In the era of technology 4.0, the field of digital technology and especially the electronic software business has developed very strongly not only in countries with modern technology but also in Vietnam – where there is a high-quality human resource. software engineering quality. Therefore, investing abroad in the field of software business is also of great interest to many investors. Here, Viet An Law would like to give advice on foreign investment procedures in Vietnam in the field of software business as follows.
- Vietnam’s commitment schedule in WTO
- Law on Investment 2020
- Law on Enterprise 2020
- Law on Information Technology 2006, as amended and supplemented in 2017
- Decree 31/2015/ND-CP dated 26/03/2021
- Decree 72/2013/ND-CP dated 15/07/2013
Conditions for investing software service in Vietnam
After joining the WTO, Vietnam has signed service agreements in the Schedule of Specific Commitments on Services. Accordingly, computer services and other related services (CPC 841-845, CPC 849) are not restricted to cross-border supply and consumption abroad. Regarding commercial presence: “Within 2 years from the date of WTO accession, 100% foreign-invested enterprises are only allowed to provide services to foreign-invested enterprises in Vietnam. After 3 years since joining, branch establishment is allowed” and the head of the branch must be a permanent resident in Vietnam.
- Establishing a foreign-invested software service company;
- Contributing capital, purchasing shares or capital contributions to economic organizations providing software services.
Method 1: Establishing a foreign-invested software service company
Step 1: The investor applies for an Investment Registration Certificate
- A written request for implementation of an investment project;
- Documents on investor’s legal status: copy of identity card or identity card or passport (if individual); a copy of the certificate of incorporation or equivalent document and the passport of the capital manager (if an organization);
- The investment project proposal includes the following contents: investor implementing the project, objectives, scale and investment capital, capital mobilization plan, location, duration, investment schedule, labor demand activities, proposals for investment incentives, assessment of the project’s socio-economic impacts and efficiency;
- Documents proving the financial capacity of the investor include at least one of the following documents: financial statements of the last 2 years of the investor; commitment to financial support of the parent company; financial institution’s commitment to financial support; guarantee on the financial capacity of the investor; other documents proving the investor’s financial capacity;
- An investment project proposal includes the following main contents: investor or investor selection form, investment objective, investment scale, investment capital and capital mobilization plan, location and time deadline, implementation progress, information on the current status of land use at the project site and proposed land use demand (if any), labor demand, proposal for investment incentives, impact activities, socio-economic efficiency of the project, preliminary assessment of environmental impacts (if any) in accordance with the law on environmental protection.
If the construction law stipulates the preparation of a pre-feasibility study report, the investor may submit a pre-feasibility study report instead of the investment project proposal;
- In case the investment project does not request the State to allocate or lease land or permit the change of land use purpose, a copy of the paper on land use rights or other documents determining the right to use the site shall be submitted for implementation. current investment project;
- The explanation of the technology used in the investment project, for the project subject to appraisal and consultation on technology in accordance with the law on technology transfer;
- Other documents related to the investment project, requirements on conditions and capacity of the investor as prescribed by law (if any);
- Power of Attorney for Viet An Law.
Place of application: Department of Planning and Investment where the head office is expected to be located.
Processing order: Within 15 days from the date of receiving the complete and valid dossier, the Department of Planning and Investment will issue the Investment Registration Certificate to the foreign investor. In case of refusal, the Department of Planning and Investment will reply in writing and clearly state the reason.
Step 2: Establish a software company with foreign capital in Vietnam
Apply for a Enterprise Registration Certificate:
Business establishment dossier includes:
- Application for business registration;
- Company charter;
- List of founding shareholders and shareholders being foreign investors (if it is a joint stock company); List of members (if it is a multiple-member limited liability company);
- Certified copy of identity card or citizen identification card or passport (if an individual); establishment decision, enterprise registration certificate or equivalent document and citizen identification card or identity card or passport with written authorization for capital manager in Vietnam (if an organization) ;
- A certified copy of the issued Investment Registration Certificate;
- Power of attorney for Viet An Law;
Place of application: Department of Planning and Investment where the enterprise’s head office is located.
Duration: 03 – 06 working days.
Disclosure of business registration information
- After being granted an enterprise registration certificate, an enterprise must make a public announcement on the National Business Registration Portal and pay fees as prescribed by law. The content to be announced includes the contents of the Business Registration Certificate and the following information:
- Business lines;
- List of founding shareholders; list of shareholders being foreign investors in the case of a joint-stock company (if any).
- Publication fee: The request for announcement of enterprise registration contents and payment of the fee for announcement of enterprise registration contents shall be made at the time the enterprise submits the enterprise registration dossier. In case the enterprise is not granted business registration, the enterprise will be refunded the fee for announcing the business registration content.
The publication fee is 100,000 VND according to the provisions of Circular 47/2019/TT-BCT.
- A seal includes a seal made at a seal engraving establishment or a seal in the form of a digital signature in accordance with the law on electronic transactions.
- The enterprise shall decide on the type, quantity, form and content of the seal of the enterprise, its branches, representative offices and other units.
- The management and keeping of the seal shall comply with the provisions of the company’s charter or regulations issued by the enterprise, branch, representative office or other unit of the enterprise with the seal. Enterprises use seals in transactions as prescribed by law.
Option 2: Contributing capital, purchasing shares, stakes to economic organizations providing software services
This method will help investors save more time and costs because they do not have to apply for an Investment Registration Certificate. However, investors must ensure the proportion of capital contribution of foreign investors in accordance with regulations. If choosing this method, investors only need to carry out the procedures for registration of capital contribution, purchase of shares, stakes at the Department of Planning and Investment. In addition, for activities that foreign investors are not allowed to carry out, it is necessary to consider and implement procedures to reduce industries.
Step 1: Foreign investors register to contribute capital, purchase of shares, stakes to economic organizations
- A written registration for capital contribution, purchase of shares, stakes includes the following contents: information on enterprise registration of the economic organization to which the foreign investor intends to contribute capital, purchase of shares, stakes; list of owners, members, founding shareholders, list of owners, members, shareholders being foreign investors (if any); rate of ownership of charter capital of foreign investors before and after capital contribution, purchase of shares, stakes to economic organizations; expected transaction value of the contract of capital contribution, purchase of shares, stakes; information on investment projects of economic organizations (if any);
- Copies of legal papers of individuals and organizations contributing capital, purchasing of shares, stakes and economic organizations with foreign investors contributing capital, purchasing of shares, stakes: Passport (as an individual); Business license or equivalent document and Passport of the person authorized to manage the capital portion in Vietnam (as an organization);
- Written agreement in principle on capital contribution, purchase of shares, stakes between foreign investors and economic organizations in which foreign investors contribute capital, purchase of shares, stakes or between investors foreign investment with shareholders or members of that economic organization;
- A copy of the certificate of land use rights of an economic organization in which foreign investors contribute capital, purchase of shares, stakes, if such economic organization has a certificate of land use right in the island, commune, border wards and towns and coastal communes, wards and towns; Other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial parks, export processing zones, hi-tech zones and economic zones established under the Government’s regulations.
- Power of Attorney for Viet An Law.
Place of application: Department of Planning and Investment where the economic organization’s head office is located.
Order and procedures: If the foreign investor’s capital contribution, purchase of shares, stakes meets the conditions on ownership ratio and investment form in accordance with the Schedule of Commitments and Vietnamese law, Within 15 days from the date of receipt of complete dossiers, the Department of Planning and Investment will notify in writing. In case the application does not meet the conditions, the Department of Planning and Investment will notify in writing and clearly state the reason.
Step 2: Carry out procedures for transferring shares, contributed capital and changing shareholders, members, and owners.
Tax policies applicable to foreign-invested software trading companies
Preferential policies on value-added tax for software production enterprises.
In order to implement policies to encourage information technology development and application of technology in life, software (regardless of production or business) software enterprises are not subject to value added tax and import tax. export.
Policy on corporate income tax for enterprises engaged in software production
Software production enterprises are entitled to corporate income tax incentives since their establishment as follows:
- From year 1 to year 4: Exempt from CIT.
- From year 5 to year 13 (next 9 years): 50% CIT reduction at 10% tax rate (5% payment).
- From year 14 to year 15 (tax rate 10% for 15 years): 10% tax rate.
- From year 16 onwards: Pay normal CIT.
Note: Enterprises trading in software trading are not eligible for the above corporate income tax incentives.
Value Added Tax (VAT) for software companies
Pursuant to Article 4 guiding the subjects not subject to VAT in Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding the implementation of the Law on Value-Added Tax and Decree No. 209/ 2013/ND-CP dated December 18, 2013 of the Government detailing and guiding the implementation of a number of articles of the Law on Value Added Tax (VAT), then: Computer software includes software products and services Software as prescribed by law is not subject to VAT.
Some questions related to the establishment of a company with foreign capital
What types of companies can foreign investors establish to do business in software services in Vietnam?
Depending on the number of members and the type of service, investors can choose one of the following types:
- One-member limited liability company;
- Multiple-member limited liability company;
- Joint Stock Company.
How much capital can foreign investors own in the company to trade in software services?
Foreign investors are allowed to own 100% of capital in a software service company in Vietnam.
Service to establish a company in Vietnam for software service with foreign capital of Viet An Law
- Consulting on the conditions for establishing a foreign-invested company: capital contribution ratio of foreign investors in Vietnam; conditions for business lines; project implementation location; pay attention to the procedures before and after the establishment of a foreign-invested company;
- Consulting to choose the right type of company for investors: Limited Company or Joint Stock Company;
- Advice on opening a capital transfer account, capital contribution term;
- Consulting and guiding investors to prepare necessary documents to establish a foreign-invested company;
- Consulting, drafting company establishment documents for investors;
- Representing investors to work with competent Vietnamese state agencies in the process of carrying out the procedures for establishing a company for investors (Apply for Investment Registration Certificate, Investment Registration Certificate, etc.) enterprises, Business Licenses, Licenses according to specialized requirements, making seals of legal entities, procedures after company establishment,…;
- Comprehensive, regular advice, accounting services, tax law package of activities arising in the process of doing business in Vietnam for investors.