Establishment of a foreign capital company in Vietnam

The first step for investors to be present in Vietnam to conduct investment activities is how to form a company with full legal status to participate in the market. This article of Viet An will mention the procedures for establishing a new foreign capital enterprise that is not in the case of applying for approval of investment policies in accordance with the Law on Investment and the Law on Enterprises in 2020.

Steps to carry out procedures for establishing a foreign capital company in Vietnam

• Application for an Investment Registration Certificate;
• Application for an Enterprise Registration Certificate;

Other cases

Establish a foreign capital company under the Plan on establishment of a Vietnamese capital company first, then transfer capital to foreign investors.

Dossiers to prepare for establishment of a foreign capital company in Vietnam

For individual investors

Individual investors need to prepare the following documents:

• Certified copy of identity card or identity card or passport of the investor (In case, the passport of the overseas investor sent to Vietnam must be notarized and consular legalized at Vietnamese diplomatic missions abroad.);
• Confirmation of the investor’s bank account balance corresponding to the expected investment capital in Vietnam (If it is a foreign bank, it is necessary to provide a notarized copy, consular legalization at Vietnamese diplomatic missions abroad);
• Lease contract for the company’s headquarters and project execution location, Documents proving the lessor’s leasing right (Certificate of land use right, Construction license, Enterprise Registration Certificate with real estate business function of the lessor or equivalent documents).

For company investors

Institutional investors need to prepare the following documents:

• A copy of the Certificate of Incorporation or other equivalent document confirming the legal status of the investor (The copy must be notarized and consular legalized at Vietnamese diplomatic missions abroad);
• A copy of one of the following documents: financial statements of the last 02 years of the investor; commitment to financial support of the parent company; commitment to financial support of the financial institution; guarantee on the financial capacity of the investor; Confirm the investor’s bank account balance corresponding to the expected investment capital in Vietnam. (Notarized copy, consular legalization at Vietnamese diplomatic missions abroad);
• Notarized passport of the legal representative of the company abroad (Copies must be notarized and consular legalized at Vietnamese diplomatic missions abroad);
• Notarized passport of the legal representative of the company in Vietnam (If the representative is abroad, the copy of the passport must be notarized and consular legalized at Vietnamese diplomatic missions abroad);
• Head office lease contract, Documents proving the lessor’s leasing right (Certificate of land use right, Construction permit, Certificate of business registration with  real estate business function of the lessor or equivalent documents).
• If the project uses technology, it is necessary to enclose an explanation on technology use for the specified project, including the following contents: name of technology, origin of technology, diagram of technological process; main technical parameters, usage status of machinery, equipment and main technological lines;

Steps to establish a foreign capital company in Vietnam

 Step 1: Apply for an Investment Registration Certificate

Dossier of application for an Investment Registration Certificate

• A written request for implementation of an investment project;
• Copy of identity card/identity card or passport for individual investors; a copy of the Certificate of Incorporation or other equivalent document confirming the legal status of an institutional investor;
• An investment project proposal includes the following contents: investors implementing the project, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, investment progress, labor demand, proposal for investment incentives, impact assessment, socio-economic efficiency of the project;
• A copy of one of the following documents: Financial statements of the last 02 years of the investor; commitment to financial support of the parent company; commitment to financial support of the financial institution; guarantee on the financial capacity of the investor; documents explaining the financial capacity of the investor;
• Proposing land use needs; in case the project does not request the State to allocate land, lease land, permit change of land use purpose, submit a copy of the site lease agreement or other document certifying that the investor has the right to use the location for the implementation of the investment project;
• Explanation on use of technology applied to investment projects, for projects using technologies on the list of technologies restricted from transferring in accordance with the law on technology transfer, including: technology name, technology origin, technological process diagram; main technical parameters, usage status of machinery, equipment and main technological lines;

Competence to grant Investment Registration Certificates of establishment of foreign capital companies

The Department of Planning and Investment shall receive and grant investment registration certificates for the following investment projects:

• Investment projects outside industrial parks, export processing zones, hi-tech parks, economic zones;
• Investment projects on infrastructure development of industrial parks, export processing zones, hi-tech parks and investment projects in industrial parks, export processing zones and hi-tech parks in localities where management boards of industrial parks, export processing zones and hi-tech parks have not been established.

Management boards of industrial parks, export processing zones, hi-tech parks and economic zones shall receive, grant, adjust and revoke investment registration certificates for investment projects in industrial parks, export processing zones, hi-tech parks and economic zones, including:

• Investment projects on infrastructure development of industrial parks, export processing zones and hi-tech parks;
• Investment projects shall be implemented in industrial parks, export processing zones, hi-tech parks, economic zones.
• The Department of Planning and Investment where the investor is located or plans to set up its head office or executive office to implement the investment project shall receive, grant, adjust and revoke the Investment Registration Certificate for the following investment projects:
• Investment projects implemented in many provinces and centrally-run cities;
• Investment projects are implemented simultaneously inside and outside industrial parks, export processing zones, high-tech parks and economic zones.

Step 2: Apply for an Enterprise Registration Certificate

Dossiers and order of procedures for issuance of the Enterprise Registration Certificate shall be similar to Vietnamese capital enterprises

Step 3: Apply for a business license for trading in some conditional trades

In case the Company retails goods or establishes a retail establishment selling goods:

Refer to the article:

• https://vietanlaw.com/business-license-for-goods-retail-distribution-of-foreign-capital-company-in-vietnam/
• https://vietanlaw.com/license-of-retail-establishments-for-a-company-in-vietnam/

According to the provisions of Decree 09/2018/ND-CP stipulating goods purchase and sale activities and activities directly related to goods purchase and sale by foreign investors, foreign capital economic organizations in Vietnam:

Retail is the sale of goods to other individuals, households or organizations for use for consumption purposes.

Investors are not required to issue business licenses for exporting, importing goods, wholesale goods (not falling into the categories of goods: oil, lubricants; rice; sugar; recorded items; books, newspapers and magazines).

Investors shall grant business licenses and licenses for setting up retail establishments when carrying out retail activities of goods or setting up retail establishments of goods.

In case the company conducts international travel business (inbound): Refer to the article https://vietanlaw.com/issue-international-travel-business-license-in-vietnam/

Foreign investors are only allowed to conduct international travel business within the scope of bringing foreign visitors into Vietnam (inbound)

In case the company conducts foreign language training business: Refer to the article https://luatvietan.vn/dieu-kien-thanh-lap-va-hoat-dong-cua-trung-tam-ngoai-ngu.html

The investor shall apply for the approval of the Department of Education and Training in the process of issuing the Investment Registration Certificate. https://vietanlaw.com/dossier-of-permit-for-foreign-capital-short-term-training-and-retraining-activities-in-vietnam/

Before coming into operation, the enterprise applies for a license to operate a foreign language training center at the Department of Education and Training.

Some questions related to the establishment of a foreign capital company

What types of companies can foreign investors establish in Vietnam?

Depending on the number of foreign investors participating in the establishment of economic organizations and business management models, foreign investors may establish the following types of companies in Vietnam:

• Partnerships;
• One Member Limited Company;
• Limited liability companies with two or more members;
• Joint stock company.

What industries can foreign capital companies operate?

Foreign investors are allowed to do business in legal professions that Vietnam does not prohibit and according to Vietnam’s commitments when joining the WTO.

What is the percentage of foreign investor ownership in the enterprise?

Depending on the industry that the foreign investor chooses to do business, the investor’s ownership rate can range from 0-100% in the enterprise. For example:

• The company provides management consulting services: the maximum ownership rate of foreign investors is 100%;
• Company providing advertising services: Foreign investors must enter into a joint venture with a domestic company that has registered this industry and the foreign investor’s ownership ratio is not restricted in the joint venture;
• Companies providing road freight transport services: the ownership rate of foreign investors is up to 51%;
• Companies providing services to send Vietnamese to work abroad: No capital contribution from foreign investors is allowed.

Services of establishing foreign capital companies of Viet An Law Firm

• Advising on conditions for establishing a foreign capital company: capital contribution ratio of foreign investors in Vietnam; business conditions for trades; project implementation location; note the procedures before and after the establishment of a foreign capital company;
• Advising on choosing the right type of company for investors: Limited company or joint stock company;
• Advising on opening a capital transfer account, capital contribution duration;
• Consulting and guiding investors to prepare necessary documents to establish a foreign capital company;
• Advising and drafting company establishment documents for investors;
• Representing investors to work with competent state agencies of Vietnam in the process of carrying out company establishment procedures for investors (Application for Investment Registration Certificate, Business Registration Certificate, Business License,  License according to specialized requirements,  make legal entity seals, procedures after company establishment,…;
• Comprehensive, regular consultancy, accounting services, tax law package of activities arising in the process of conducting business in Vietnam for investors.