navigating investment in vietnam's logistics and
TRANSCRIPT
Webinar | 14 October 2021
Navigating investment in Vietnam's logistics and industrial real estate sector
Agenda
1 Investments into IPs, warehouse
and logistics
2 Tax incentives
3 Land use and sub-lease
4 Merger control
5 Renewable Energy
6 Financing and security
7 Intellectual property protection
8 Q&A
Chung Seck
Partner
Corporate/M&A
+84 28 3520 2633
Manh Hung Tran
Partner
Intellectual Property+84 24 3936 9398
Thanh Hai Nguyen
Special Counsel
Energy & Projects+ 84 24 3936 9606
Tuan Minh Le
Associate
Antitrust/Competition+ 84 28 3520 2695
Our speakers
Hien Bui
Senior Consultant
Real Estate+84 28 3520 2663
Thuy Van Pham
Special Counsel
Finance & Project+84 28 3520 2703
Thanh Hoa Dao
Special Counsel
Tax & Trade+84 28 3520 2642
Thanh Le
Senior Associate
Corporate/M&A+84 28 3520 2681
1
Investments into IPs, warehouse and logistics
OverviewForeign investment into Vietnam in Warehouse services (Logistics)
According to the report from Ministry of Planning and Investment, logistics is one of the top ten
industries attracting most foreign direct investment capital accounting for approx. USD 5.7 billion
(as of September 2021).
According to the Vietnam Logistics Business Association, logistics industry in Vietnam accounts
for 20 to 25% of GDP, with the sector projected to grow by roughly 12% every year.
Typical foreign real estate investment structure are:
■ Greenfield investment; or
■ Brownfield investment (M&A).
Market access
Most of these projects are engaged in 2 business activities:
■ Real estate business, owner – owned or leased land use rights. Details: Warehouse for rent.
(VSIC 6810).
■ Warehousing and commodity storage. Details: warehousing and commodity storage services.
(VSIC 5210).
Vietnam international treaties will be applied first to look for any foreign ownership restrictions. If
the Schedule is silent, the authorities will refer to sector-specific Vietnamese regulations if the
foreign investors wish to engage in activities that are not committed.
Market access
For real estate business:
Real Estate business is not committed
by international treaties, but the Real
Estate Business Law provides the
activities that foreign invested company
(with no foreign ownership limitation) can
provide certain services, including "build
and sublease construction works (công
trình) in an IP.
For logistic services:
Vietnamese government has removed
market access restrictions for most
logistic services (e.g. warehousing
services) in its domestic laws. The
applicable domestic law for this area is
Decree 163/2017/ND-CP on the
provision of logistics services.
Investment StructureGreenfield investment (without bidding or auctioning)
Project Company
Project/
Property
Offshore
Vietnam
Foreign Investor
Vietnam
Government /
IP developer
100%
Leases or
allocates land to
Project Company
for development
of project
STEP
1
STEP
2
STEP
3
Identifying and acquiring land;
Obtaining approval for investment
project in Vietnam and setting up
Vietnamese subsidiary for implementing
the approved project; and
Obtaining approval for
construction of the project.
Investment structure (Cont’)Brownfield investment (M&A)
There are two common structures: Acquisition of onshore share or of asset.
Vietnam specific issues
DD on land before
investment
■ Validity of land use right /
ownership of real
properties;
■ Implementation schedule
– In compliance or delay?
/ zoning issue
Corporate ownership in
M&A
Equity transfer is not
guaranteed if the charter
capital has not yet been
fully contributed;
Time consuming between
signing and closing.
Payment evidence
2
Tax incentives
Overview of CIT incentives
Reduced CIT rates
10%, 15% or 17%
CIT exemption 50% CIT reduction
CIT incentives include preferential CIT rate, exemption and reduction
Overview of CIT incentivesCIT incentives are granted to a project, not to a legal entity
Expanded projectsNew investment
projects
Restructured
projects
Overview of CIT incentives
■ Location: economic parks, high-tech parks, industrial parks, geographical
areas with harsh or especially harsh socio-economic conditions.
■ Business activities: high-tech industries, scientific research and
technological development, infrastructure development, software product
production, supporting industries, renewable energy, etc.
■ Scale of an investment project in the manufacturing sector: investment
capital, revenues, number of employees.
CIT incentives are determined based on the following criteria:
Criteria for enjoying CIT incentives
CIT incentives applicable to real estate business and logistics services
Real estate business: leasing service is not entitled to CIT incentives. There would be CIT
incentives depending on the location of a project
Warehouse/logistics projects: only location based CIT incentives applied.
Location-based CIT incentives
LocationReduced CIT
rateCIT Exemption
50% CIT
Reduction
New investment projects located in economic
parks, high-tech parks or geographical areas
with especially harsh socio-economic conditions
10% for 15
years
4 years Subsequent 9
years
New investment projects located in areas with
harsh socio-economic conditions
17% for 10
years
2 years Subsequent 4
years
New investment projects in industrial parks other
than those located in areas with advantageous
socio-economic conditions
N/A (standard
CIT rate
applied)
2 years Subsequent 4
years
3
Land use andsub-lease
Industrial land classification and land use of IP developer
Classification of industrial land under the
Land Law 2013
Industrial land can be located inside
Industrial Park ("IP") or outside IP
Type of industrial land (i.e. annual land,
upfront land)
Type of IPs under Decree 82 of 2018
(Industrial Park, Export Processing Zone,
Eco - Industrial Park)
Establishment of IP
IP land sub-lease and land use of IP tenant
Conditions required for IP developer to sub-lease
the land in IPTerm of the sub-lease
What is leasable land area in IP Land use purpose/ zoning
Who are eligible Tenants of IP Rights and obligations of IP Tenants
When to enter into the Land Reservation
Agreement and the Land Lease Agreement
Lease of ready built/ Built to suit factory/ Warehouse
Key terms of the lease
Risks from Landlord perspective
Risks from Tenant perspective
Practical issues and common questions
IP land type
■ Can IP Tenant convert its sub-lease
annual land into sub-lease upfront
land?
Zoning
■ Can industrial production land in IP be
converted into logistics/ warehouse
land?
IP land acquisition
■ Can foreign invested company (FIE)
receive industrial land use rights
transfer by another IP Tenant or buy
factory/ warehouse from IP developer/
another IP Tenant?
4
Merger control
Overview of Vietnam merger control rulesScope of applicability
Competition Law No.
23/2018/QH14
Mergers, Consolidations,
Acquisitions, Joint Ventures
(collectively referred to as an
"Economic Concentration")
Vietnam's merger control regulations
covers the following transactions
Definition of Acquisitions redefined
under Decree 35Legal Framework
■ Appointment/removal of majority of the Board, the Chairman of the Board of Members, the Director or General Director;
■ Decide on the amendment or supplementation to the Charter;
■ Decide on other important decisions of the Target
Decree No. 75/2019/ND-CP on
Penalties for Administrative
Violations
Decree No. 35/2020/ND-CP
Guiding the Implementation of
the Competition Law Other economic concentrations
as prescribed by law
Acquisition of over 50% charter
capital, or 50% total voting rights
of the acquired enterprise;
Acquisition of over 50% assets of
all or one business line of the
acquired enterprise;
Acquisition sufficient to gain the
following rights:
Overview of Vietnam merger control rulesMerger Prohibition and Notification Regime
Enterprises carrying out an
economic concentration
which causes or potentially
causes a "substantial
anti-competitive effect" in
the Vietnam market.
Article 33 Notification of
economic concentration
Enterprises which participate in an
economic concentration must
submit a file notifying the
economic concentration to the
National Competition Commission
("NCC") as stipulated in article 34
of this Law prior to carrying out the
economic concentration if [such
economic concentration] reaches
the threshold requiring notification
of economic concentration…
(1)
Mandatory Notification RegimeMerger Prohibition
Article 30 Prohibited
economic concentration
Overview of Vietnam merger control rulesMerger Notification Thresholds
General Thresholds Sectors Specific Thresholds
Threshold 1: The total Vietnam asset of any enterprise involved in the
concentration (on a consolidated group-wide basis) is VND 3,000 billion
(approx. USD 129 million) or more.
■ Credit Institutions
■ Insurance companies
■ Securities companies
Threshold 2: The total Vietnam turnover of any enterprise involved in the
concentration (on a consolidated group-wide basis) is VND 3,000 billion
(approx. USD 129 million) or more.
Threshold 3: The value of the economic concentration is VND 1,000 billion
(approx. USD 43 million) or more.
Threshold 4: The combined market share of the participating enterprises is
20% or more on the relevant market.
Overview of Vietnam merger control rulesNotification/Approval Timeline
Merger control
regime does not
apply
If no
Step 3: Notify the
NCC of the
transaction and
seek approval
If no
Mandatory
notification does not
apply
Step 4(a): Proceed
to complete the
transaction
No response from NCC
at end of time limit
Clearance decision
from the NCC Step 4(b): Cooperate
with NCC to provide
further information
Issue notice
of official
appraisal
Step 2: Are any notification thresholds
triggered? If yes, proceed to step 3
Step 1: Determine if proposed
transaction is an "economic
concentration" if yes, proceed to
step 2
NCC commences
Preliminary Review (30
days from the date of
receipt of a complete
filing)
NCC commences
Official Review (90++
days from date of
issuance of notice)
Overview of Vietnam merger control rulesEnforcement Trends
Administering authority:
■ Ministry of Industry and Trade ("MOIT")
■ Vietnam Competition and Consumer
Authority ("VCCA")
Statistics from 2019 to 2021
■ 125 merger notifications have been made to
the VCCA/MOIT
• 80% Acquisitions
• 11% Mergers
• 11% Joint Ventures
■ 90% Preliminary Review /
10% Official Review
■ 70% Onshore Transaction /
30% Offshore Transaction
5
Renewable Energy
Introduction
Corporate PPAs - Overview
Traditionally, electricity generated by a renewable power project is sold directly to
an electricity supplier who then trades the electricity on the wholesale market or
supplies it directly to its customers.
Corporate PPAs: Instead of buying electricity direct from utilities (EVN),
corporations are now purchasing electricity directly from generators under corporate
renewable PPAs.
Many Asian countries (including Vietnam) operate under the traditional monopoly
utility market structure.
Regulations therefore need to be navigated – the regulations drive the structure.
$ for
excess
power
/ FiT
Structure 1: Behind-The-Meter Corporate PPA structure for Onsite Rooftop Solar
SOLAR ENERGY PROJECTCORPORATE
CUSTOMER
ELECTRIC UTILITY
(EVN)
BEHIND THE METER PPA
Power
to cover
unserved
electricity
demand
Excess
power
Electricity (and RECs)
$ Electricity (and REC) price
$ for
power
ELECTRICITY SUPPLY
CONTRACT
Rooftop solar
RTS Corporate PPA
If the purchaser is not EVN (i.e.,
private consumer), PPA terms and
tariff are subject to parties' negotiation
in accordance with applicable laws
Utility PPA
If the purchaser is EVN,
PPA is subject to model
PPA issued by MOIT
On-site rooftop solar PPAs
■ Utility PPA vs. RTS Corporate PPA (FiT 2 Decision 13/MOIT Circular 18) for COD by 31 Dec 2020
■ Utility PPA vs. RTS Corporate PPA (Draft New PM Decision) for COD in 2021
Key terms Key Considerations in Rooftop Solar Corporate PPA
Pricing ■ Power price risk is top of the agenda.
■ Negotiable price: Parties have certain flexibilities to agree on a price and how to reflect in the PPA
pricing (e.g., incentive regimes, environmental attributes)
■ Price adjustment: Parties can negotiate cases in which the price can be adjusted. From a power
consumer's perspective, power purchase may not be a core business of power consumer.
Payment
options
■ Actual v. deemed generation: How to deal with excess energy? Who is responsible for paying to EVN if
any excess energy?
■ Power consumption risk – consumers may not be able to consume all power produced, but still have to
pay for it?
Contract term ■ Commencement delay: Whether any installation delay may need to trigger an event of default or
termination rights and entitle the power consumer with compensation (e.g., delay LD, penalty)?
■ Consistency with other project documents: Whether the contract term of the PPA is consistent with the
land/site/building lease agreement for rooftop/building/premises/site and the investment approvals of
the power consumer's businesses.
Key Contractual TermsOn-site Rooftop Solar Corporate PPA
Key terms Key Considerations in Rooftop Solar Corporate PPA
Qualification ■ Counterparty risk
■ The developer's qualification: Qualified and duly licensed to provide proposed relevant services and
activities (e.g., power generation, equipment installation, O&M and repair services, etc.):
■ Business lines registrations for power sellers
■ Capacity permits for installation, maintenance, and repairing rooftop solar rooftop system
System Size
and Capacity
■ Regulatory risk: restrictive regulations relating to the direct sale of power to corporations.
■ Licensing implications (related to 1 MW and 1.25MWp threshold if there are more than one location
and total size is larger than 1 MW and 1.25MWp).
Key Contractual TermsOn-site Rooftop Solar Corporate PPA
Structure 2: Synthetic Corporate DPPA
SOLAR OR WIND
GENCO / PROJECT COMPANY
EVN / Vietnam
Wholesale
Electricity
(Pool) Market
CORPORATE
POWER
CONSUMER
ELECTRIC UTILITY
(Power Corporation)
VIRTUAL PPA
"Contract-for-Differences"
(CfD)Electricity
(PPA output)
Wholesale
market spot
price
Electricity(Energy charge
+ DPPA charge)
price x load
Electricity
Wholesale spot price and
market charges
Whole market
spot priceRECs
Fixed price (electricity &
RECs) for PPA output
POWER SUPPLY
AGREEMENT
POWER PURCHASE
AGREEMENT
Tentative plan and schedule for DPPA pilot program
Within 15 working days from the date on which this proposed DPPA Circular comes into effect (which is
to be determined), the MOIT will announce the launch of the DPPA pilot program.
Within 15 working days from the date of announcing the launch of the DPPA pilot program, the MOIT
will open the pilot DPPA Program's portal and announce the Service Unit (which is selected by the
MOIT) that will assess the application dossier.
Within 45 working days from the date of MOIT's opening of the DPPA pilot program's electronic
information portal, GENCOs and CONSUMERS who wish to participate will be required to prepare and
submit registration applications to the MOIT portal.
Within 40 working days from the date of closing the DPPA pilot program's portal, the Service Unit will
evaluate and rank the application dossiers and send the MOIT a list of eligible GENCOs and
consumers.
Within five working days from the date of receiving the list from the Service Unit, ERAV will submit the
selection result to the head of the MOIT for announcement.
Preparation Phase (Draft MOIT Circular)1
Key eligibility criteria for
CONSUMER
Must be an existing industrial consumer purchasing power at 22 kV or higher
voltage level.
Must have committed to using renewable energy or its factories within supply
chain of its group have committed to using renewables.
Must have a CfD "in-principle agreement" with GENCO for purchase of power
from selected project.
Must commit that, for the first three years of participation in the DPPA pilot
program, the output to be purchased from GENCO within a year will be at
least 80% the total output consumed in such year as supplied by EVN/Power
Corporation.
6
Financing and Security
A
Financing
Types of loans
Types of loans
Onshore loan (such as loans from credit institutions, inter-companies loans, shareholder loans)
Offshore loan (such as loans from credit institutions, other
offshore lenders, and offshore shareholders)
Short-term loan
Middle-long term loan
(registration with the State Bank of Vietnam
in case of offshore loan)
Borrowing limits
FDI company
■ For middle-long term loans: Borrowing limits (include onshore and offshore) may not exceed
investment capital minus equity of borrower as mentioned in its Investment Registration
Certificate.
■ For short-term loan: Not subject to limitation.
Local company
■ No borrowing restriction imposed.
Borrowing purposesOffshore Loan
Offshore Loan
Offshore loan
Short-term loanFunding the working
capital
Middle and long-term loan
Implement the business plans or investment
projects of
The borrower
The borrower's subsidiaries
Refinance of foreign loans without increasing the borrowing cost
Borrowing purposes
Onshore Loan
Prohibited purposes:
■ For business investment activities in an industry or trade in which the law prohibits business.
■ To pay the expenses of or to satisfy financial requirements of transactions or other conduct prohibited by law.
■ To purchase or use goods or services in an industry or trade in which the law prohibits business investment.
■ To purchase gold bars.
■ To refinance its existing loan which was granted by its credit institution, except for a loan to make payment of
interest arising during the construction process, which were included in the estimated budget for building the
construction works approved by the competent body in accordance with law.
■ To refinance its existing loan which was granted by another credit institution or to refinance a foreign loan,
except for a refinanced loan satisfies all the following conditions:
• a financed loan to serve business activities;
• the term of the new loan does not exceed the residual term of the refinanced loan;
• the term for repayment of the refinanced loan has not yet been restructured.
Onshore Loan
Accounts
Account for borrowing and
repaying of foreign loan
For FDI company
For the medium/long-term loan
Direct Investment Capital Account
For the short-term loan
Direct Investment Capital Account; or
Specialized current account for borrowing
and repaying of foreign loanFor local
company
Specialized current account for borrowing
and repaying of foreign loan
Each foreign loan can only be made through one account service bank. The Borrower may use 01 (one)
account for 01 (one) or multiple foreign loans.Note
Requirements on opening and use of onshore & offshore accounts for offshore loan
Accounts
SpecificRequirements on opening and use of onshore & offshore accounts for offshore loan (continue)
Offshore foreign currency account require the SBV’s approval: granted on a case by case basis
The application dossiers for issuance of the license for opening and use of offshore foreign
currency account shall be submitted to the SBV, together with the application dossier for
registering the foreign loan.
Offshore Loan
■ Fees payable to the offshore lenders in relation to the offshore loan (either bilateral or
syndicated loans) are not subject to Vietnamese law. The popular fees relating to the offshore
loans are:
■ Payment of fees are only made after registration of the foreign facility/loan with the SBV.
■ SBV only registers ascertainable fees as at the time of application.
Fees that can be collected relating to onshore and offshore loans
Agency feeSecurity
agency feeCommitment
feeUpfront fee
Arrangement fee
Fees that can be collected relating to onshore and offshore loans
Onshore Loan
■ Onshore lenders are permitted by law to collect certain fees relating to their provisions of
onshore loans, including:
Commitment fee (one off payment) can be calculated and accrued from the effective date of
the facility/loan agreement to the first drawdown date.
With regard to onshore syndicated loans: agents can collect fees/remuneration arising from
their implementation of agency roles such as facility agency fee, security agency fee,
arrangement fee, paying agency fee.
Prepayment fee/premium
Standby credit line fee
Arrangement fee relating to
syndicated loans
Commitment
fee
B
Security
Common Security Package
Priority can be preserved by voluntary registration with the
National Registration Agency of Secured Transactions (NRAST).
Mortgage or pledge of:
■ LUR, assets attached to LUR
(including future assets)
■ equipment and machinery
■ equity/shares
■ receivables from contracts,
insurances, bank accounts
■ other assets in line with
Vietnamese laws
Notarization and mandatory registration of the mortgages of LUR
and assets attached to LUR with the LUR Registration Offices,
aircrafts with Civil Aviation Authority of Viet Nam (CAAV) and
vessels with sea vessel registration authorities of Vietnam. The
security over listed shares must be registered with Vietnam
Securities Depository and Clearing Corporation (VSDCC),
including block the trading of the listed shares.
Mortgage of LUR and assets attached to LUR can only be
granted to onshore lenders (including onshore branches of
foreign lenders). Upfront land rental needs to be made before the
mortgage.
Mortgage of land for companies in IPs
■ Companies in IPs sign the
sub-lease land agreement with
IP Developer, who leased the
land from the
State/Government.
■ Companies in IPs has the
LURC for its sub-leased land.
■ it has obtained the LURC for its leased land;
■ it has paid fully the sub-lease land rental to the IP
developer, and the IP developer also has paid fully
land lease rentals over the whole land it leased to the
Government. If the IP developer or has not fully paid
the lease rental, then companies in IPs can only
mortgage its assets on land to the bank.
Conditions for companies in IPs to mortgage its sub-
leased land:
7
Intellectual Property protection in Vietnam
Intellectual property protection in VietnamIP Registration
Common types of intellectual property (IP): trademark, patent, industrial design, copyrights, trade
secrets
Vietnam follows the first-to-file system (for patent, design and trademark).
■ Consequences of not filing or untimely filing:
• Patent / Design: Loss of novelty
• Pirated filing / Squatting (especially trademark)
• Lack of effective basis for brand protection against infringement
• Risk becoming an infringer yourself
Almost IP protection only has territorial effects it is necessary to obtain local registrations,
instead of relying on those obtained in other countries.
Intellectual property protection in VietnamIP Registration - Takeaways
IP is an asset, not a cost – IP filings and management are investments with substantial return-on-
investment as you expand your business in Vietnam.
If IP does not become your legitimate asset, it will really become a huge cost:
■ Costs for defending yourself against infringement claims of parties that have establish the
right first
■ Costs for negotiating and buying back the IP from squatters
■ Costs for negotiating and entering related arrangements such as coexistence agreements,
license agreements so that you can use the IP in Vietnam
Intellectual property protection in VietnamIP Commercialization
IP commercialization takes up many forms – most common: technology transfer, IP license,
franchising
Guarantee the validity and effectiveness of your arrangements in Vietnam:
■ Must be registered to have effect:
• Technology transfer agreements: at the
Ministry of Science and Technology
• Patent / Design license agreements: at
the Intellectual Property Office of
Vietnam
■ Registration not mandatory, but strongly
recommended:
• Trademark license agreement – some
Vietnamese authorities still request the
registration (such as Customs
agencies, tax agencies, some courts):
at the Intellectual Property Office of
Vietnam.
Our resources
Global Private M&A GuideA practical tool covering key aspects of the
legal and regulatory M&A framework in nearly
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Global Public M&A GuideA guide to some of the key legal
considerations associated with public M&A
transactions across the globe.
Global Guide to Take-Private TransactionsA comparison of the key features and requirements applicable
to take-private deals in a numbers of jurisdictions around the
globe, including indicative timelines.
Vietnam's New Investment LandscapeA dedicated investment updates covering a range of
issues including our views the legislative changes and
what businesses should look out for.
Guide to IPOsAn overview of the key stages of the process,
and an indicative timeline. A who's who as
regards the IPO deal team. Practical tips to help
achieve a successful IPO.
Asia Pacific Business Renewal SeriesBased on a custom survey of 800
respondents, this series spans four main areas
of business: Supply Chains, New M&A
Landscape, Digital Transformation and ESG.
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