The duration of an investment project is one of the important factors determining the feasibility and long-term effectiveness of the project. In particular, for factory projects, the investment duration affects the investor’s financial strategy and is also related to the locality’s planning and socio-economic development policies. Therefore, when the project duration is about to end, the investor can request an extension of operation to continue production and business. The extension process must comply with current legal regulations and meet many specific conditions.
1. Duration of a manufacturing plant investment project
The duration of a manufacturing plant investment project in Vietnam is determined based on many factors, including the location of the investment project, the business sector and the economic development policy of each region. Specifically:
- Normal duration: the duration of investment projects outside the economic zone is usually 50 years, and within the economic zone, it is no more than 70 years
- Special duration: In the case of an investment project implemented in an area with difficult socio-economic conditions, or in the case of a large-scale project with significant impacts on socio-economic development implemented outside the economic zone, the duration may be extended up to 70 years, according to the decision of the competent authority.
2. Conditions for extending the operation period of a manufacturing plant investment project
(1) The project is still operating legally
The first condition for an extended manufacturing plant investment project is that the project must be implemented according to the contents of the granted Investment Registration Certificate and not violate regulations on investment, environment, tax, and labor.
(2) In accordance with the socio-economic development plan
Extending a manufacturing plant project must ensure compliance with the local socio-economic development plan, including land use planning, manufacturing industry planning, and industrial development policies. Suppose the manufacturing investment project’s location changes land use planning (for example, converting an industrial park to a residential area). In that case, the project may not be granted an extension of its operating period.
(3) Conditions on scale, objectives and operational requirements of the investment project
During the operation of the manufacturing plant project, policies on some manufacturing industries may change, or the law may specify requirements for the operating period for some products with preferential terms.
Investment projects in manufacturing plants that provide a clear, large-scale production and business plan and demonstrate the feasibility of the project’s finance, human resources, and development strategy in the next phase will have a higher possibility of being extended than other projects.
(4) Other conditions
- Not using outdated technology, posing a risk of environmental pollution, resource-intensive.
- Not falling into the case where the investor must transfer assets without compensation to the Vietnamese State or the Vietnamese party.
- The manufacturing project must meet environmental standards according to the Law on Environmental Protection.
3. Some notes when extending the operating period of an investment project
Extending the operating period of an investment project is an important process and often takes a long time because it requires opinions from many different agencies. Therefore, investors need to pay important attention when implementing the extension procedure:
- Check the project duration and prepare documents early: Investors need to monitor the project’s operating duration and prepare the extension application procedure about 06-09 months before the project expires to avoid interrupting investment project activities.
- Ensure that the project complies with current laws: Enterprises must fully fulfill their financial obligations to competent authorities and not violate legal regulations on project activities.
- Determine the suitability of land use planning and business lines: Investors need to check whether the land use planning and production industry planning in the locality has changed.
- Determine the operational strategy and financial capacity: Investors need to develop a specific operational plan for the extension period, demonstrating the project’s feasibility for consideration by competent authorities. The project needs to ensure sufficient financial capacity to continue operating effectively, avoiding the situation of extension but not implementing.
- While preparing documents, investors should proactively discuss with the Department of Planning and Investment, the Management Board of Industrial Parks/Export Processing Zones, and relevant agencies to update the latest requirements related to the extension of investment projects.
See more:
1/ Compliance with food safety regulations when establish a manufacturing projects in Vietnam
2/ Foreign investors establishing manufacturing companies in Vietnam
Disclaimers:
This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.
For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.
Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Contract Drafting and Reviewing and contact our team of lawyers in Vietnam via email info@apolatlegal.com.
