Investment reports for foreign-owned companies following the Circular 02/2022/TT-BKHDT, effective from April 2022.

Are you compliant with required reports?

With significant numbers of new foreign-invested enterprises established and expanded each year (1,738 foreign-invested companies were established in 2021, according to the Ministry of Planning and Investment), the Vietnam government utlises methods to manage to ensure that investment projects are operating following the investment scheme as planned. One of the management tools is through investment reports submitted by foreign invested entities.

However, the practical compliance by enterprises regarding these obligation is still limited (especially for enterprises that do not have specific staff in charge of this), and as these reports are not generally under the responsibility of a specific department (e.g., Accounting, HR and Admin). Hence, we often see these obligations being omitted. These oversights can result in penalties and blemish in the historical compliance records of companies with authorities, and can also impact the credit of foreign investors when undertaking investment in Vietnam.

How many types of investment reports a foreign-owned company is required to submit?

Upon prevailing regulations, foreign invested projects (including organisations and enterprises) operating under an Investment Registration Certificate, are required to lodge the following types of investment reports:

1. Report on Investment Implementation, following the Investment Law in 2015 and its guiding documents: the report is now required to be submitted on a quarterly and yearly basis.

2. Report on Investment Supervision and Assessment, following Decree 29/2021/ND-CP (Decree 29) dated and effective 26 March 2021, and Circular 02/2022/TT-BKHDT (Circular 02) dated 14 February 2022, effective on 1 April 2022: the report is required to be submitted on a semi-annual and annual basis.

In the context of this article we focus on the second report, but also touch on the first report further below.

Report on Investment Supervision and Assessment (Periodic Report)

Report on Investment Supervision and Assessment is an existing concept stipulated in the Law on Investment 2020. However, in this law, only competent authorities are required to report to the Government regarding (i) investment status, and (ii) assessment on implementation of the investment report. From 1 April 2022, following Decree 29 and Circular 02, foreign-invested enterprises are required to complete periodic Reports on Investment Supervision and Assessment, and one-off reports upon specific scenarios. Details of reporting requirements are presented in the below sections.

Who are subject to the report?

According to Circular 02, the subjects of the report include:

• Foreign-invested organisations and projects implemented/invested by foreign-invested organisations or organisations specified in Clause 1, Article 23 of the Law on Investment*, that are granted an Investment Registration Certificate. (*Organisations according to Clause 1, Article 23 of the Law on Investment are organisations having foreign investor(s) holding more than 50% of the charter capital, or having the majority of general partners being foreign individuals (for economic organizations being in form of partnership)

• Projects invested in the form of a business cooperation contract (BCC) with the participation of a foreign investor or organisation specified in Clause 1, Article 23 of the Law on Investment.

These subjects (foreign-invested enterprises/projects, and BCC) are from now abbreviated as FIE.

Reporting frequency and deadline?

FIEs are required to submit the following periodic Report on Investment Supervision and Assessment:

• Semi-annual (6-month) report: submitted prior to 10 July
• Annual report: submitted prior to 10 February of the following year

Forms and contents of the report?

Forms of the report have not been indicated clearly in the prevailing regulations. In practice, some authorities in provinces generate forms applicable to that certain province whilst they still remain contents as stipulated in Decree 29 and Circular 02.

In Ho Chi Minh City, the Department of Planning and Investment agrees to use forms issued previously in Circular 22/2015/TT-BKHDT

• Form No.12 for foreign investment projects under the phase of investment implementation
• Form No.14 for foreign investment projects under the phase of exploitation and operation

Areas of the report include (according to Article 71 of Decree 29):

1. The project implementation schedule and the project target implementation schedule.
2. Progress of contribution of investment capital, charter capital, and legal capital (for investment and business lines requiring legal capital).
3. Status of exploitation and operation: results of business investment activities, information on labour, payments to the state budget, investment in research and development, the financial situation of the enterprise and industry-specific indicators.
4. The fulfilment of requirements on environmental protection, land use and use of mineral resources according to regulations.
5. Implementation of the provisions of the decision or approval of the investment policy and the Certificate of investment registration (if any).
6. Satisfaction of business investment conditions for projects in conditional investment and business lines.
7. Implementation of investment incentives (if any).

How to submit the report?

According to Decree 29, the report can be submitted either,

• directly to the investment registration agency in the locality where the investment project is implemented. (It can be the Department of Planning and Investment, Management Board of Industrial Park, High-Tech Park, and Export Processing Zone, depending on specific activities of the FIE), or
• via online on ‘Investment Supervision and Assessment Information System’ by the account which organisations/individuals registered on https://taikhoan.mpi.gov.vn.

Penalties for violation of reporting?

Failure to Report on Investment Supervision and Assessment will result in administrative penalties, and affect the implementation of the investment plan and the credit of investors when performing investment in Vietnam.

Under Article 15 of Decree 122/2021/ND-CP, a penalty from VND 20,000,000 to VND 30,000,000 will be imposed on entities with the following behaviours:

• Late reporting submission, or reporting with incomplete contents
• Failure to comply with the periodical reporting regime as prescribed

Those entities are required to supplement the missing contents and implement the periodical reporting regime in accordance with the provisions of the law.

One-off Report on Investment Assessment

In addition to the above periodic Report on Investment Supervision and Assessment, there are some scenarios in which FIEs are also required to submit the following one-off reports:

1. Report on Investment Supervision and Assessment where changing registered information of the project: a one-off Report on Investment Supervision and Assessment is required to be submitted prior to amending the Investment Registration Certificate.
2. Report on Investment Finishing Assessment: this report is required to complete once finishing investment projects. The contents of this report focus on evaluating the results of the implementation of the objectives, use of resources, implementation progress, project benefits, and recommendations.

Inspection of competent authorities on foreign investment activities

Competent authorities (which can be the Ministry of Planning and Investment, and/or specialised state management agencies or provincial People’s Committees, depending on investment activities of foreign entities) have the right to conduct inspections suddenly (which can be through reports, and/or onsite inspection), subject to the compliance status of the foreign investment entities or where they detect signs of violation of the entities.

Foreign investment entities are encouraged to review and ensure that their implementation on investment reporting is compliant with the prevailing law.

If you need any assistance with these or any other compliant matters, our experts are ready to work with your company to ensure you understand how the above will apply to your specific situation in Vietnam.

Contact our teams for expert support and further information:

Thao Nguyen, Head of Corporate Services | Email: thao.nguyen@acclime.com

Matthew Lourey, Managing Partner | Email: m.lourey@acclime.com