Foreign Investment Law Amendments: In May 2000, the Law on Foreign Investment in Vietnam (LFI) was amended for the first time since its promulgation in 1996, in an attempt to create more favourable conditions for foreign investment. The amendments merely formalize some practices, which have been in existence for sometime. The Law on Amendments of and Additions to the Law on Foreign Investment in Vietnam (the amended LFI) shall come into effect from 1 July 2000. The main amendments to the LFI 1996 include: General Provisions  Board of Management of the joint venture enterprises (JVE) The principle of unanimous decision is now only required in case of changes in certain key personnel of the JVE, including the appointment and dismissal of the General Director, the First Deputy General Director and amendments of and additions to the Charter of the JVE. The appointment and dismissal of the Chief Accountant and few other financial matters of the JVE may now be decided by a simple majority and no longer require an unanimous approval as before.  Conversion of investment form Although up to the time of these Amendments there have been no any Government regulations guiding the conversion of investment form, merger, integration or separation of foreign invested enterprises (FIEs), in practice there have been many cases in which FIEs have been approved for conversion of investment form or merger. Now the amended LFI formalizes and provides the background for FIEs and parties to a business co-operation contract (BCC) to convert their investment form, separation, merger, or integration. Specific regulations will be stipulated in the implementing Government Decree to be issued soon.  Investment guarantee measures Basically it can be said that the Amendments only provide a bit more details on investment guarantee measures which have been existing in practice for the last 2 years, e.g. tax exemption and reduction, change in operational objectives of the projects, losses and damages carrying forward. It seems that there is only one new point providing that FIEs and contractual parties could be considered for compensation of damages in certain necessary cases. The necessary cases will be detailed in the implementing decree of the Government. Rights and benefits of FIEs and foreign investors  Foreign currency requirements- Banking The main difference is that FIEs and parties to the BCC are now permitted to buy foreign currencies at commercial banks for current transactions. Previously, FIEs must apply to the State Bank of Vietnam (SBV) and obtain from the SBV a specific permission to buy foreign currency within a certain maximal limit before they could contact commercial banks to buy foreign currency. In addition, very important projects will be guaranteed by the Government in respect of foreign currency balancing. Besides, with an approval of the SBV, FIEs are entitled to open bank accounts in abroad.  Capital assignment A significant change is that the assignment of capital is no longer required to be approved by the licensing body before effectuation. Besides, the priority in assignment of capital to Vietnamese enterprises and tax holiday or reduction measures applicable to those are also omitted. Financial & Tax issues  Loss carrying forward There is no any significant change in this regard beside an expansion of the objects, including 100% foreign owned enterprise, JVEs, the parties to the BCC to which the provision on loss carrying forward is applicable. In practice, this amendment was reflected in Article 11 of Decree 10 dated 23 January 1998 regarding encouragement and guarantee measures on foreign direct investment in Vietnam.  Funds The provision on a fixed percentage of the reserve fund in the JVE is now omitted. According to the LFI 1996, the JVE must deduct 5% of the after-tax profit to set up a reserve fund, which is limited to 10% of the legal capital.  Taxation The most important change in these Amendments is a general income remittance tax reduction to 3%, 5%, and 7% from the previous rates of 5%, 7%, and 10%, respectively. The income remittance tax applicable to overseas Vietnamese investing in Vietnam is also reduced to 3% from the previous rate of 5%. Although some further import duties exemption were applicable in fact for a long time ago under Decree 10, the amended LFI now formalises these import duties incentives, in particular, import duty exemption is given to materials, supplies used for making equipment, machinery in the technology line, those construction materials which have not yet been produced locally and the incentives shall be still applicable to the case of expansion or renovation of technology. Furthermore, projects in the fields where investment is specially encouraged or located in area with difficult socio-economic conditions will enjoy exemption of import duties imposed on materials, supplies imported for manufacturing for a period of 5 years from the commencing of production.  Land The amended LFI clearly provides for the responsibility on compensation, site clearance and completing land lease procedures to the Vietnamese party and the People’s Committee of provinces, but not a responsibility of the foreign investors. In fact, all these issues have been implemented in practice so far. Under the amended LFI, the FIEs may now mortgage property attached to the land and land use right against a bank loan given by credit organizations licensed to operate in Vietnam. Miscellaneous  Termination of FIEs The main contents in this provision remains unchanged, except that the amended LFI now provides another possibility for termination based on agreements of the parties stipulated in the contract or the charter of the FIEs. The procedures on liquidation remain unchanged, except that in case the Vietnamese party to the JVE contributes capital in form of land use right and the JVE is dissolved or bankrupt, the residual land use value contributed shall be treated as liquidated assets of the enterprise.  Other changes A few amendments with regard to State management of foreign investment are also referred to in the amended LFI. Besides, the time limit for consideration, appraisal and issuance of investment licenses is now shortened to 45 days for those projects, which must be evaluated, and 30 days for projects, which only need to be registered for licensing as compared to 60 days for both cases as before.