Deposit for execution of investment projects

Legal basis

• Law on Investment 2020
• Decree No.31/2021/ND-CP dated March 26, 2021, on the elaboration of some articles of the Law on Investment
• Circular No.03/2021/TT-BKHDT dated April 09, 2021, on regulations for forms of documents and reports related to investment activities in Vietnam, investment from Vietnam to abroad, and investment promotion promulgated by the Ministry of Planning and Investment

The investor must pay a deposit or have a guarantee of a credit institution or foreign branch bank established under Vietnam’s law (hereinafter referred to as “the credit institution”) for execution of the investment project which uses land allocated or leased out by the State or is permitted by the State to repurpose land, except for the following cases:

- The investor is the successful bidder for the right to use a land area that is allocated by the State for land levy or leased out by the State for a lump-sum rent;

- The investor wins bidding for execution of an investment project using land;

- The State allocates or leases out land to the investor on the basis of receipt of an investment project for which a deposit has already been paid or for which the capital has been fully contributed or raised following the schedule specified in the written approval for investment guidelines or the investment registration certificate;

- The State allocates or leases out land to the investor for execution of an investment project on the basis of receipt of the land use right and assets on land from another land user.

Note: The contract of guarantee for deposit payment obligation between the credit institution and the investor shall be signed and executed pursuant to regulations of law on civil matters, credit, bank guarantee and relevant regulations of law.

Form of deposit: a written agreement between the investment registration authority and the investor

Time and duration of deposit

- The investor shall pay the deposit or submit the credit institution’s guarantee certificate after being issued with the decision on approval for both investment guidelines and investor or decision on investor approval or decision on approval for bidding result and prior to implementing the compensation, assistance and relocation plan approved by a competent authority (if the investor does not advance the payment for compensation, assistance or relocation) or by the time of issuing the decision on land allocation or land lease or land repurposing (if the investor does not advance compensation, assistance or relocation payments or the investor is selected to execute the project through a land use right auction and is leased out land by the State and pays land rents on an annual basis);

- The duration of guaranteeing project execution begins from the time of fulfilling the obligation as specified in Point a of this Clause to the time when the deposit is refunded to the investor or paid to the state budget or to the time of invalidating the guarantee.

The guarantee rate is expressed as a percentage of the investment capital of the investment project on the progressive principle. To be specific:

- For a capital portion of up to VND 300 billion, the guarantee rate is 3%;

- For a capital portion of over VND 300 billion to VND 1,000 billion, the guarantee rate is 2%;

- For a capital portion of over VND 1,000 billion, the guarantee rate is 1%.

Note: The project’s investment capital determined as the basis for calculation of the guarantee rate does not include land levy or land rent payable to the State and costs of construction of the investment project’s works (if any) which the investor is obliged to transfer to the State for management after completion.  If the costs of construction of works to be transferred to the State have yet to be accurately determined at the time of signing the project execution guarantee agreement, the investment registration authority shall determine the guarantee amount according to the cost estimate specified in the project proposal prepared by the investor.

Bank for the deposit execution: The guarantee amount shall be paid to the investment registration authority's account opened at the commercial bank established under Vietnam’s law and selected by the investor; the investor shall pay all costs incurred in connection with the opening and maintenance of the account for project execution guarantee and conduct of transactions relating to the account. In case of execution of multiple projects, it is required to sign a project execution guarantee agreement with the same investment registration authority. The investor may negotiate with the investment registration authority about use of the same account for receiving guarantee amounts with respect to the projects executed in the areas under its management.

The investor is entitled to a reduction of the guarantee amount in the following cases:

- 25% discount for the guarantee amount of investment projects in business lines eligible for investment incentives specified in the Appendix II of Decree No.31/2021/ND-CP; investment projects in disadvantaged areas specified in the Appendix III of Decree No.31/2021/ND-CP.

- 50% discount for the guarantee amount of investment projects in business lines eligible for special investment incentives specified in the Appendix II of Decree No.31/2021/ND-CP; investment projects in extremely disadvantaged areas specified in the Appendix III of Decree No.31/2021/ND-CP; investment projects in business lines eligible for investment incentives executed in disadvantaged areas.

The refund and adjustment of a guarantee amount, and termination of the guarantee obligation shall be carried out as follows:

- 50% of the deposit shall be refunded or 50% of the guarantee rate at the time when the investor is issued by a competent authority with the decision on land allocation, land lease or land repurposing and issued by a competent authority with other licenses or approvals to commence the construction (if any);

- The remaining deposit and interest (if any) arising from the deposit shall be refunded or the guarantee for deposit payment obligation shall be invalidated at the time when the investor accepts the construction works;

- Where the project's investment capital is decreased, the investor shall receive a refund of an amount of deposit corresponding to the decreased investment capital according to the adjusted decision on approval for adjustment of the investment guidelines or the adjusted investment registration certificate;

- Where the project's investment capital is increased, the investor shall pay an additional amount of deposit or credit institution’s deposit payment guarantee corresponding to the increased investment capital according to the adjusted decision on approval for adjustment of the investment guidelines or the adjusted investment registration certificate. If 50% of the paid deposit has been refunded prior to the adjustment, the investor shall only investor shall only pay a half of the required additional deposit;

Note:

• Where the execution of an investment project cannot be continued due to a force majeure event or on account of a competent authority while following administrative procedures or due to the project adjustment made at the request of a competent authority in case of change of the planning, the investor may claim the refund of the guarantee amount or terminate the guarantee obligation.
• Regarding a domestic investor that has their investment guidelines approved and is not required to obtain the investment registration certificate, when the project not subject to adjustment of its investment guidelines is adjusted as prescribed in this Decree and the adjustments change any content of the project execution guarantee agreement, the investor shall send a written notification to the investment registration authority prior to the adjustment. The investment registration authority and investor shall adjust the project execution guarantee agreement in conformity with the adjustments to the investment project.

The above is the deposit for execution of investment projects in HNLAW & PARTNERS Law Firm. If the business still has problems, unknowns, or needs other legal assistance, please contact the online legal consulting department through the email: tuvan.hnlaw@gmail.com for answers. We hope to receive the cooperation of customers!

For more details, please contact Hnlaw & Partners Law Firm

Address: DBS Tower, No.N028, lot 31 Hà Trì residential and commercial service area, Hà Trì ward, Hà Đông district, Ha Noi.

Hotline: 0912.918.296

Email: tuvan.hnlaw@gmail.com