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Guarantee for investment execution projects in Vietnam

Ensuring the implementation of the first project is a mandatory obligation for investors subject to guarantees according to the law. In the case of ensuring the implementation of an investment project, the investor does not deposit or does not guarantee the deposit obligation as prescribed, it will lead to the legal consequences specified in Article 48.2 of the Investment Law 2020: “The investment registration agency terminates or partially terminates the activities of the investment project.” For investors to better understand the regulations on this obligation, Viet An Law provides advice on guarantee for investment execution projects in Vietnam in the article below.

Vietnam Investment

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    Legal basis

    • Law on Investment 2020;
    • Decree 31/2021/ND-CP guiding the Investment Law 2020.

    When must a project performance guarantee be implemented?

    Pursuant to Article 43 of the Investment Law 2020, investors must ensure the implementation of an investment project when that project requests the State:

    • Allocation;
    • Land lease; or
    • Allows change of land use purpose.

    Exclusions include:

    • Investors who win an auction of land use rights to implement an investment project are allocated land by the State with land use fees collected, or leased land with a one-time land rental fee for the entire lease period;
    • The investor wins the bid to implement an investment project using land;
    • Investors are allocated or leased land by the State based on receiving transfer of investment projects that have made deposits or have completed capital contributions and capital mobilization according to the schedule specified in the policy approval document, Investment Registration Certificate;
    • Investors are allocated or leased land by the State to implement investment projects based on receiving transfer of land use rights and assets attached to land from other land users.
    • Investment projects that have been implemented or approved or allowed to be implemented according to the provisions of the law before July 1, 2015, and are subject to ensuring the implementation of investment projects according to the provisions of the Investment Law 2020 are not eligible. must deposit a deposit or bank guarantee on the deposit obligation, except in cases where the investor adjusts the goals and progress of the investment project or changes the land use purpose after the 2020 Law (January 1, 2020) takes effect.

    Guarantee for investment execution projects in Vietnam by investors

    According to the provisions of Article 25 of Decree 31/2021/ND-CP, when in the case of ensuring project implementation, investors must perform one of the following forms of assurance:

    • Deposit at a designated credit institution in Vietnam. Credit institutions are responsible for paying the deposit amount that investors must pay to the state budget according to the provisions of law in cases where the project is behind schedule for being put into exploitation, operation, or is terminated.
    • Submit a certificate of guarantee from a credit institution established under Vietnamese law;
    • Submit a guarantee certificate from a foreign bank branch established under Vietnamese law.

    Authority to receive guarantees for the implementation of investment projects

    • The Investment Registration Authority is the entity authorized to receive investment project implementation guarantees, based on the legal form of the Project Implementation Guarantee Agreement signed between the Investment Registration Authority and the investor investment in project implementation.
    • Project implementation guarantee money is paid into the investment registration agency’s account opened at a commercial bank established under Vietnamese law, selected by the investor;
    • Using the same account to carry out multiple projects with the same investment registration agency can be done based on an agreement.

    Guarantee level for investment project implementation

    According to Article 43 of the Investment Law 2020, the investment project implementation guarantee level ranges from 1-3% of the project’s investment capital depending on the scale, nature, and implementation progress of each investment project.

    Article 26 of Decree 31/2021/ND-CP guides regulations on investment project implementation guarantees calculated as a percentage of the investment capital of the investment project according to the principle of partial progression as follows:

    Capital part Guarantee level
    Up to 300 billion VND 3%
    300 billion VND < x =< 1,000 billion VND 2%
    > 1,000 billion VND 1%

    For example:

    The project investment capital used as a basis is 2,000 billion VND, and the guarantee level to be paid (in case of ensuring the implementation of the investment project) is:

    300 x 3% + (1,000 – 300) x 2% + (2,000 – 1,000) x 1% = 33 (billion VND)

    The investment capital is taken as the basis

    Investment capital as a basis = total registered investment capital – land use/rental fees paid to the state – construction costs of works under investment projects that must be handed over to the state for management after completion (if any).

    Deductible costs can be determined by the investment registration agency at the time of signing the Investment Project Implementation Guarantee Agreement based on the cost estimate in the Project Proposal submitted by the investor. established to determine the amount of money to ensure the implementation of an investment project.

    Cases where the guarantee amount is reduced

    Except for projects that are not eligible for investment incentives as prescribed in Clause 5, Article 15 of the Investment Law 2020, investors are entitled to a reduction in the project implementation guarantee in the following cases:

    Project type Reduced level
    ·      Investment projects in sectors and occupations eligible for investment incentives

    ·      Investment projects in areas with difficult socio-economic conditions.

    25%
    ·      Investment projects in industries and occupations with special investment incentives;

    ·      Investment projects in areas with particularly difficult socio-economic conditions;

    ·      Investment projects in sectors and occupations eligible for investment incentives are implemented in areas with difficult socio-economic conditions.

    50%

    In there:

    • The list of industries and occupations eligible for investment incentives is specified in Appendix II of Decree 31/2021/ND-CP;
    • The list of areas with difficult socio-economic conditions is specified in Appendix III of Decree 31/2021/ND-CP

    Guarantee period for investment project implementation

    Time of performance of the guarantee

    Investors make guarantees after being issued one of the following documents:

    • Decide to approve the investment policy at the same time as approving the investor;
    • Decision on investor approval;
    • Decision to approve winning auction results

    Investors make guarantees before:

    • Organize the implementation of compensation, support, and resettlement plans approved by competent authorities in cases where investors do not advance compensation, support, and resettlement money;
    • Issuing decisions on land allocation, land lease, and permission to change land use purposes in cases where investors have advanced compensation, support, and resettlement money or in cases where investors are selected to carry out the implementation. Currently, the project is through the auction of land use rights and is leased land by the State, paying annual land rent.

    Guarantee period

    The project implementation guarantee period is calculated from the time the guarantee obligation is performed to one of the following times:

    • The time when the deposit amount is fully refunded to the investor.
    • The time when the deposit amount is fully paid into the state budget.
    • The effective date of the guarantee is based on the signed Investment Project Implementation Guarantee Agreement.

    Refund, termination of guarantee obligations

    The refund and termination of the obligation to ensure project implementation are stipulated as follows:

    • Refund 50% of the deposited amount or reduce the guarantee level by 50% at the time the investor has been granted a decision on land allocation, land lease, or permission to change land use purpose by a competent state agency be granted a license or other approval for construction activities (if any);
    • Refund the remaining deposit amount and interest arising from the deposit amount (if any) or terminate the validity of the deposit obligation guarantee at the time the investor has completed the acceptance of the construction work;
    • In case the investment project cannot continue to be implemented due to force majeure or due to the implementation of administrative procedures by a competent state agency or because the project must be adjusted according to the request of a state agency in case of planning change, the investor can consider refunding the amount of money to ensure project implementation obligations or terminate the obligation to ensure project implementation.

    The unrefunded project implementation guarantee amount shall be paid into the state budget according to the provisions of the law in the following cases:

    • The project is behind schedule for being put into exploitation and operation according to the provisions of the Investment Policy Approval Decision and Investment Registration Certificate without permission from a competent state agency to adjust the progress;
    • The project’s operation is terminated according to the provisions of Clause 2, Article 48 of the Investment Law, except for the case specified in Point a, Clause 2, Article 47 of the Investment Law.

    Adjustment of guarantee obligations

    According to Article 26 of Decree 31/2021/ND-CP, there are two cases of adjustment as follows:

    • Adjustment to reduce the guarantee level: when reducing the project’s investment capital, the investor will be refunded the deposit amount corresponding to the reduced investment capital based on the capital reduction dossier;
    • Adjusting to increase the guarantee level: when increasing the project’s investment capital, the investor must pay an additional deposit amount or add a deposit guarantee from a credit institution corresponding to the adjusted registered investment capital amount. increase. In case 50% of the deposit paid before adjustment has been refunded, the investor only has to pay an amount equal to 50% of the additional deposit.
    • Domestic investors whose investment policies have been approved and are not subject to the issuance of Investment Registration Certificates, when adjusting projects, are not subject to investment policy adjustments but changing Project Implementation Guarantee Agreement, the investor shall send a written notification to the Investment Registration Authority before adjusting the investment project. The investment registration agency and the investor make adjustments to the Project Implementation Guarantee Agreement under the adjusted content of the investment project.

    Measures to handle guarantee money

    Multi-phase project

    • The payment and refund of the deposit or payment, adjustment, and termination of the guarantee are applied to each stage of project implementation according to the provisions of the Project Implementation Guarantee Agreement.
    • Investors can transfer the remaining deposit or guarantee from the previous stage to ensure project implementation for the next stage without necessarily having to refund the remaining deposit or terminate the validity of the project. guarantee of the previous period and additionally pay the difference between the deposit or guarantee amount for the next period and the deposit or guarantee amount of the previous period (if any).

    Investors have advanced compensation, support, and resettlement money

    However, in case the investor has advanced compensation, support, and resettlement money, the guarantee is carried out as follows:

    Case Consequence
    Advance amount >= Guarantee level ·      There is no need to immediately submit a deposit or guarantee deed at the specified time

    ·      Must be paid when the project is behind schedule as prescribed in the Investment Policy Approval Decision, Investment Policy Approval Decision concurrent with investor approval, or Investment Registration Certificate.

    Advance amount < Guarantee level Submit a deposit amount or submit a guarantee deed from a credit institution equal to the difference

    The guarantee validity will not be extended upon expiration

    In case the deposit obligation is guaranteed by a credit institution when the guarantee expires, the investor does not extend the guarantee’s validity and there is no opinion from the investment registration agency regarding the termination of the guarantee’s validity. If the guarantee is valid, the credit institution must transfer the guarantee amount to the account of the investment registration agency to continue depositing to ensure the implementation of the investor’s project.

    Investment legal consulting services of Viet An Law

    • Consulting on implementing obligations to ensure investment project implementation according to current regulations;
    • Representing clients to fulfill their obligations to ensure investment project implementation;
    • Consulting on legal issues related to the implementation of investment projects in Vietnam.

    For clients who need advice on the guarantee for investment execution projects in Vietnam, please contact Viet An Law for the fastest and most effective advice.

    Disclaimer: This article was last updated in April 2024. Laws may have changed since then. Please contact Viet An Law to confirm the information in this article is current and for any legal assistance.

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