Implementation of Investment Projects under the Law on Investment 2020: Legal Provisions and Distinctions between Domestic and Foreign Investors

The implementation of investment projects is a core mechanism for conducting business activities in Vietnam under the Law on Investment 2020. This legal framework establishes clear procedures and requirements for investors to commit capital, define project objectives, and ensure compliance with regulatory conditions. While both domestic and foreign investors may implement investment projects, the applicable legal procedures differ significantly, particularly regarding market access conditions, licensing requirements, and regulatory oversight. Understanding these distinctions is essential for investors seeking to structure projects efficiently and mitigate legal risks in Vietnam’s evolving investment environment.

1. General Legal Framework for Investment Forms

Main table of contents

The Law on Investment 2020 (Article 21) establishes four basic forms of investment in Vietnam:
(i) Establishment of an economic organization;
(ii) Capital contribution, share purchase, or acquisition of capital contribution;
(iii) Implementation of investment projects; and
(iv) Investment under business cooperation contracts (BCC).

Among them, Clause 3, Article 21 provides: “Implementation of investment projects.”

This form is understood as the investor directly carrying out a specific business project in Vietnam based on the approved investment registration dossier. Unlike other forms, “implementation of investment projects” represents a concrete commitment regarding capital, location, objectives, and duration, closely tied to the investor’s responsibility to ensure the project’s progress.

2. Definition and Legal Characteristics

2.1. Definition

According to Clause 2, Article 3 of the Law on Investment 2020, an investment project means a set of proposals to commit medium- or long-term capital to conduct business activities in a defined geographical area within a certain period.

Thus, “implementation of investment projects” refers to the process in which an investor registers and executes a specific project, either through an established economic organization or directly as an individual/entity.

2.2. Characteristics

Project-based nature: Unlike share purchases or capital contributions, this form requires a project dossier, legally binding commitments on scope and timeline.
State oversight: Depending on the scale, sector, or land use, investors may need approval of investment policy or an Investment Registration Certificate (IRC).
Linkage to land, construction, environment: Since most projects are tied to physical infrastructure and specific locations.
Potential incentives: Projects may enjoy investment incentives if they meet the conditions under Article 15 of the Law on Investment.

3. Scope of Application: Domestic vs. Foreign Investors

It is important to note that this form of investment applies to both domestic and foreign investors, though the applicable procedures differ.

3.1. Domestic Investors

IRC: Domestic investors are not required to obtain an IRC, unless the project falls under the category requiring investment policy approval.
Investment policy decision: Required for projects of large scale, projects with significant environmental impact, use of forest/land for wet rice cultivation, or those requiring resettlement.
Procedure: Mainly enterprise registration and specialized permits (land, construction, environment).

3.2. Foreign Investors

IRC: Mandatory for all projects.
Market access conditions: Must comply with Article 9 of the Law on Investment 2020 and the negative list on restricted business lines (Appendix I).
Investment policy decision: Required for projects similar to those of domestic investors but subject to stricter review.
Dual procedures: Typically includes both (i) obtaining an IRC for the project and (ii) registering a company to implement the project.

4. Legal Procedures for Implementation of Investment Projects

The general process can be summarized as follows:

Project proposal: Investor prepares a dossier specifying objectives, scope, capital, location, and progress.
Investment policy approval: Required for projects under Articles 30–32 of the Law on Investment.
Investment Registration Certificate (IRC):
- Mandatory for foreign investors.
- Optional for domestic investors unless policy approval is required.
Enterprise registration: Establishment of a legal entity to execute the project.
Specialized permits: Land allocation/lease, environmental impact assessment, construction permits, fire prevention approvals.
Deposit for project implementation: Required for certain land-using projects.
Project execution and reporting: Periodic reports to investment authorities on project implementation and status.

5. Key Differences between Domestic and Foreign Investors

Aspect	Domestic Investors	Foreign Investors
IRC	Not required (unless policy approval needed)	Always required
Market access	No restrictions (except prohibited sectors)	Subject to market access conditions
Procedures	Simpler, mainly enterprise registration	More complex: policy approval + IRC + enterprise registration
Regulatory control	Less strict	Stricter, with regular reporting
Timeline	Faster processing	Longer due to additional review steps

6. Legal Notes for Investors

For Domestic Investors

Verify whether the project requires investment policy approval.
Strictly comply with project timelines to avoid project revocation.
Prepare financial resources to meet deposit requirements.

For Foreign Investors

Carefully review whether the business line is restricted under market access conditions.
Anticipate the “dual procedure” of obtaining both an IRC and enterprise registration.
Ensure financial and technical capacity documentation is sufficient, as authorities conduct strict due diligence.

7. Practical Significance

The form of “implementation of investment projects” is the core method of attracting investment in Vietnam, accounting for a significant proportion of registered FDI.

Understanding the differences between domestic and foreign investor requirements enables businesses to plan effectively and mitigate legal risks. For the State, this form provides a legal framework to manage project progress, scale, and ensure socio-economic benefits.

8. Legal Services of La Défense

As a specialized legal advisory firm, La Défense offers comprehensive services for investment projects in Vietnam, including:

Consulting on the appropriate form of investment for domestic and foreign investors.
Preparing and filing dossiers for investment policy approval and IRC.
Assisting with enterprise establishment and licensing procedures.
Representing investors in dealings with competent authorities.
Providing ongoing legal support during project implementation, adjustment, and compliance.

Clause 3, Article 21 of the Law on Investment 2020 establishes “implementation of investment projects” as a fundamental form of investment, applicable to both domestic and foreign investors. While the framework is unified, foreign investors are subject to stricter controls, mandatory IRC procedures, and market access conditions.

For investors, compliance with these regulations is vital to ensure lawful and successful project execution in Vietnam. For businesses seeking long-term stability, engaging professional legal advisors is indispensable to navigate this complex regulatory landscape.

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