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> decree 62-1988 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
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
GOVERNMENT
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 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 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.
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
Article 4 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. CHAPTER III METHODS OF IMPLEMENTATION OF
Article 12 1. Based on the planning and orientation of social and economic development in each period, the Ministry of Planning and Investment shall be responsible for co-coordinating with ministries, sectors and people/s committees of provinces and cities under central authority to submit to the Prime Minister for approval the list of investment projects on the basis of BOT, BTO, and BT contracts.
2. The Prime Minister may approve BOT, BTO, and BT contracts not included in the published list after consulting relevant ministries, sectors and people/s committees of provinces and cities under central authority where those project are proposed to be implemented 3. Investment projects on the basis of a BOT,BTO, or BT contract which are submitted to the Prime Minister as stipulated in clauses 1 and 2 of this article shall specify the necessity, location, designed capacity, size of proposed invested capital, and recommendations on the authorized State bodies and methods of selection of foreign investor(s) to enter into a BOT, BTO or BT contract.
Article 13 1. Based on the approved list of BOT, BTO, or BT projects and methods of selection of foreign investor(s) to enter into a BOT, BTO or BT contract, the authorized State body shall direct the preparation of a pre-feasibility study which shall be used as a basis for preparation of files for selection of foreign investors. The authorized State body shall consider and approve the pre-feasibility study.
The costs of preparation of the pre-feasibility study shall be covered by the approved budget of the authorized State body as stipulated. If the project is implemented, the costs of preparation of the pre-feasibility study shall be charged to the invested capital of the project and the BOT enterprise shall be responsible for refunding same to the State Budget.
2. Foreign investors shall prepare and submit pre-feasibility studies of the BOT, BTO, or BT projects referred to in clause 2 of article 12 to the authorized State body for consideration and approval. Where a pre-feasibility study is adopted by the authorized State body, foreign investor(s) shall be permitted to prepare and submit an application file for an investment license.
Article 14 1. Procedures and methods of selection of foreign investor(s) to enter into BOT, BTO or BT contracts shall be carried out in accordance with the laws of Vietnam in relation to tendering. 2. The results of the selection of foreign investor(s) to enter into a BOT, BTO, or BT contract must be approved by the Prime Minister of the Government.
Article 15 1. Upon approval of the results of the selection of foreign investor(s) to enter into a BOT, BTO, or BT contract by the Prime Minister, the selected foreign investor(s) shall prepare a feasibility study which shall be submitted to the authorized State body. 2. The authorized State body shall co-ordinate with relevant ministries, sectors and people/s committees of provinces and cities under central authority in the consideration and approval of feasibility studies. In the case where there is any difference in opinions or issue beyond its authority, the authorized State body shall report to the Prime Minister of the Government for decision.
Article 16 1. The authorized State body shall be responsible for negotiating and entering into a BOT, BTO or BT contract with the selected foreign investor(s). With respect to important projects decided by the Government, the authorised State body shall be responsible for submitting principles serving as the basis for negotiating and entering into a BOT, BTO, or BT contract to the Government for approval. 2. A draft BOT, BTO, or BT contract, after being negotiated, agreed and initialed by parties, together with other documents relating to the application for an investment license shall be submitted to the Ministry of Planning and Investment for evaluation and submission to the Prime Minister for consideration and decision. A BOT, BTO, or BT contract shall only be officially signed upon the approval of the Prime Minister
Article 17 1. An application file for an investment license shall comprise: - Application for investment; - Initialed BOT, BTO, or BT contract; - Joint venture contract (in the case where the BOT enterprise is a joint venture enterprise); - Charter of the BOT enterprise; - Initialed contract or heads of agreement on purchase of materials or sale of products (if any); - Documents evidencing the legal status and financial standing of investors.
2. In addition to the above with respect to BT projects, documents regarding other projects as required by applicable regulations shall also be submitted 3. A BOT, BTO, or BT contract and contracts for purchase of materials or sale of product (if any) shall be sent to the Ministry of Planning and Investment after being officially signed.
Article 18 1. The Ministry of Planning and Investment shall issue an investment license to a BOT, BTO, or BT project within a period of fifteen(15) days from the date on which the Prime Minister approves the BOT, BTO, or BT project 2. The investment license shall contain the following main issues: Main terms and conditions of the contract. Amount of invested capital, objectives and duration of operation of the project; Requirements of design technical conditions and conditions for normal operation of the project upon being transferred to the State of Vietnam; - Financial and tax obligation; - Right to the use land and support facilities; - Conditions regarding environmental protection; - Principles for determining and adjusting prices and other charges; - Provisions on the conversion of Vietnam currency into foreign currencies; - Importation or exportation of equipment, machinery and goods; - Rights and conditions for operating the projects with respect to BOT, BTO projects, for operating other projects; - Main principles for assets upon transfer; Undertaking of the Government and relevant State bodies;
Article 19
The authorized State body shall be responsible for coordinating with the Ministry of Construction and relevant ministries, sector and people?s committees of provinces and cities under central authority to carry out evaluation of technical design of projects prior to implementation. Upon approval of the technical design of project, the BOT enterprise shall be permitted to commence construction of the project. 2. Investor(s) and BOT enterprise shall BOT enterprise shall entitled to select sub-contractors or open a tender in order to implement BOT, BTO and BT project and shall BOT enterprise shall responsible for submitting a report on the selection of tendered or the tendering results to authorized State body. 3. After signing subcontracts with BOT enterprise, sub-contractors must register their operations with the State body.
Article 20 1. The principles for determining prices, rates, fees and other charges of BOT, BTO projects must BOT enterprise shall provided for in BOT and BTO contracts. 2. Increases in prices, fees and other charges must BOT enterprise shall agreed and provided for in BOT or BTO contracts. Any changes in prices or fees or other charges shall BOT enterprise shall subject to a 30 day notice to other authorized State body prior to implementation.
Article 21 1. The duration of a BOT, BTO or BT contracts, the time limit for transfer of a BOT, BTO and BT project, and the duration of operation of a BTO project shall BOT enterprise shall agreed upon by the parties and specified in the investment License in Vietnamese, 2. upon the expiry of the operation of a BOT project, the foreign investor(s) shall transfer the project to the State of Vietnam without compensation. With respect to a BTO or BT project, the foreign investor(s) shall transfers the project to the State of Vietnam in the BOT or BT contract upon completion of construction. 3. The competent State body shall take over BOT, BTO, or BT projects transferred in accordance with articles 22 nd 23 of these Regulations.
Article 22 Upon transfer of a project tj State of Vietnam, the authorized State body and BOT enterprise must check against the terms and conditions stipulated in stipulated in the investment license and the BOT, BTO or BT contract. The file for hand over of the project shall contain the following main issues: 1. The condition of the project upon transfer, 2. The list of assets transferred, including documents relating to surveys, designs, construction, installation, operation, maintenance and management of the project. 3. The written report on evaluation of the value anf quality of the project transferred; 4. The responsibilities of the parties for the continued operation of the project transferred; 5. The duration, conditions for maintenance and guarantee of the project after being transferred. Other necessary contracts and conditions for the maintenance ad operation of the project after being transferred.
Article 23 Before a BOT, BTO or BT project is transferred, the BOT enterprise must carry out any maintenance, repair and necessary technical activities to transfer the project as agreed in BOT, BTO or BT contract. The authorized State body shall only take over the project in accordance with the terms and conditions stipulated in BOT, BTO or BT contract and investment license.
CHAPTER V RIGHTS AND OBLIGATIONS OF THE AUTHORIZED STATE BODY
Article 26 The authorized State body shall have the following powers: - To determine economic and technical targets of projects and organize the consideration and approval of reversibility studies and feasibility studies; - To negotiate, agree and decide the contents of BOT, BTO or BT contracts. - To co-ordinate with the Ministry of Construction, other ministries, sectors and people?s committees of provinces and cities under central authority in the consideration and evaluation of technical designs of projects; - To organize the supervision of construction and participate in the acceptance of quality of construction works during the course of construction; - To approve contracts for purchase of material and sale of main products and services signed by BOT enterprise and Vietnamese specialized economic organization in case where these contracts require a guarantee as referred to in clause 2 of article 10 of these Regulations; - To supervise the parties in the performance of their obligations undertaken in BOT, BTO or BT contract and sub-contractors; - To take over the project transferred as stipulated.
Article 27 The authorized State body shall have the following responsibilities. - To provide support to foreign investors in the preparation and implementation of BOT, BTO, and BT projects; - To provide support to BOT enterprises in the completion of procedures for preparation for investment, construction and operation (if any) in accordance with BOT, BTO and BT contracts and sub-contracts. - To assume the responsibility for or to co-ordinate with other State bodies in the consideration and resolution of legitimate requirements of BOT enterprises during the implementation of BOT, BTO and BT projects. - To perform the obligations undertaken in BOT, BTO and BT contracts. - To perform other duties related to the management and administration of activities under BOT, BTO and BT projects in accordance with law.
Article 28 All costs relating to the exercise of powers and performance of responsibilities of the authorized State body referred to in articles 26 and 27 of these Regulations shall BOT enterprise shall charged to the State budget on the basis of proposals of the authorized State Body and the Ministry of Finance.
CHAPTER VI IMPLEMENTING PROVISIONS Article 29 Ministers, head of ministerial equivalent bodies, heads of governmental bodies and chairmen of people/ s committees of provinces and cities under central authority shall BOT enterprise shall responsible for the implementation of these Regulations.
Source: Department of Ministry of Investment and Planning, HCM city, Vietnam |
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