital as defined in Vietnam's Law on Private Enterprises or Law on Companies. Chapter II INVESTMENT GUARANTY AND SUPPORT Article 10.- Enterprises which make investment under the Law on Promotion of Domestic Investment shall be entitled to land allocation or land lease, be guaranteed in term of the rights and obligations of organizations with land allotted or leased by the State according to the land legislation and shall be granted land use right certificates. Article 11.- Enterprises owned by overseas Vietnamese and enterprises of foreigners permanently residing in Vietnam, which operate under the Law on Promotion of Domestic Investment and this Decree, shall be treated as enterprises of the same type in the country, like they shall be eligible for the same prices set by the State for input commodities and services, for the same tax rates, the same investment privileges and the land allocation or land lease by the State, and shall have to perform obligations as provided for domestic organizations by laws. Article 12.- The State encourages economic sectors, social organizations and individuals inside and outside the country to contribute ital to set up development investment funds and manage such funds according to the principle of financial autonomy. The Government shall promulgate regulations on the operation of investment funds, policies and measures on investment promotion and privileges so as to ensure the ital contributors' interests. Article 13.- The State shall directly support investment activities through the National Investment Support Fund, development investment funds and other programs of the State. Objects of investment support, the mode of management and the support duration shall be stipulated by the Government for each specific program or project. The State encourages economic or social organizations, and individuals inside and outside the country to contribute ital to the National Investment Support Fund on the principle of voluntariness. The State shall ensure the ital contributors' rights and interests according to the Fund's Statute. Article 14.- The National Investment Support Fund shall support investment projects in branches, trades, fields and areas eligible for preferential treatment as follows: 1. Providing mid-term and long-term soft loans for investment projects on List B and List C. The project owners shall be entitled to use assets purchased by this loaned ital for mortgages. The lending interest rates shall be decided by the Prime Minister, based on the proposal of the Minister of Finance; 2. Providing investment credit guaranty for investment projects on List A, List B and List C; 3. Partially subsidizing the lending interest rates for loans granted by the Bank for Investment and Development and State-owned commercial banks to investment projects in the branches and trades on List A. The subsidy level shall be equal to the difference between the lending interest rate set by the Bank for Investment and Development or the Sate-owned commercial bank in the locality where the project owner borrows ital and the lending interest rate set by the National Investment Support Fund at the time of ital borrowing, and such subsidy shall be given to the project owner only after he/she has repaid the principal of the loan. Article 15.- The contribution of State ital to enterprises shall be made in the form of Build-Operate-Transfer contracts (referred to as BOT enterprises for short) and other forms through the National Investment Support Fund, the Bank for Investment and Development, the State-owned commercial banks and/or State-owned financial companies. The contribution of State ital to BOT enterprises for Group A projects (according to investment classification) shall be decided by the Prime Minister at the proposal of the Ministry of Planning and Investment; the presidents of the People's Committees of the provinces and cities directly under the Central Government shall decide the contribution of the local budget ital as investment ital to BOT projects of Groups B and C (according to investment classification) at the proposal of the provincial/municipal Planning and Investment as well as Financial Services. Article 16.- Enterprises involved in the production of goods for export shall be entitled to directly export goods produced by themselves. The minimum level of working ital set for import-export enterprises which have registered their operations in the areas on List B or List C shall be 50% lower than the common prescribed level of working ital. Article 17.- Establishments involved in the production of goods for export or production of raw materials and/or materials in direct service of the production of goods for export, which are entitled to investment privileges according to List A, List B or List C, shall be provided with guaranty or export-related credit loans by the Bank for Investment and Development and the State-owned commercial banks, including loans for the purchase of export goods and loans for the expansion of establishments producing export goods. In cases where such banks fail to have enough ital for lending, the State Bank of Vietnam shall have to provide them with loans as reallocated ital in accordance with the current provisions of the State Bank of Vietnam. Regarding a number of important export commodities eligible for development priority according to the List prescribed by the Government, in cases where the international market prices of such commodities fall or the domestic prices of materials and raw materials for the production of such export commodities rise, thus causing big losses for the establishments which produce export goods, the State shall consider support for such establishments through the Price Stabilization Fund. The Government Pricing Committee shall assume the prime responsibility and coordinate with the concerned agencies in submitting to the Prime Minister for decision the support level and duration according to the objectives and management regulation of this Fund. Article 18.- The investors shall be entitled to select geographical areas for the realization of investment projects or opening of branches, irrespective of the locations where they have registered their current permanent residence. After obtaining a certificate of investment preferential treatment, a project owner with his/her name stood on the business license shall have the right to transfer the permanent residence register or certificate of his/her own and his/her family to the locality where the new investment project is to be realized. Laborers with university degrees or professional skills of grade four or higher and with labor contracts for 2 years or more with production, business establishments which are eligible for investment preferential treatment under the Law on Promotion of Domestic Investment, shall have the right to transfer their permanent residence to the new working place(s). Article 19.- Investors under the Law on Promotion of Domestic Investment shall have the right to hire foreign laborers and experts and pay them wages according to the labor contracts. Article 20.- Investors being overseas Vietnamese, after obtaining certificates of investment preferential treatment, shall enjoy the same water, railway, road and air freight and service charges for dwelling houses, hotels, electricity and water supply and post and telecommunications fees as Vietnamese residing in the country. Article 21.- Overseas Vietnamese investing in Vietnam shall be granted multiple entry and exist visas during the time of preparation, construction and management of their production establishments. Article 22.- After fulfilling financial obligations prescribed by Vietnamese law, overseas Vietnamese directly investing in Vietnam shall be entitled to transfer abroad their lawful profits, borrowed ital, investment ital and other lawful monies and property, like the cases for foreigners investing in Vietnam under the Law on Foreign Investment in Vietnam. Article 23.- When transferring abroad profits, borrowed ital and investment ital as prescribed in Article 22 of this Decree, overseas Vietnamese directly investing in Vietnam shall be entitled to convert them into foreign currency(ies) at the banks licensed to deal in foreign currencies. Overseas Vietnamese who buy shares or contribute ital to enterprises or investment funds, after fulfilling tax obligations prescribed by Vietnamese law, shall be entitled to buy foreign currency(ies) at the banks licensed to deal in foreign currency(ies) so as to transfer abroad their dividends or investment ital, if their contributed ital or shares are transferred to other persons. Article 24.- The State encourages organizations and individuals to set up organizations or enterprises to provide consultancy services on investment, management, technological transfer, vocational training, technical and managerial skill training and information provision in support of domestic investment. The State management agencies are strictly forbidden to directly provide investment consultancy services for profits. Article 25.- The State agencies shall, within their respective powers and tasks, have to provide information, guidance and support for domestic investors in carrying out their investment activities. The Ministry of Finance shall assume the prime responsibility and coordinate with the Ministry of Science, Technology and Environment in stipulating in detail the use of the Fund for Technological Development and financial-support measures to renew technologies of enterprises subject to the regulation of this Decree. Article 26.- In cases where damage is caused to the interests of enterprises entitled to investment preferential treatment under the Law on Promotion of Domestic Investment and this Decree due to changes in law provisions, the State shall take measures to reasonably settle the investors' interests. The Ministry of Planning and Investment shall assume the prime responsibility and coordinate with the Ministry of Finance and the concerned agencies in submitting to the Prime Minister the basic principles for the implementation of this Article. Chapter III INVESTMENT PREFERENTIAL TREATMENT Article 27.- Enterprises involved in agricultural production, forestry, aquaculture and salt making and enterprises with List A investment projects to be carried out in districts mentioned in List B or in the areas mentioned in List C, if allocated land by the State, shall not have to pay the land use levy; if renting land, shall be entitled to the land rent exemption for five years and a 50% reduction of the land rent for five (5) more years after signing the land-renting contracts. Article 28.- Enterprises with investment projects for infrastructure construction and business in industrial parks, export processing zones or high-tech parks shall be entitled to a 50% reduction of the land rent for five (5) years after signing the land-renting contracts. Enterprises with investment projects for List A - branches or trades in industrial parks, export processing zones or high-tech parks shall be entitled to a 50% reduction of the land ground rent at the original renting price set by the State, excluding the value of infrastructure constructions owned by domestic infrastructure development companies, for five (5) years after signing the ground-renting contracts. Article 29.- Investment projects for the production of export goods or import substitutes or the production of raw materials and materials in direct service of the production of export goods or import substitutes shall be entitled to: 1. Export - related credit loans granted by the State-owned commercial banks at preferential interest rates; 2. Guaranty provided by the National Investment Support Fund for export - related credits; 3. Shortening by half the duration for depreciation of fixed assets which are used in the production, processing or assembly of export goods. Article 30.- The following investment projects shall be eligible for tax privileges: 1. Investment in branches and trades prescribed in List A attached to this Decree. 2. Investment in production establishments that use technologies with one of the following factors: a/ Technology to produce export goods or import substitutes; b/ Technology, which, when being applied, is able to give rise to the renovation of technology and equipment in other branches; c/ Technology that use domestic raw materials to turn out products with quality higher than the quality of the existing products of the same type. d/ Clean technology; technology that use solid, liquid and gas waste matters. The Ministry of Science, Technology and Environment shall assume the prime responsibility and coordinate with the concerned State agencies in studying and promulgating a list of technologies that meet the requirements mentioned in Clause 2 of this Article. 3. Investment in production and/or business projects which annually employ at least an average number of: a/ 100 persons for urban areas of the 1st and 2nd categories. b/ 20 persons for districts on List B and areas on List C. c/ 50 persons for other areas. The Ministry of Labor, War Invalids and Social Affairs shall determine the method of calculating the average number of laborers prescribed in this Clause. 4. Investment in districts on List B. 5. Investment in areas on List C. 6. Investment in industrial parks and/or export processing zones. Article 31.- Production, transport, trade and service establishments investing in the forms prescribed in Clause 1, Article 2 of this Decree in districts other than those in areas of ethnic minorities, mountain or island areas (List B) or in other difficult areas (Li

Decree 7/1998/ND-CP