BASIC CONDITIONS AND LIMITATIONS IN EDUCATION INVESTMENT THAT INVESTORS NEED TO KNOW
1. Who are investors in education industry under Education Law 2019?
According to Article 5 and Article 54 of Education Law 2019, investors are organizations, individuals that carry out investment activities in the field of education with non-state budget funds, including domestic investors being individuals holding Vietnamese nationality, organizations established in accordance with Vietnamese law and foreign investors being individuals holding foreign nationality, organizations established in accordance with foreign laws.
2. What educational sectors can foreign investors be involved in? Are there any restrictions on foreign investors?
Considered to be a "sensitive" industry and related to training and development of human, Vietnam has currently only committed to allow market access and commercial presence for WTO members in certain areas of education such as technical, natural sciences and technology, business administration and business studies, economics, accounting, international law and language training, and the scope of activities are also limited to higher education, adult education and other educational services.
Except for the Agreement Establishing the ASEAN – Australia – New Zealand Free Trade Area (AANZFTA) which its commitment is a little more open in some sectors: agriculture, architecture, building, business administration, management, computer science, construction, information systems, dental services, economics, etc. and the scope of activities including higher secondary education, technical and vocational secondary education, only for students who have completed 9 years of general education as specified by Vietnamese relevant laws.
In addition, the investor should note that foreign investment and even co-operation with foreign individuals and organizations is not allowed when it comes to education of national defense, security, political and religion.
3. In what ways can investors participate in education investment?
The new Education Law provide two ways for investors to invest in education, including (i) Invest via establishment of a financial organization and use this financial organization to establish a private educational institution; or (ii) Investor directly invest and establish a private educational institution.
For foreign investors, they can opt for the following options in accordance with the provisions of Decree No. 86/2018/ND-CP: (i) Joint education and training; (ii) Establishment of foreign-invested educational institutions; (iii) Establishment of a branch in Vietnam (applicable to higher education institutions); (iv) Establishment of representative offices; or other forms of the investment or cooperation in accordance with the law of Vietnam on investment.
4. Conditions that investors must satisfy when investing in education?
The Investors need to satisfy the following conditions:
First and foremost, whether the investors satisfy the regulations on subject carrying out investment and operating business? Do they fall into cases where they are prohibited from setting up or managing enterprises in accordance with the Law on Enterprise, such as government agencies, officials, civil servants, minors, individuals facing criminal prosecution, etc.
Second is conditions on the form, the method of investment as well as the sector that are allowed to participate as mentioned above. This is a factor that foreign investors should pay special attention to.
The third and final is the condition on establishment and operating license. The licensing factor is closely associated with the details and features of each specific investment project from condition of minimum capital investment, financial resources to training program, facilities, equipment, managers and teachers. Depending on form of investment, type of educational institution, area of activity, scale of organization determined by the investor, the conditions of establishment and licensing will also change accordingly.
5. What incentives can the investor receive when investing in education?
Education is one of the prioritized sectors in the List of investment incentives of Decree No. 118/2015/ND-CP, specifically: Investment - business in infrastructure of education and training institutions; development - investment of non-public education institutions, including preschool education, general education, and vocational education.
Basically, the principle of determining specific type of incentives and incentive rate for each project will be decided by the authorized agency, which may be Application of a LOWER RATE OF CORPORATE INCOME TAX for a certain period of time or throughout the project execution; EXEMPTION, REDUCTION of corporate income tax; or EXEMPTION OR REDUCTION OF IMPORT TAX on goods imported as fixed assets; raw materials, supplies, and parts used for the project; or EXEMPTION OR REDUCTION OF land rental, land levy, or land use tax.
Especially in accordance with Article 103 of Education Law, private schools shall receive land allocation or rental, infrastructure allocation or rental by the State, receive BUDGET SUPPORTS when implementing duties requested by the State, and BENEFITS FROM PREFERENTIAL POLICIES on taxes and credits; shall receive FINANCIAL ASSURANCES from the State in order to implement policies for learners, such as scholarships, social subsidies, tuition exemption/reduction, subsidies on tuition, and living costs.
6. Procedures for issuing Investment Registration Certificate (IRC) for educational investment projects
The process of investment and establishment of an educational institution usually goes through two main steps: (i) Establishing educational institution; (ii) Obtaining operating license. However, before being granted an establishment approval, there is still one more step for investment projects of foreign investors or investment projects of foreign-invested economic organizations is applying for IRC according to Clause 1 Article 36 of Law on Investment.
Procedures for issuing IRC for educational investment project shall be as provided in Article 37 of Law on Investment, including:
Step 1: Obtain approval of investment policy (if necessary). Depending on the decision-making authority and project’s scale, this step can take up from 35 days to 150 days.
Step 2: The investor submits the project dossier and the Department of Planning and Investment shall consider and issue an IRC within 15 days after receiving the appropriate dossier. The actual application period usually lasts for about 1-2 months for projects which do not need investment policy approval.
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