CONSEQUENCES FOR NON-COMPLIANCE WITH INVESTMENT MONITORING AND EVALUATION REPORTING OBLIGATIONS - OTIS LAWYERS

Under current law, submitting investment monitoring and evaluation reports is a mandatory obligation for foreign-invested enterprises (FDI companies). In practice, many companies fail to comply with this requirement due to various reasons, such as a lack of awareness of the regulations or the belief that government agencies will not inspect. This results in these companies facing consequences: they cannot adjust their Investment Registration Certificate or modify their investment project and may also be subject to administrative fines.

Obligation to Submit Investment Monitoring and Evaluation Reports  

According to Article 100.11 of Decree 29/2021/ND-CP, investors are required to submit investment monitoring and evaluation reports directly to the Department of Planning and Investment where the company is headquartered by the following deadlines:

• Semi-annual report: Due by July 10 of the reporting year.
• Annual report: Due by February 10 of the following year.

As of September 1, 2023, these reports must be prepared in accordance with Forms 13 and 17 issued under Circular 05/2023/TT-BKHDT, replacing Forms 12 and 14 under Circular 22/2015/TT-BKHĐT.

Consequences for Failing to Submit Investment Monitoring and Evaluation Reports

Difficulty in Adjusting Investment Registration Certificate or Project

Although current law does not explicitly state that companies cannot adjust their Investment Registration Certificate or investment project if they fail to submit investment reports, in certain localities, the Department of Planning and Investment may require companies to fulfill their reporting obligations and pay fines for failure to submit or delayed submission of reports before proceeding with any adjustments. 

For example, a company, X LLC, headquartered in City Y, encountered difficulties in adjusting its Investment Registration Certificate due to delayed and missed submissions of investment monitoring and evaluation reports. The department issued a notice stating that X LLC’s application was invalid because the company had not complied with reporting obligations and requested that the company contact the relevant authority to pay administrative fines within 30 days from the notice issuance date. To proceed, the company was required to provide additional documents, including a notarized administrative violation report, a notarized administrative penalty decision, and a copy of the fine receipt. However, completing this process within the 30-day limit was infeasible due to the following challenges:

(1) Lack of a Formal Procedure

There is no specific law governing the procedure for companies to contact authorities directly to address administrative violations, and the inspection division of the Department often experiences a backlog of cases, leading to delays. Based on AZLAW's experience, the resolution of administrative violations in these cases generally takes one to two months from the date the company submits its explanation, following the steps below:

• Step 1: The company submits a written explanation for failing to submit or delaying submission of the investment monitoring and evaluation report to the Department’s office.

At this stage, if the company has not yet submitted the report, it should submit it to the Department to mitigate the consequences. This may be considered a mitigating factor when the inspection division determines the administrative penalty.

• Step 2: The Department’s office forwards the explanation to the inspection division.
• Step 3: The inspector reviews and assesses the explanation and requests additional documents if necessary.
• Step 4: The company collaborates with the inspector to prepare an administrative violation report and issues an administrative penalty decision.
• Step 5: The company pays the fine and submits a copy of the receipt to the inspection division.

(2) Challenges with the 2-Day Violation Report Deadline 

Although Article 12.2 of Decree 118/2021/ND-CP stipulates a 2-day deadline for issuing an administrative violation report, this requirement is difficult to enforce in these cases due to the lack of specific legal grounds to demand that the inspection division meets this timeframe, as well as the complexity of inter-departmental coordination.

(3) Lack of Clear Procedures 

There is no specific regulation governing the inspection division’s administrative violation handling procedures, making it challenging for companies to understand the steps required. Consequently, companies often struggle to complete the required steps within the 30-day period, unless they are familiar with the procedure from past experience.

As a result, companies often cannot submit the necessary documentation within the Department’s deadline and must resubmit their application. This delays the process and disrupts business plans, especially for companies intending to increase or decrease capital. To avoid these difficulties in adjusting the Investment Registration Certificate or investment project, companies should comply with all reporting obligations.

Administrative Fines for Non-compliance with Reporting Obligations

For late or non-submission of investment monitoring and evaluation reports, companies may be fined between VND 20,000,000 and VND 30,000,000, according to Article 15.1 and Article 4.2 of Decree 122/2021/ND-CP.

For any questions or comments, please contact:
OTIS AND PARTNERS LAW FIRM
Office address: 2nd Floor, CT3 Building, Yen Hoa Park View Urban Area, No. 3 Vu Pham Ham Street, Yen Hoa Ward, Cau Giay District, Hanoi
Email: [email protected]
Hotline: (+84)987748111