PERFORMANCE SECURITY TO THE PROJECT EXECUTION

PERFORMANCE SECURITY TO THE PROJECT EXECUTION

Many investors are still concerned about procedures, order or related regulations while investing in Vietnam. Among those detailed regulations, there are regulations stipulating issues related to secure investment execution. The following article shall provide an in-depth and comprehensive understanding of the aforementioned matter.

I. Legal regulations

- Law on investment 2020

- Decree 118/2015/ND-CP

II. Consultation from HTC Vietnam law firm

Assurance of project execution can be considered as one of fundamental basis for investing, this is performed through escrow deposit. Vietnam law has stipulated this through these regulations:

- The investor must pay a deposit when receiving land, leasing land, or permitted to repurpose land by the State to execute the investment project, except for the following cases:

+ The investor is the successful bidder for land use right to execute the investment project and receives levied land from the State or leases land from the State and pay a lump sum rent for the entire lease term;

+The investor is a successful bidder for an investment project using land according to regulations of law on bidding

+ The investor receives land or lease land from the State on the basis of transfer of an investment project has paid the deposit of completely contributed capital and/or raised capital according to the schedule specified in the Investment Registration Certificate or decision on investment guidelines;

+ The investor receives land or leases land from the State to execute an investment project on the basis of receipt of land use right or property on land of another land user;

+ The investor is a revenue-earning public service agency, a hi-tech zone development company established under a decision of a competent authority to execute investment projects that receive land or lease land from the State to develop infrastructure of industrial parks, export-processing zones, hi-tech zones, specialized areas in economic zones.

- The deposit mentioned in Clause 1 of this Article shall be paid under a written agreement between the investment registration authority and the investor after a decision on investment guidelines is issued and before the time of land transfer, land lease, or land repurposing. If the investment project is not required to have a decision on investment guidelines, the time for paying the deposit is the time of land transfer, land lease, or land repurposing.

- The deposit is a progressive percentage of the project capital written on the decision on investment guidelines or Investment Registration Certificate as specified below:

+ If the capital does not exceed VND 300 billion, the deposit is 3%;

+ The deposit on the amount of capital in surplus of VND 300 billion but not exceeding VND 1,000 billion is 2%;

+ The deposit on the amount of capital in surplus of VND 1 billion is 1%;

Notes: Project capital does not include land levy or land rent payable to the State and the cost of construction of public works of the project. If the project receives land or leases land from the State in stages, the deposit shall depend on the capital of the project in each stage.

- The deposit shall be paid to the account of the investment registration authority in a Vietnamese commercial bank selected by the investor. The investor shall incur the cost of opening, maintaining the deposit account, and making transactions related to the deposit account.

- The investor shall receive a deposit reduction in the following cases:

+ 25% reduction of deposit for investment projects in business lines eligible for investment incentives; investment projects in disadvantaged areas, investment projects in industrial parks and export-processing zones, including projects for construction and operation of infrastructure in industrial parks and export-processing zones;

+ 50% reduction of deposit for investment projects in business lines eligible for special investment incentives; investment projects in extremely disadvantaged areas, investment projects in business lines eligible for investment incentives located in disadvantaged areas; investment projects in hi-tech zones and economic zones, including projects for construction and operation of infrastructure in hi-tech zones and economic zones;

- The investor that has advanced the payment for land clearance and relocation may delay paying the amount of deposit equal to the advance payment for land clearance and relocation.

- The investor shall receive refund of the deposit as follows:

+ 50% of the deposit shall be returned when the investor completes procedures for land transfer, land lease, or land repurposing and obtain other licenses/approvals to commence the construction (if any) according to the schedule on the Investment Registration Certificate or decision on investment guidelines;

+ The remaining deposit and interest on which (if any) shall be returned when the investor accepts the construction and installation for the project to be inaugurated according to the schedule on the Investment Registration Certificate or decision on investment guidelines;

+ Where the project capital is decreased, the investor shall receive a refund of an amount of deposit which is equal to the decrease in capital according to the adjusted Investment Registration Certificate or adjusted decision on investment guidelines;

+ Where the execution of an investment project cannot be continued because of a force majeure event or on account of a competent authority while following administrative procedures, the investor may claim the refund of the deposit under an agreement of the investment registration authority.

The deposit shall be transferred to state budget except for the cases investors receive refund of the deposit. Where adjustments to an investment project also change the deposit conditions, the investment registration authority and the investor shall reach an agreement on deposit adjustment

The aforementioned are the consultations about performance security to investment project execution. HTC Law Firm is pleased to accompany clients with all legal problems. For the best consultancy service, please get in touch with us.

For more details, please contact:

HTC Vietnam Law Firm

Address: 15th Floor, Multipurpose Building, 169 Nguyen Ngoc Vu, Trung Hoa Ward, Cau Giay District, Hanoi.

Tel: 0989.386.729; Email: [email protected]

Website: https://htc-law.com; https://luatsuchoban.vn