DECREE No. 62-1988-ND-CP Hanoi,15 August 1998

PROMULGATING THE REGULATIONS ON INVESTMENT ON THE BASIS OF BUILD-OPERATE TRANSFER CONTRACTS, BUILD-TRANSFER-OPERATE CONTRACTS AND BUILD-TRANSFER CONTRACTS APPLICABLE TO FOREIGN INVESTMENT IN VIETNAM

THE GOVERNMENT

Pursuant to the Law on the Organization of the Government dated 30 September 1992;

Pursuant to the Law on Foreign Investment in Vietnam passed by the National Assembly on 12 November 1996;

In order to encourage investment in construction and development of infrastructure facilities in Vietnam;

On the proposal of the Minister of planning and investment,

DECREES:

Article 1
To issue with this Decree the Regulations on Investment on the Basis of Build-Operate-Transfer Contracts, Build-Transfer- Operate Contracts and Build-Transfer Contracts Applicable to Foreign Investment in Vietnam.

Article 2

This Decree shall be of full force and effect after fifteen (15) days from the date of its signing and shall replace Decree 87-CP of the Government dated 23 November 1993 Promulgating the Regulations on Investment in the Form of Build-Operate-Transfer Contracts

Article 3
Ministers, heads of ministerial equivalent bodies and Government bodies and chairmen of people/s committees of provinces and cities under central authority shall be responsible for the implementation of this Decree.

GOVERNMENT
SOCIALIST REPUBLIC OF VIETNAM
Independence ? Freedom ? Happiness

REGULATIONS ON INVESTMENT ON THE BASIS OF BUILD-OPERATE ?TRANSFER CONTRACTS, BUILD-TRANSFER-OPERATE CONTRACTS AND BUILD-TRANSFER CONTRACTS APPLICABLE TO FOREIGN INVESTMENT IN VIETNAM

(Issued with Decree 62-1998-ND-CP of the Government dated 15 August 1998)

CHAPTER I

GENERAL PROVISIONS
 

Article 1
In these Regulations, the following terms shall have the meanings ascribed to them hereunder:

1. ?Build ?Operate-Transfer contract? (abbreviated in English as BOT ) means a written document entered into by an authorized State body of Vietnam and a foreign investor(s) for the construction and commercial operation of an infrastructure facility (including expansion, upgrading, an modernization thereof) for a certain duration in order to recover the invested capital and earn reasonable profits; upon the expiry of such duration, the foreign investor(s) shall, without compensation, transfer the facility to the State of Vietnam .

2. ?Build-Transfer-Operate Contract? (abbreviated in English as BTO) means a Written document entered into by an authorized State body of Vietnam and a foreign investor(s) for the construction of an infrastructure facility (including expansion, upgrading, and modernization thereof ) upon the completion of which the foreign investor shall transfer the facility to the State of Vietnam. The Government of Vietnam shall grant the investor(s) the right to commercially operate the facility for a certain duration in order to recover the invested capital and earn reasonable profits.

3. ?Build-Transfer contract? (abbreviated in English as BT) means a written document entered into by an authorized State body of Vietnam and a foreign investor(s) for the construction of an infrastructure facility (including expansion, upgrading, and modernization thereof) upon the completion of which the foreign investor(s) shall transfer the facility to the State of Vietnam. The Government of Vietnam shall facilitate for the foreign investor(s) in the implementation of other project(s) in order to recover the invested capital and earn reasonable profits.

4. ?BOT enterprise?, ?BOT or ?BT enterprise ? (hereinafter referred to as BOT enterprise) means a joint venture enterprise or an enterprise with 100% foreign owned capital established in accordance with the Law on foreign Investment in Vietnam for the purpose of implementing a BOT, BTO, or BT contract.

5. ?State body authorized to enter into a BOT, BTO or BT contract ?hereinafter referred to as authorised State body) means any ministry or government body or any people?s committee of a province or city under central authority, which is appointed by the Prime Minister to enter into and perform a BOT, BTO, or BT contract with a foreign investor(s).

6. ?Foreign investor(s) entering into a BOT, BTO or BT contract? mean any foreign organistation or individual performing a BOT, BTO, or BT contract (hereinafter referred to as foreing investor) and being fully responsible for threi undertakings under the BOT, BTO, or BT contract.

7. ?Sub-contractor? means any Vietnamese or foreign contractor who enters into a contract with a BOT enterprise in order to carry out each part or a BOT, BTO or BT project.

8. ?Sub-contract? means any contract enterred into by a BOT enterprise and a sub-contractor to implement each part of a BOT, BTO or BT project.

9. ?Other project(s)? means any project(s) attached to a BT contract which the foreign investor is permitted to perform in accordance with the Law on Foreign Investment in Vietnam for the purpose of recovering the capital invested in such BT project.

Article 2
1. The Government of Vietnam encourages foreign organizations and individuals to carry out investment on the basis of BOT, BTO and BT contracts in the fields of transportation, production and sales of electricity, water supply and drainage, waste treatment, and other areas as determined by the Prime Minister of the Government.

2. The Government of Vietnam protects the ownership of invested capital and other legitimate interests of foreign organizations and individuals carrying out investment on the basis of BOT, BTO, and BT contracts and at the same time creates favorable conditions and simple and rapid procedures for the implementation of the projects.

3. The Government shall grant preferential treatment to BOT enterprises and sub-contractors in accordance with the provisions of chapter II of these Regulations.

Article 3
1. For the purpose of carrying out a BOT, BTO or BT project, foreign investor(s) establishes a BOT enterprise.

2. A BOT enterprise shall be establishes and shall commence operation from the date of issuance of the investment license, and shall be responsible for complying with the provisions of the investment license and the undertakings made by the investor(s) in the BOT, BTO or BT contract.

CHAPTER II

PREFERENTIAL TREATMENTS
AND INVESTMENT GUARANTEES

Article 4
BOT enterprises shall be subject to the following taxes:
 

The profits tax rate of 10% (ten per cent) of the profits earned shall apply for the whole duration of implementation of a project;

Exemption from profits tax shall be granted for four years commencing from the time when the operations start to earn profits and a fifty (50) per cent reduction shall be granted for the four subsequent years. In cases of investment in areas where investment is encouraged, profit tax shall be exempted for eight years commencing from the time when the operations start to earn profits.

The duration for exemption from or reduction of taxes shall be continuously counted from the first year of profitable operations.

Withholding tax rate shall be five (5) per cent of the profits remitted abroad;

In addition to the above-mentioned taxes, BOT enterprise shall pay other taxes in accordance with the laws of Vietnam.

2.Foreign sub-contractors participating in BOT, BTO and BT projects shall pay taxes and shall be entitled to incentives in relation to exemption from and reduction of taxes in accordance with current provision applicable to foreign contractors.

Vietnamese sub-contractors participating in BOT, BTO and BT project shall fulfill tax obligations n accordance with the current regulations applicable to Vietnamese enterprise.

Article 5

1. BOT enterprises and sub-contractors shall be exempted from import duties for the purpose of carrying out BOT, BTO and BT project in respect of the following:

Equipment and machinery imported for the purpose of forming fixed assets (including equipment, machinery and spare parts used for survey, design and construction of works);

Specialized means of transportation included in a technological process imported for the purpose of forming fixed assets and means of transportation used to transport workers (vehicles with 24 or more seats, and watercraft);

Components, small parts, accessories, spare parts, attachment, moulds, kits accompanying the above-mentioned equipment, machinery, specialized and other means of transportation referred to in this article including those used for replacement, warranty or maintenance during the operation the projects;

Fuel, raw materials and supplies imported for the implementation of BOT, BTO and BT project, including fuel, raw materials and supplies required for production or operation of project.

2. The exemption from import duties in respect of above-mentioned equipment, machinery, means of transportation, raw material and supplies referred to in clause 1 of this article shall also be applicable to the expansion of the scale of a project or change or renovation of technology.

3. The imported goods referred to in clauses 1 and 2 of this article shall not be permitted to be disposed or sold in Vietnam. Where these goods are disposed or sold in the Vietnamese market, an approval of the Ministry of trade must be obtained and the applicable import duties, turnover tax or special sales tax shall be paid in accordance with the laws in Vietnam.

4. In cases if implementation of other project attached to a BT contract, import and payment of import duties shall be carries out in accordance with article 63 of Decree 12-CP of the Government dates 18 February 1997 Making Detailed Provisions on the Implementation of the Laws on Foreign Investment in Vietnam and article 10 or Decree 10-1998-ND-CP dated 23 January 1998 of the Government on a Number of Measures for Encouragement and Guarantee of Foreign Direct Investment in Vietnam.

5. Objects of industrial property currently under property currently under protection, technical know-how, technical processes and technical services required for implementation of projects shall exempted from payment of taxes relating to technology transfer.

Article 6

1. Any assignment of capital within a BOT enterprise shall be carried out in accordance with article 64 of Decree 12-CP of the Government dated 18 February 1997 Making Detailed Provisions on the Implementation of the Law on Foreign Investment in Vietnam.

2. The assignment of capital shall only take effect upon approval of the capital assignment contract by the authorized State body and the investment license issuing body.

Article 7

1. BOT enterprise and sub-contractors shall be entitled to open foreign currency account(s), Vietnamese currency account(s) and loan account(s) in accordance with article 71 of Decree 12-CP of the Government dated 18 February 1997 Making Detailed Provisions on the Implementation of the Law on Foreign Investment in Vietnam and relevant legal instruments in relation to foreign exchange control.

2. The State Bank of Vietnam assures the conversion of Vietnamese dong earned by BOT enterprise through the implementation of BOT, BTO and other project into foreign currency in order to meet the requirements for business operations, repayment of principals and payment of interest on loans, and remittance of profits and capital abroad.

BOT enterprise are to use lawful income in Vietnamese Dong derived from the implementation of BOT, BTO and BT project to purchase goods for export or for processing for direct export in accordance with the regulations of the Ministry of Trade in other to generate foreign currency sources to meet the requirements for business operations of BOT enterprise.

Article 8

1. During the implementation of a project, a BOT enterprise shall be permitted to pledge or mortgage the following assets in accordance with the laws in Vietnam.

Equipment, plant, architectural works and real estate properties which have been purchases or constructor with the invested capital of the BOT enterprise;

(a) Other assets owned by the BOT enterprise;

(b) Value of the land use right in accordance with the laws of Vietnam;

(c) Property rights of the BOT enterprise;

2. Any pledge or mortgage by a BOT enterprise must be approved by the authorized State body, shall not be prejudicial to the implementation of the objectives, time schedule and operation of the project as stipulated in the contract and shall be in accordance with the laws of Vietnam.

3. Deeds of mortgage and pledge must be made in accordance with the laws of Vietnam and copies thereof must be sent to the authorized State body.

Article 9

1. The government shall assure that BOT enterprise are permitted to use land, roads and other public support facilities for the implementation BOT, BTO and BT project.

2. BOT enterprises shall be exempted from payment of land rent for the duration of implementation of projects.

3. People?s committees of provinces and cities under central authority where investment projects are located shall be responsible for making compensation, carrying out site clearance and completing the procedures for allocation of land to BOT enterprises in accordance with the laws and within the undertaken time limit.

All cost of compensation and site clearance shall be paid by investor(s) and include in total invested capital, unless otherwise stipulated in the BOT, BTO and BT contract.

Article 10

1. Vietnamese enterprises shall in BOT, BTO and BT project subject to approval of the authorized State body.

2. Where necessary, the Government shall, depending on the nature of each project, delegate the authorized State body to act on behalf of the Government as a guarantor for the fulfillment of undertakings to financial obligations by Vietnamese enterprises participating in the implementation of the project as defined in a BOT, BTO and BT contract and for the obligations of Vietnamese enterprise with respect to sale of raw materials and purchase of main products or services for the purpose of carrying out a BTO and BT contract.

Article 11

During the implementation of projects, all organizations and individuals shall comply with applicable regulations on foreign exchange control, export and import, technology transfer, environment, labor relations, accounting, statistics, entry and exit and other relevant provisions of the laws of Vietnam.