Establish branch of foreign construction company in Vietnam

Currently, in the market economy, construction is one of the important and increasingly developed industries. Foreign enterprises, especially construction companies, that want to establish branches of their companies in Vietnam must comply with the provisions of Vietnamese law. In this article below, Viet An Law will analyze regulations to establish branch of foreign construction company in Vietnam according to current laws.

Legal basis

• Vietnam’s schedule of commitments on trade and services in the WTO;
• Law on Commercial 2005;
• Law on Construction 2014, as amended and supplemented in 2020;
• Decree 07/2016/ND-CP detailing the Commercial Law on representative offices and branches of foreign traders in Vietnam;
• Decree 15/2021/ND-CP regulating construction investment project management.

General information on construction business in Vietnam

Construction is one of the industries committed to allowing foreign traders to establish branches in Vietnam within the scope of WTO. Based on the concept of branches of foreign traders in Vietnam in Clause 7, Article 3 of the Commercial Law 2005, it can be understood that branches of foreign construction companies in Vietnam are dependent units of foreign construction companies in Vietnam, established and operating commercially in Vietnam under Vietnamese law.

Conditions to establish branch of foreign construction company in Vietnam

Foreign construction enterprises are licensed to establish branches in Vietnam when they meet the conditions prescribed in Article 8 of Decree 07/2016/ND-CP and the provisions of the Construction Law, specifically:

Market access conditions

According to regulations, branches of foreign construction companies are established and registered for business by the laws of countries and territories participating in international treaties to which Vietnam is a member or recognized by this country or territory. The content of the Branch’s activities must be consistent with Vietnam’s market access commitments in international treaties to which Vietnam is a member and by the business lines of the foreign construction company.

Specifically, according to Vietnam’s commitments within the WTO framework, construction services according to regulations from CPC 511 to CPC 518 include:

• Construction of high-rise buildings (CPC 512)
• Construction of civil engineering works (CPC 513)
• Erection and installation work (CPC 514, 516)
• Completion work of high buildings (CPC 517)
• Other construction works (CPC 511, 515, 518)

Accordingly, construction services have no restrictions on commercial presence. However, the foreign enterprise must be a legal entity of a WTO Member and after 3 years from accession, be allowed to establish a branch (the 3 years has expired). Thus, currently, foreign construction companies are allowed to establish branches in Vietnam.

However, it should be noted that, according to the commitment, the head of the construction company branch must be a permanent resident in Vietnam.

Regarding operating time

• The foreign construction company has been operating for at least 5 years from the date of establishment or registration.
• In case the Enterprise Registration Certificate or equivalent document of a foreign trader stipulates an operating term, that term must be at least 01 year from the date of submission of the application.

Regarding operational capacity

According to Article 148 of the Construction Law, organizations and individuals engaged in construction activities must meet the following conditions:

• Individuals participating in construction activities must have diplomas and training certificates appropriate to the work undertaken, issued by legal training establishments.
• Titles and individuals practicing construction activities that must have a practicing certificate include construction investment project management director; Head of construction planning design; Head of the construction survey; Head of design, construction design verification; construction supervision consulting; Responsible for establishing, verifying, and managing construction investment costs.
• Organizations participating in construction activities must have qualifications including construction investment project management consulting; Construction survey; establishing construction planning design; design and verifying construction design; Construction works; and Construction supervision consulting.

Note for foreign individuals:

• According to Article 62 of Decree 15/2021/ND-CP, a foreign individual who has a practicing certificate issued by a foreign agency or organization will be recognized if he or she practices construction activities in Vietnam for less than 6 months. In case an individual practices construction activities in Vietnam for 6 months or more, they must convert their practicing certificate to the agency competent to issue practicing certificates.
• According to Article 66 of Decree 15/2021/ND-CP, foreign individuals need to have a work permit in Vietnam before being granted a construction practice certificate.

Regarding branch headquarters

According to Article 28 of Decree 07/2016/ND-CP, the location of the Branch headquarters must be by the provisions of Vietnamese law on security, order, labor safety and hygiene conditions, and other conditions as prescribed by law.

Branch headquarters cannot be apartments, dormitories, or rental premises without business functions. Branches are not allowed to lend or sublease their headquarters.

Regarding branch name

• Branch name must be written with letters in the Vietnamese alphabet, letters F, J, Z, W, numbers, and symbols.
• The branch name must bear the name of the foreign trader accompanied by the phrase “Branch”.
• The Branch name must be written or posted at the Branch headquarters. The Branch name is printed or written in a smaller font than the foreign trader’s name on transaction papers, documents, and publications issued by the Branch.

Branch establishment documents

According to the provisions of Article 12 of Decree 07/2016/ND-CP, the application for a branch establishment license includes:

• Application for a Branch Establishment License signed by an authorized representative of the foreign trader;
• Copy of Enterprise Registration Certificate or equivalent documents of the foreign construction company;
• Document of the foreign construction company appointing/appointing the head of the Branch;
• A copy of the audited financial statement or document confirming the implementation of tax or financial obligations in the most recent fiscal year or documents of equivalent value issued by a competent agency or organization where the company is located. foreign construction establishment issued or certified, proving the existence and operation of the foreign construction company in the most recent fiscal year;
• Copy of the Branch’s Charter of Operations;
• Copy of passport or identity card or citizen identification card (if Vietnamese) or copy of passport (if foreigner) of the head of the branch;
• Documents on the expected location of the Branch headquarters.
• Power of Attorney for Viet An Law.

Authority to issue License for establishment of branch of foreign construction company

Currently, the provisions of specialized laws (Construction Law) do not specifically regulate the establishment of branches of foreign construction companies in Vietnam. Therefore, according to Article 6 of Decree 07/2016/ND-CP, the authority to grant licenses to establish branches of foreign construction companies in Vietnam belongs to the Ministry of Industry and Trade.

Procedure to establish branch of foreign construction company in Vietnam

Step 1: Apply for License for establishment

Foreign construction companies submit applications directly or by post or online (if eligible) to the Licensing Agency.

Step 2: The agency receives and processes the dossier

• Within 03 working days from the date of receiving the dossier, the Licensing Agency shall check and request additional documents if the dossier is not complete and valid. Requesting additional documents can be made at most once during the document processing process.
• The Licensing agency sends a document to seek opinions from the Ministry of Construction within 03 working days from the date of receipt of complete and valid documents. Within 05 working days from the date of receipt of the document from the Licensing Agency, the Ministry of Construction shall issue a document clearly stating its agreement or disagreement to license the establishment of the Branch.
• Within 05 working days from the date of receiving the document from the Ministry of Construction, the Licensing Agency shall issue or not issue the Branch Establishment License. In case of refusal to grant a permit, there must be a document clearly stating the reason.

Term of the Establishment License

According to Article 9 of Decree 07/2016/ND-CP, the Branch establishment license is valid for 5 years. The term of the reissued Branch Establishment License is equal to the term of the previously issued License. At the end of this term, procedures for renewal can be carried out. The term of the extended Branch Establishment License is the same as when the Establishment License is granted.

Services of Viet An Law regarding branches of foreign construction companies in Vietnam

• Legal advice on conditions, documents, procedures, branch establishment license;
• Draft documents, records, and papers for customers as requested;
• Representing clients, conducting procedures at competent state agencies;
• Regular legal advice for the branch after its establishment.

Clients who have related questions or need legal support on establishing a branch of a foreign construction company in Vietnam, please contact Viet An Law for the best support.