04 notes for the Japanese investors before investing in Vietnam

Date: 11 August 2021

Writers: Tuyen Pham

Currently, with an open economic market and stable politics, Vietnam has been attracting many foreign investors for investment and doing business, especially Japanese investors. Therefore, before investing in Vietnam, what issues should Japanese investors be paid attention to? Through this article, BLawyers Vietnam will introduce an overview of issues that Japanese investors should pay special attention to when investing in Vietnam.

1. Treaties that Vietnam and Japan are members

When investing in Vietnam, investors should study the treaties relating to the investment field to which their country and Vietnam are members. As a result of this studying, investors will determine their rights and obligations in the investment process and grantable incentives.

Up to now, the essential treaties that Japanese investors need to note when investing in Vietnam include:

  • The agreement for the liberalization, promotion, and protection of investment was signed in 2003 by Vietnam and Japan. This treaty contains provisions for the protection of Japanese investors. Accordingly, Japanese investors shall be treatable no less favorably than domestic investors and investors from any third country in similar circumstances.
  • The agreement on Comprehensive Economic Partnership among member states of the ASEAN and Japan (AJCEP) was signed in 2008. This treaty marked Vietnam’s commitment to eliminate tariffs and reduce taxes to 0% on some industrial products.

In addition, Vietnam and Japan are also members of many multilateral organizations such as the World Trade Organization (WTO), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Regional Comprehensive Economy (RCEP). Therefore, Japanese investors also need to learn more about the contents of the above agreements to apply in accordance with the investment projects they intend to invest in Vietnam.

2. Investment incentives that Vietnam offers Japanese investors

Investment incentives are regulated to encourage Japanese investors to invest in Vietnam based on their suitability with the country’s socio-economic development strategy.

Pursuant to the prevailing regulation, the forms of incentives include:

  • Corporate income tax incentives exemption from and reduction of tax and other incentives prescribed by the Law on Corporate Income Tax;
  • Exemption from import tax on imported goods;
  • Exemption from and reduction of land levy and land rents; and
  • Accelerated depreciation, increasing the deductible expenses upon calculation of taxable income.

3. Selecting the business line for investment

In the case of investing by establishing a company in Vietnam, Japanese investors should note the banned business line as specified in the Law on Investment 2020. Selecting the business line carefully will help investors avoid doing business with the business lines that the Vietnamese law ban such as prostitution, provision of debt collection services, trade-in firecrackers, etc.

Besides, for some business lines, to be able to invest in Vietnam, Japanese investors must meet certain conditions. Especially, some business lines require Japanese investors to meet the conditions of Sub-licenses, practice certificates, confirmation letters from competent authorities, etc. In addition, in some cases, market access conditions applied to foreign investors must be considered. Accordingly, Japanese investors must ensure the percentage of foreign investors owning charter capital in economic organizations, as well as investment forms and scope of investment activities.

4. Forms that Japanese investors can choose when making investments

Japanese investors can choose the following forms to invest in Vietnam:

  • Investing in the establishment of a business entity.
  • Investing in the form of capital contribution or purchase of shares or stakes in a company.
  • Executing of an investment project.
  • Investing in the form of a business cooperation contract.
  • New forms of investment and types of business entities are prescribed by the Government’s regulations.

Thus, apprehending the aforementioned issues will assist Japanese investors in understanding the provisions of Vietnamese law as well as assuring their rights prior to implementing investment projects in Vietnam.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

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