To adapt to the global integration process, creating favorable mechanisms to promote production and export activities of enterprises is very important. Vietnam has many geographical and political advantages, helping to achieve an important role in the international supply and processing chain of goods, especially through the formation and support of export processing enterprises. In this article, VIET MY LAW AND ACCOUNTING will clearly explain the legal provisions related to foreign investment in and outside export processing zones.

1. Legal basis

Cases for carrying out procedures for granting Investment Registration Certificates

Cases that must carry out procedures for granting Investment Registration Certificates include:
a) Investment projects of foreign investors;
b) Investment projects of economic organizations specified in Clause 1, Article 23 of this Law.

2. What is an export processing zone?

Before learning in detail about the operating documents of foreign investment projects inside and outside the export processing zone, we hope that readers will clearly understand the concept of “Export Processing Zone”.
According to the provisions of Clause 2, Article 2 of Decree No. 35/2022/ND-CP, an export processing zone is a special industrial zone dedicated to the production of goods for export, providing support services for the production of export goods and carrying out export activities. This export processing zone must be divided and isolated from the outside area according to the regulations applicable to non-tariff zones, as prescribed in the law on export tax and import tax.

3. Special conditions for foreign investment in and outside export processing zones

To meet the legal documents certifying foreign investment in and outside export processing zones, enterprises must properly and fully meet the following requirements:

3.1. Regarding industries

Export processing enterprises operating in the field of industrial production for export.

According to the provisions in Appendix I, Section A of Decree No. 31/2021/ND-CP, foreign investors are not allowed to invest in industries and trades that have not yet had market access. These industries and trades that have not yet had market access are specifically regulated therein.

To invest in industries and trades that have market access, foreign investors must comply with the regulations applicable to those industries and trades for foreign investors. Regulations on industries and trades with conditional market access (including the ratio of charter capital ownership of foreign investors in economic organizations, investment forms, scope of investment activities, capacity of investors, and partners participating in investment activities) are specified in detail in Appendix I, Section B of Decree No. 31/2021/ND-CP.

3.2. Regarding equipment & infrastructure

For foreign investment in and outside export processing zones, the requirements for infrastructure and equipment are also clearly and specifically regulated:

In industrial zones, there may be industrial sub-zones reserved for export processing enterprises. Export processing zones, export processing enterprises and industrial sub-zones for export processing enterprises are isolated from the outside territory by a fence system with gates and doors. This ensures conditions for inspection, supervision and control by customs authorities and relevant authorities according to regulations applicable to non-tariff zones, as prescribed in the law on export tax and import tax.

3.3. Incentives for export processing enterprises

Enterprises implementing foreign investment in and outside export processing zones will enjoy the following benefits:

First, regarding corporate income tax incentives:

According to the provisions of Clause 4, Article 19 of Circular 78/2014/TT-BTC, export processing enterprises are entitled to a tax rate of 17% from January 1, 2016, when implementing new investment projects in difficult socio-economic areas as detailed in the Appendix of Decree 218/2013/ND-CP, amended and supplemented by Appendix III of Decree 31/2021/ND-CP, specifically item 55.

At the same time, export processing enterprises are also exempted from tax for 2 years and have 50% of the tax payable reduced for the next 4 years for income from implementing new investment projects as prescribed in Clause 4, Article 19 of Circular 78/2014/TT-BTC. 4 of Article 19 of Circular 78/2014/TT-BTC as stated (Article 6 of Circular 151/2014/TT-BTC).

Second, on land use fee incentives:

Export processing enterprises are exempted from land rent for 7 years as prescribed in Point b, Clause 3 of Decree 46/2014/ND-CP.

Third, on export – import tax incentives:

According to Point c, Clause 4, Article 2 of the Law on Export Tax and Import Tax 2016, goods exported from non-tariff areas to foreign countries, goods imported from foreign countries into non-tariff areas and used only in non-tariff areas, as well as goods transferred from one non-tariff area to another non-tariff area will not be subject to tax.

Export processing enterprises located in non-tariff zones will therefore not be subject to export and import taxes in the above cases.

4. Foreign investment project activities inside and outside export processing zones

According to Article 62 of Decree 31/2021/ND-CP, investors in foreign investment projects inside and outside export processing zones may carry out the following activities:

1. Lease or purchase factories, offices, and warehouses that have been built for use in production and business activities.
2. Use technical infrastructure works and service works that have been built by paying infrastructure usage fees. These works include traffic systems, electricity, water, drainage, telecommunications, wastewater and waste treatment, and other service works and public utilities.
3. Transfer or receive transfer of land use rights, lease land or sublease land with technical infrastructure works to build factories, offices, and other works serving production and business in accordance with the provisions of the law on land and real estate business.
4. Leasing or subleasing factories, offices, warehouses and other constructions that have been built to serve production and business in accordance with the provisions of the law on land and real estate business.
5. Carrying out other activities in accordance with the provisions of the Investment Law 2020, Decree 31/2021/ND-CP, Government regulations on industrial parks, export processing zones, high-tech zones, economic zones and relevant laws.

These activities allow investors in export processing zones to take advantage of and use assets and land use rights to serve their production and business activities, while complying with the provisions of the law on land and real estate business.

5. Procedures for adjusting foreign investment projects inside and outside export processing zones

The procedure for adjusting investment projects under the approval authority of the Export Processing Zone Management Board, as prescribed in Article 32 of the Investment Law 2020, is carried out as follows:

1. Investors of foreign investment projects inside and outside the export processing zone must submit 04 sets of documents as prescribed in Article 44 of Decree 31/2021/ND-CP to the Export Processing Zone Management Board. Including:

• A document requesting adjustment of the investment project;
• A report on the progress of project implementation up to the time of adjustment;
• A decision to adjust the investment project (if applicable);
• Explanation or documents related to the adjustment of the provisions specified in Article 33 of the Investment Law 2020.

2. Within 03 working days from the date of receipt of a valid dossier, the Export Processing Zone Management Board shall transfer the dossier to the competent state agency as prescribed in Article 33 of Decree 31/2021/ND-CP to collect opinions on the project adjustment.

3. Within 15 days from the date of receipt of a valid dossier, relevant agencies shall provide opinions on the content of the project adjustment within their scope of management.

4. Within 25 days from the date of receipt of a valid dossier, the Export Processing Zone Management Board shall decide to approve the adjustment of the investment policy. This decision shall be sent to the investor and relevant agencies related to the investment project.

6. Procedures for accepting and granting certificates of foreign investment projects inside and outside export processing zones

Investment projects in export processing zones are projects that have been approved for investment policy according to the provisions of Point h, Clause 1, Article 31 and Clause 2, Article 32 of the Investment Law 2020.

The time limit for granting Investment Registration Certificates for foreign investment projects inside and outside export processing zones subject to investment policy approval is prescribed as follows:

(i) Within 05 working days from the date of receipt of the investment policy approval document, the investment registration agency must issue an Investment Registration Certificate to the investor and the investment project.

(ii) Within 15 days from the date of receipt of the request for an Investment Registration Certificate from the investor for investment projects not falling under the cases specified in Point (ii).

Foreign investment in and outside export processing zones are a special type of enterprise with a more complex and strict establishment process, however, it brings many economic benefits to enterprises. This article of VIET MY LAW AND ACCOUNTING aims to help you better understand the characteristics and establishment process of export processing enterprises. If you have any questions, please contact us for direct advice and answers.