Issue of March 2022 – Regulations on supervision of foreign investment activities in 2022

Dear Valued Clients,

It has come to our attention during operation that the matter concerning the supervision of foreign investment activity carried out by Vietnamese competent state authorities is always one among others that draws attention of foreign-invested economic organizations. On the occasion of the adoption of Circular No. 02/2022/TT-BKHDT on the guidance on supervision and assessment of investment for foreign investment activities in Vietnam (“Circular 02”), we would like to sum up some key points of this Circular for your kind reference. We note that Circular 02 will take effect from April 1, 2022 and will replace Circular No. 09/2016/TT-BKHDT.

REGULATIONS ON SUPERVISION OF FOREIGN INVESTMENT ACTIVITIES

1. Authority to supervise foreign investment activities

According to Article 4 of Circular 02, the authority to supervise foreign investment activities is assigned to the following entities:

a) Ministry of Planning and Investment;

b) Specialized state management agencies;

c) People’s Committees of provinces and centrally-run cities;

d) The investment registration agency that supervises economic organizations and foreign-invested projects under its management in accordance with the law on investment;

e) Foreign investors and foreign-invested economic organizations that carry out project supervision by themselves.

2. Supervision of foreign investment activities

Regarding the scope of supervision of foreign investment activities, economic organizations and foreign-invested projects need to pay special attention to inspection issues. Specifically, the main regulations on inspection activities are stated as follows:

2.1. Contents of inspection of economic organizations and foreign-invested projects

According to Article 8 of Circular 02, the contents that will be inspected by the competent entities include:

a) The schedule of capital contribution and disbursement of registered investment capital; the situation of legal capital contribution (for sectors and fields where legal capital is regulated); total realized investment capital and ratio to total registered investment capital;

b) Project deployment progress; the implementation of investment objectives of the project; the application of technology to projects subject to appraisal and opinions on technology (applied technology compared with technology already appraised or commented by competent authorities; installation of machinery; equipment and technological lines of the investment project); technology transfer for projects involving technology transfer (objects, contents, methods of technology transfer, results of technology transfer as agreed between the parties); the implementation of commitments and the satisfaction of investment conditions, market access conditions, conditions for enjoying investment incentives and investment support of investors when the project is put into operation;

c) The fulfillment of financial obligations towards the state;

d) The implementation of legal regulations on labor, foreign exchange management, environment, land, construction, fire prevention and fighting and other specialized legal regulations;

e) Financial situation of the foreign-invested economic organization:

• • Value of assets contributed as capital by the parties (value of land use rights; value of assets of machinery and equipment; intellectual property rights and other assets as prescribed by law);
  • The correct use of imported machinery and equipment to create fixed assets, raw materials, supplies and components imported for production are exempt from import tax;
  • Checking the results of determining the enterprise value, the value of shares at the time before going on the stock exchange in some special cases shows signs of fake raising the enterprise value;
  • Transactions with overseas parent companies or related companies;
  • Performance of debts (bank loans, corporate bond issuance and other loans);
  • Setting up and using reserve funds, depreciating fixed assets, accounting for exchange rate differences;
  • Distribution of profits for the state’s capital contribution in foreign-invested economic organizations and projects;
  • Preservation of capital contribution of economic organizations and projects with state capital (including investment outside enterprises and receiving partners to contribute capital to joint ventures and associations in economic organizations).

f) Other contents related to the implementation of investment projects:

• • The observance of regulations on investment supervision and assessment conditions and reporting and statistical regimes as prescribed;
  • The observance of measures to handle detected violations.

g) For projects eligible for investment registration certificates, in addition to the contents specified from points a to f above, the inspection contents also include the implementation of the contents specified in the approval of investment policy, investment registration certificate, enterprise registration certificate;

h) Depending on the purposes and requirements of the inspection and according to the nature and characteristics of the foreign-invested project, the inspection contents may include all or part of the above contents.

2.2. Inspection forms

According to Article 10 Circular 02, there are 03 inspection forms as follows:

a) Periodic inspection: conducted based on the annual inspection plan;

b) Unscheduled inspection: carried out on a case-by-case basis, based on management requirements and the actual situation, or based on requests and feedback from agencies, organizations and individuals on problems encountered in the process of implementing investment activities or in the process of organizing the implementation of laws and policies on foreign investment or there are signs of violations in investment activities of foreign-invested economic organizations and projects with foreign investment capital.

c) Specialized inspection: conducted in accordance with specialized laws and at the request of specialized state management agencies in order to assess the implementation of the provisions of law related to the field of authority.

2.3. Inspection methods

According to Article 11 of Circular 02, depending on the actual content and situation, the competent authority shall carry out the inspection in the following ways:

a) Through the National Investment Information System;

b) Through the report;

c) Organize inspection groups, working groups.

Note: Depending on the specific task, an inspection can be carried out in one way or a combination of the above inspection methods to achieve the highest efficiency.

As usual, we hope you find this Legal Update helpful and look forward to working with you in the near future.

Kind regards,

ENT Law LLC

The full version of this Legal Update can be found here.