What Should Be Noted in the Report on Foreign Investment Activities in Vietnam?

Foreign investment in Vietnam has become increasingly important, contributing significantly to the country’s economic growth. With the growing presence of foreign investors, understanding the legal framework and key requirements for reporting foreign investment activities is crucial for businesses and regulatory authorities alike. The report on foreign investment activities in Vietnam plays a vital role in ensuring transparency, compliance with regulations, and facilitating the assessment of the overall impact of foreign investments. Below are the essential aspects that should be noted when preparing such a report.

1. Legal Basis for Reporting Foreign Investment Activities

The reporting of foreign investment activities in Vietnam is primarily governed by the Law on Investment (2020), the Decree No. 31/2021/ND-CP guiding the implementation of the Law on Investment, and various related legal documents. These regulations require foreign investors, as well as local entities involved in foreign investments, to submit periodic reports to competent authorities. The reports are typically submitted to the Ministry of Planning and Investment (MPI) or provincial-level investment authorities, depending on the scale of the investment.

2. Types of Reports on Foreign Investment Activities

There are several types of reports that foreign investors need to prepare, including:

Annual Report: This is the most common form of report submitted by foreign-invested enterprises (FIEs). The annual report typically includes an overview of the company’s activities, financial performance, investments, and other relevant data.
Investment Report: For businesses seeking to make additional investments or changes to their current investment, this report outlines the nature and extent of the proposed investment.
Tax and Financial Reports: Foreign investors are also required to submit periodic tax filings, including corporate income tax returns, VAT reports, and other financial reports that align with Vietnamese law.

3. Essential Information in the Report on Foreign Investment Activities

When preparing the report on foreign investment activities in Vietnam, several key elements must be included to ensure compliance with legal requirements:

a. Company Information on Foreign Investment Activities

The report should provide detailed information about the foreign-invested enterprise (FIE), such as:

Name, address, and contact details of the company.
Investment license number, date of issuance, and issuing authority.
Business registration certificate and other relevant licenses.
Ownership structure and percentage of foreign capital.
Key personnel involved in the management of the enterprise.

b. Investment Capital and Fund Sources on Foreign Investment Activities

A clear breakdown of the total capital investment, including the sources of funds, should be provided. This should include:

The initial investment capital and subsequent changes to the capital structure.
Contributions from foreign investors (cash, assets, technology, etc.).
Source of capital, whether it is directly from the foreign investor or through a third-party financial institution.
Details of the capital used for various operational activities, such as purchasing equipment, infrastructure development, or market expansion.

c. Investment Activities and Business Operations on Foreign Investment Activities

The report must cover the foreign investor’s activities in Vietnam, including:

A summary of the business operations and activities undertaken during the reporting period.
The sectors and industries in which the enterprise operates, such as manufacturing, services, or real estate.
Detailed analysis of production, export-import activities, and sales performance, if applicable.
Any changes or significant developments in the business activities, such as the introduction of new products or markets.

d. Employment and Workforce

A section on the employment impact of the foreign investment should be included, providing information about:

The number of employees hired, both Vietnamese and foreign.
Training and skill development programs provided to the workforce.
Compliance with labor laws, including minimum wage requirements, social insurance contributions, and occupational health and safety standards.
Any changes in employment policies or workforce structure during the reporting period.

e. Environmental and Social Impact

Foreign investments in Vietnam are subject to environmental regulations, and companies are required to report on their compliance with these standards. The report should include:

The company’s environmental protection measures, such as waste management, emissions control, and resource conservation.
Any social programs or corporate social responsibility (CSR) initiatives, including donations, community support, or infrastructure development.

4. Compliance with Vietnamese Laws and Regulations on Foreign Investment Activities

Foreign investors must ensure that their activities comply with Vietnam’s legal requirements, including the Law on Foreign Exchange (2015), taxation laws, and industry-specific regulations. The report should outline any legal challenges or issues faced during the reporting period and steps taken to ensure compliance with Vietnamese laws.

Key compliance areas include:

Taxation Compliance: Submission of tax reports, including income tax, VAT, and other tax obligations.
Foreign Exchange Regulations: Reporting on the movement of foreign currency and the transfer of profits or dividends abroad.
Labor Law Compliance: Adherence to Vietnam’s labor laws, including employment contracts, work permits, and other labor-related matters.

5. Key Financial Information

Financial performance is a central component of the report, and foreign investors must provide comprehensive financial statements for the reporting period. This should include:

Balance Sheet: A snapshot of the company’s financial position, including assets, liabilities, and equity.
Income Statement: A summary of revenue, expenses, and profits.
Cash Flow Statement: A breakdown of cash inflows and outflows, detailing operating, investing, and financing activities.
Financial Ratios: Key performance indicators, such as return on investment (ROI), profitability ratios, and liquidity ratios.

6. Audit and Verification

In some cases, foreign investors may be required to submit an audit report conducted by an independent auditing firm. The audit serves to verify the accuracy and completeness of the information provided in the foreign investment report. Audited financial statements ensure that the company is adhering to accounting standards and providing reliable data to the authorities.

7. Timelines and Submission Procedures

Foreign investors must be aware of the deadlines for submitting their reports. The annual report is typically due within 90 days after the end of the fiscal year. However, specific timelines may vary depending on the nature of the investment or business activities.

Reports must be submitted to the appropriate government authorities, such as the Ministry of Planning and Investment or the provincial-level Department of Planning and Investment. In some cases, online submission via the government’s official portal may be possible, streamlining the process.

8. Penalties for Non-Compliance

Failure to submit reports on time or submitting inaccurate or incomplete information may result in penalties, including fines, delays in obtaining necessary licenses, or even revocation of investment licenses. Therefore, foreign investors should ensure they meet all reporting obligations in a timely and accurate manner to avoid any legal or financial repercussions.

Reporting foreign investment activities in Vietnam is a complex but crucial process for both foreign investors and regulatory authorities. By ensuring compliance with the legal framework, providing accurate and comprehensive data, and adhering to deadlines, foreign investors can contribute to the overall development of Vietnam’s economy while maintaining a positive reputation. The report serves not only as a legal obligation but also as a tool for fostering transparency and trust in foreign investment activities within the country.

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