WHEN AND HOW TO IMPLEMENT THE PROCEDURES FOR INCREASING CAPITAL INVESTMENT IN VIETNAM?

“Hello NPLaw Firm, currently, I’m a foreign investor. After establishing a project in Vietnam, during the process of deploying and bringing the project into operation, I found that the initial capital source wasn’t enough to satisfy practical needs and expand the scale of production activities and businesses. Therefore, I want to receive legal advice relating to the procedure for increasing capital investment according to the Law.”

When do we need to increase capital investment?

For domestic businesses, we only know the definition of a charter capital. In contrast, the Foreign-Invested Enterprise (Foreign Direct Investment) still has a familiar definition with all enterprises, which is capital investment, including capital contribution, mobilized capital, and loan capital.

However, whether the capital contribution implementing the project is the business’s charter capital or not? Within the process of implementing and deploying a project, if an investor wants to increase capital investment, what procedures does the investor need to implement? In this essay, NPLaw will consult the provisions relating to the procedure for increasing capital investment for the client.

What is capital investment?

Pursuant to the Law on Investment 2020: Capital Investment is money and other assets as defined by the Law on Civil and International Treaties, of which the Socialist Republic of Vietnam is a member, to implement the activity of business investment.

In other words, The capital investment is the entire cost that an investor spends to implement the investment activity planned in advance. Such costs are formed from the following two main financial resources: domestic investment resources and foreign-invested resources. 

When do we need to increase the capital investment?

Firstly, the enterprise needs to distinguish between the definition of capital contribution in a business’s charter capital and capital contribution for implementing the project; specially, the business simultaneously implements many projects. Charter capital is the capital committed to contribute within a duration not exceeding ninety (90) days, and is recorded in the company’s charter. In contrast, the business’s capital investment is prescribed by each investment project, including the investors' capital contribution for the project. Therefore, when the Foreign-Invested Enterprise (Foreign Direct Investment) invests in Vietnam's market first, the minimum capital contribution has to be equal to the charter capital. In other words, normally, the capital contribution for implementing the project will be equal to the charter capital in this case. However, such the capital contribution for implementing the project is not limited to investment, if the investor wants to deploy many projects in the future.

Therefore, when do we need to increase the capital investment?

Pursuant to Clause 2, Article 41 of the Law on Investment 2020: The investor implements the adjusting procedures for the Investment Registration Certificate, if the adjustment in the investment policy causes a change in the Investment Registration Certificate’s content.

The change in the investment project's capital investment (including the investor’s capital contribution and mobilized capital) is content that obliges the investor to implement the procedure for increasing the capital investment.

Conditions and Forms of increasing the capital investment

With the applicable Law, the enterprise owner (entrepreneur) will decide the business’s capital investment, and register it based on the entire capital investment and asset, including the loan capital and the lease asset. Within the process of activity and development of the enterprise, the enterprise owner (entrepreneur) has the right to adjust their capital investment to serve the enterprise’s business activity. Within 10 days from the date of deciding an increase in the enterprise’s capital investment, the enterprise owner (entrepreneur) has to send the notice to the competent agency with the content needing to change.

The investor can increase the capital investment in the following forms: Loans from a credit institution, or other organizations and individuals; additional capital contributions by the investor; or use of gained profits for investment.

The procedures for increasing the capital investment

To implement the increase in the enterprise’s capital investment, the legal representative or the authorized legal representative needs to implement the following steps:

Step 1: Preparing and drafting for increasing application in the enterprise’s capital investment.

The increasing application of the enterprise’s capital investment includes the following documents:

• The proposal for adjustment in the investment project;
• The report on deployment status for the investment project at the time of adjustment;
• The investor’s decision to adjust the investment project;
• The copied Investment Registration Certificate;
• The copied Business Registration Certificate;
• The documents demonstrating the increase in capital investment are a financial statement for the last 2 years, a statement of account, and a letter of guarantee;
• The letter of introduction;
• The letter of authorization;
• Identification or Passport of the applicant.

In case, if the increase in capital investment by assets that the investor buys according to the loan form, the application will include the following documents:

• Customs declaration;
• Purchase invoice;
• The loan agreement.

Step 2: Filing an application and receiving the result of business registration

After drafting and fully preparing for the application of the increase in capital investment, the business owner (entrepreneur) can self-implement or authorize another person to file an application to the competent state agency at the Registry under the Department of Planning and Investment where the enterprise locates its headquarters. The enterprise can choose one of three ways to file an application, as follows:

• Filing an application directly at the Inter-Agency One-Stop-Shop Mechanism of the Registry;
• Filing an application by express delivery;
• Filing an application online at the National Registration Portal website.

Filing an application and receiving the result of business registration.

Step 3: Declaring the content of increasing the enterprise’s capital at the National Registration Portal 

When increasing capital investment, the enterprise needs to declare a change in capital rate at the National Registration Portal within thirty (30) days from the date of the change.

Step 4: Completion of the procedures after increasing the enterprise’s capital investment

 The enterprise needs to implement the procedures relating to the process of increasing capital investment, as follows:

• Filing a License Tax Return supplementally if the enterprise increases its capital investment, causing the change in License Tax rate that must file. The duration for filing such a return is December 31 of the year when there is a change in the charter capital.
• Declaring online the investment project’s information: The enterprise needs to declare online the information of an extended adjustment in the National Registration Portal for foreign investment within fifteen (15) days before filling an adjusting application.

Some questions arise when the investor wants to increase the capital investment.

When increasing the capital investment, the business owner (entrepreneur) often finds the following problems:

Whether changing a capital investment total is difficult or not?

If the enterprise implements a change in the investment project’s capital investment total, it will cause a change in the investment project’s scale, which is approved right from the start, so the enterprise needs to implement the procedures for adjusting the approval of the investment policy. The enterprise needs to prepare to file an application to the Registry if the application is valid and demands full conditions according to the Law on Investment, Law on Enterprise, and Decree No. 31/2021/ND-CP.

Whether the capital investment is increased or not when the enterprise doesn’t increase the charter capital?

Pursuant to the Law on Enterprise 2020, the enterprise’s charter capital isn’t absolutely equivalent to the project’s capital investment. The enterprise implementing the contribution to capital mobilizes other capital to implement the project according to the investment policy’s decision, and the Investment Registration Certificate. Thus, the enterprise can increase its capital investment without increasing its charter capital.

Does the enterprise need to demonstrate the capital resource for increasing capital?

The total capital investment includes the capital contribution for implementing the project, the loan capital, and other capital. The investor can increase the capital contribution for implementing the project to expand scale and business activity more.

To increase the capital contribution, the investor has to demonstrate their financial capacity, and the capital contribution for implementing the project, which is registered on the Investment Registration Certificate, has to be fully contributed according to the Law.

When increasing the capital investment, have the issues relating to the tax changed or not?

If the enterprise adjusts the Investment Registration Certificate to increase charter capital, which changes the License Tax rate, the investor needs to implement the declaration of the new License Tax and file an additional License Tax.

These are all information relating to the increase in the capital investment as prescribed by Vietnamese Law. Please don’t hesitate to contact us, if the clients have any further questions.

NPLaw specializes in providing legal services all-around relating to domestic and abroad investments such as Enterprise, Real Estate, Intellectual Property, Labor; Drafting Consultation, negotiations and concluding support for the Commercial Contract, domestic and abroad Service Contract; consultations and support for implementing licensed procedures of licenses, etc,. With our professional Lawyers and Specialists, we have the full ability to consult with and support customers as they implement the above procedures. 

NPLaw Firm

Hotline: 0913 449968

Email: legal@nplaw.vn