Consequences for enterprises that do not comply with the obligation to submit investment supervision and assessment reports

According to current law, submitting investment supervision and assessment reports is a mandatory obligation of foreign-invested enterprises (“FDI Enterprises”). In reality, many enterprises do not comply with this obligation for many different reasons such as a lack of legal awareness or thinking that competent authorities do not inspect. This leads to adverse consequences for these enterprises. Specifically, they are not able to implement the procedures for modification of the Investment Registration Certificate (“IRC”), or adjustment of investment project and are subject to administrative sanctions.

1. Obligation to submit investment supervision and assessment reports

Under Article 100.11 of Decree No. 29/2021/ND-CP, investors need to submit investment supervision and assessment reports directly to the Department of Planning and Investment (“DPI”) where the enterprise is headquartered according to the following deadline:

• A 6-month report before July 10th of the reporting year.

• An annual report before February 10th of the following year.

From September 1st, 2023, Investment supervision and assessment reports must be prepared according to Form No. 13 and Form No. 17 attached to Circular 05/2023/TT-BKHDT, instead of Form No. 12 and Form No. No. 14 attached to Circular 22/2015/TT-BKHDT.

2. Consequences for enterprises that do not comply with the obligation to submit investment supervision and assessment reports

2.1 Enterprises encounter difficulties when implementing the procedures for modification of the Investment Registration Certificate, adjustment of investment project

Although there are no specific regulations stating that enterprises not submitting investment reports are not allowed to implement the procedures for modification of the IRC, adjustment of investment project; however, in some localities, before implementing such procedures, the DPI requires enterprises to fulfill their reporting obligations and pay fines for failure to submit and/or late submission of reports.

In reality, X LLC, headquartered in city Y, faced difficulties in implementing the procedures for modification of the IRC due to failure to submit and late submission of investment supervision and assessment reports. Specifically, the DPI issued a Notice stating that the dossier was invalid due to company X’s failure to comply with the above reporting obligations and required company X to contact the competent authority to pay the administrative fine within 30 days from the date of the Notice. Accordingly, the company must submit additional documents, including: notarized written records of administrative violations, notarized decision on sanctioning an administrative violation, and a company-stamped copy of the payment receipt. However, implementing the fine payment procedures within 30 days is impractical for the following reasons:

• The current law does not have specific procedures for the case when enterprises directly contact the competent authorities to resolve administrative violations. Meanwhile, the DPI’s Inspectorate (“Inspectorate”) is often overwhelmed, hence, it is impossible to promptly handle enterprises’ requests related to administrative penalties. Based on the practical experience of Apolat Legal, handling administrative violations in such cases typically takes about 1 to 2 months from the date the enterprise submits an Explanation official letter, with the following process:

Step 1: The enterprise submits the Explanation official letter stating the reasons for failure to submit and/or late submission of the investment supervision and assessment reports to the DPI’s Clerical office.

At this step, if the enterprise has not yet submitted the report, it should proactively submit the supplementary report to the DPI to mitigate the consequences. This will be considered an extenuating circumstance when the Inspectorate determines the administrative penalty.

Step 2: The Clerical office sends this Letter to the Inspectorate.

Step 3: The Inspectorate reviews this Letter and requests additional documents (if necessary).

Step 4: The enterprise works with the Inspectorate to issue the written record of administrative violations and the decision on sanctioning an administrative violation

Step 5: The enterprise pays the administrative fine and submits a copy of the payment receipt to the Inspectorate.

It should be noted that although Article 12.2 of Decree No. 118/2021/ND-CP regulates that the time limit for issuing the record of administrative violations is 2 working days from the date of the detection of administrative violation, this regulation is difficult to apply in this case. This is because there is no specific legal basis to require the Inspectorate to apply this time limit, and coordination between departments cannot be carried out within such a short period as prescribed by law.

• Most enterprises are not aware of the Inspectorate’s procedures for handling administrative violations

Currently, the procedures for handling administrative violations by the Inspectorate are not specifically regulated in legal documents, hence, it is difficult for enterprises to be aware of these procedures. This results in enterprises being confused when implementing the necessary actions to pay administrative fines. Therefore, completing this procedure within 30 days as required by the DPI is very challenging, unless the enterprise encountered this situation before and acknowledged the process.

Thus, enterprises can not submit supplementary documents within the timeframe required by the DPI and must resubmit a new dossier. This not only wastes time but also impacts the business plans of the enterprises, especially plans for capital increase or decrease. Therefore, to avoid difficulties in implementing the procedures for modification of the IRC, adjustment of investment project, enterprises should comply with their investment reporting obligations.

2.2 Penalties for administrative violations in case of non-compliance with reporting obligations

For late submission/failure to submit investment supervision and assessment reports, under Article 15.1 and Article 4.2 of Decree No. 122/2021/ND-CP, enterprises may be fined from VND 20,000,000 VND to VND 30,000,000.

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