Establish a foreign company in Vietnam for production activities

Foreign direct investment (FDI) is one of the important factors in a country’s economic development process. The role of foreign investment in our country’s socio-economic development has been proven in practice. So, what are the conditions for establishing a foreign-invested company with production activities? In this article, Viet An Law Firm will provide information on the above issue.

Legal basis

• Vietnam’s schedule of service commitments in the WTO;
• Law on Investment 2020;
• Law on Enterprise 2020;
• Decree 01/2021/ND-CP on business registration;
• Decree 31/2021/ND-CP detailing and guiding the implementation of several articles of the Investment Law;
• Decree 35/2022/ND-CP regulates the management of industrial parks and economic zones.

Conditions for establishing a company with foreign capital for production activities

Conditions on subject and nationality of foreign investors

Be an individual over 18 years old, an organization or enterprise with a nationality that is a member of the WTO, or has signed a bilateral treaty related to investment with Vietnam. However, in Vietnam, some industries only allow foreign investors who are legal entities to invest in Vietnam.

Vietnam’s commitments when joining the WTO

Production-related services (CPC 884 and 885): After 3 years from the date of accession, only joint ventures are allowed to be established, in which the foreign capital contribution ratio cannot exceed 50%. 5 years later, allowing the establishment of 100% foreign-owned enterprises.

Thus, currently, Vietnam has allowed foreign investors to establish manufacturing businesses with 100% foreign capital, with no restrictions on market access.

Conditions of industry and business

According to the provisions of the Investment Law 2020, production and business sectors that have not yet been accessed and have market access with market conditions on production activities for foreign investors include:

Conditions on the location of the production project

• Production locations must be consistent with the overall socio-economic development planning and environmental planning of the city and province. Investors in general are not allowed to operate production activities in concentrated residential areas or inner city areas, but can only be located in sunny areas, away from residential areas and areas planned for production such as industry. Currently, in all provinces and cities, there are many industrial parks with the right to operate production. Investors can contact industrial parks in the provinces/cities where the investor plans to locate for survey and evaluation. Many provinces only accept grant production projects to foreign investors in industrial parks/clusters such as Hanoi.
• In case the investor wishes to locate the factory in locations outside the industrial area, but far from residential areas, when applying for an investment registration certificate, the licensing agency will consult with the provincial People’s Committees to inspect planning issues and approve projects.
• In addition, large projects using large land areas of 50 hectares or more may require approval from the Government and National Assembly before being granted. This also shows that investors need to carefully research the legal regulations and required procedures when deciding to invest in Vietnam to have an appropriate investment plan.

Procedures for establish a foreign company in Vietnam for production activities

Step 1: Prepare documents to establish a foreign-invested company

For individual investors

For individual investors making investments in Vietnam, they need to meet the following conditions and prepare the following documents:

• A certified copy of the investor’s identity card or identification card or passport (In case the investor’s passport from abroad is sent to Vietnam, it must be notarized and consular legalized at a Vietnamese diplomatic representative in foreign countries);
• Confirm the investor’s bank account balance corresponding to the amount of capital expected to be invested in Vietnam (If a foreign bank confirms, it is necessary to provide a notarized copy and consular legalization at the Vietnamese diplomatic representative agency abroad);
• Lease contract for the company headquarters and project location, Documents proving the lessor’s leasing rights (Certificate of land use rights, Construction permit, Certificate of functional business registration real estate business of the lessor, or equivalent documents).

For institutional investors

For investors who are organizations investing in Vietnam, they need to meet the following conditions and prepare the following documents:

• Copy of Establishment Certificate or other equivalent document confirming the legal status of the investor (Copy must be notarized and consular legalized at Vietnamese diplomatic representative agency abroad);
• Copy of one of the following documents: the investor’s 02 most recent financial statements; commitment to financial support from the parent company; commitment to financial support from financial institutions; guarantee of the investor’s financial capacity; Confirm the investor’s bank account balance corresponding to the capital expected to invest in Vietnam (notarized copy, consular legalization at Vietnamese diplomatic representative agency abroad);
• Notarized passport of the legal representative of the company abroad (The copy must be notarized and consular legalized at the Vietnamese diplomatic representative agency abroad);
• Notarized passport of the company’s legal representative in Vietnam (If the representative is abroad, the copy of the passport must be notarized and consularly legalized at a Vietnamese diplomatic mission agency). abroad);
• Head office lease contract, Documents proving the lessor’s leasing rights (Certificate of land use rights, Construction Permit, Enterprise registration certificate with real estate business function of the lessor or equivalent documents).
• If the project uses technology, it must be accompanied by an explanation of technology used for the specified project, including the following contents: technology name, technology origin, technology process diagram; Main technical parameters, usage status of main machinery, equipment, and technological lines.

Step 2: Apply for an Investment Registration Certificate

The dossier for issuance of the Investment Registration Certificate is as follows:

• Document requesting implementation of the investment project;
• Copy of identity card/ID card or passport for individual investors; Copy of Certificate of Establishment or other equivalent document certifying legal status for institutional investors;
• Investment project proposal includes the following contents: investor implementing the project, investment objective, investment scale, investment capital, and capital mobilization plan, location, term, investment progress, labor needs, proposals for investment incentives, assessment of impact and socio-economic efficiency of the project;
• Copy of one of the following documents: Financial statements of the investor for the last 2 years; commitment to financial support from the parent company; commitment to financial support from financial institutions; guarantee of the investor’s financial capacity; Documents explaining the investor’s financial capacity;
• Propose land use needs; In case the project does not request the State to allocate land, lease land, or allow a change of land use purpose, submit a copy of the location lease agreement or other documents certifying that the investor has the right to use the location for implementation. current investment project;
• Explanation on the use of technology in investment projects for projects using technology on the List of technologies restricted from transfer according to the provisions of the law on technology transfer, including the following contents: name of technology, technology origin, technology process diagram; Main technical parameters, usage status of main machinery, equipment, and technological lines.

Location to apply for Investment Certificate

The place to receive and issue Investment Registration Certificates for investment projects is specified according to each type of investment project as follows:

 Issuance of Investment Registration Certificate:

Within 15 days from the date of receiving complete documents, the investment registration agency shall issue an Investment Registration Certificate; In case of refusal, the investor must be notified in writing and clearly state the reason.

Step 3: Apply for Enterprise Registration Certificate

Companies with foreign investment, including projects located in industrial parks or projects outside industrial parks, after being granted an Investment Registration Certificate, will carry out procedures for issuance of a Business Registration Certificate at the Business Registration Office – Department of Planning and Investment where the company’s headquarters is located.

Documents for establishing a foreign-invested company:

According to the provisions of the Enterprise Law 2020, Chapter IV of Decree No. 01/2021 on business registration orders and procedures for various types of business. Similar to a company with Vietnamese capital, a company with foreign investment depends on the type of company the customer wants to establish: limited liability company, joint stock company, or other type of business, Luat Viet An will draft the corresponding documents, usually the company establishment documents include the following documents:

• Application for business registration.
• Draft company charter;
• List of members for a multiple-member LLC or list of founding shareholders for a joint stock company;
• Valid copy of one of the following personal identification documents:
• For individuals: Valid ID card or passport or citizen identification card;
• For organizations: Enterprise registration certificate for organizations and attached personal identification documents of the organization’s authorized representative.
• Decision on capital contribution, Document on the appointment of an authorized representative for company members, and company shareholders who are organizations;
• Other documents in special cases (Viet An Law Firm will advise customers to prepare according to the provisions of law);
• Contract to provide legal services (Power of Attorney) to authorize Viet An Law Firm to perform business establishment services.

Submit documents to establish a company and pay the business information disclosure fee

After fully preparing the application for an Enterprise Registration Certificate, Viet An Law Firm applies for an Enterprise Registration Certificate via the National Business Registration Portal.

Unlike before, the procedure for paying fees for publishing business registration information will be carried out in parallel with the procedure for submitting documents to establish a company. Therefore, as soon as the company is granted an Enterprise Registration Certificate, it will also have its business information published on the National Business Registration Portal.

Issuance of Enterprise Registration Certificate

Within 03 – 05 working days from the date of receiving complete documents, the business registration agency will issue an Enterprise Registration Certificate.

Step 4: Engrave the company seal.

As soon as there is an Enterprise Registration Certificate which is also the company tax code, the company will proceed to engrave the legal entity mark.

Similar to companies with Vietnamese capital, foreign-invested companies engrave their seals and are responsible for the use of the company’s legal seal.

Executive time: 01 day.

Step 5: Open a foreign direct investment capital account

After being granted an Investment Registration Certificate or Enterprise Registration Certificate, a foreign-invested company must open a direct investment capital account in foreign currency at 01 (one) permitted bank to carry out the implementation of legal revenue and expenditure transactions in foreign currency related to foreign direct investment activities in Vietnam.

Step 6: Make capital contributions according to the capital contribution commitment schedule in the Investment Certificate

Foreign investors and Vietnamese investors in foreign-invested companies are allowed to contribute investment capital in foreign currency and VND according to the investor’s capital contribution level in the Investment Registration Certificate into the foreign direct investment account. Cash investment capital contributions of foreign investors and Vietnamese investors in foreign-invested companies must be made through transfer to a direct investment capital account. The foreign direct investment capital account is also an account later when the company operates a profitable business through which investors can transfer profits to pay investors abroad.

The capital contribution progress is committed in the business registration, but must not exceed 90 days from the date of issuance of the Business Registration Certificate.

Step 7: Apply for a business license or sub-license for some conditional business lines

For conditional business lines, in addition to immediately carrying out the procedures for granting the Investment Registration Certificate, the investor must prove and submit the conditions to be granted the Investment Certificate after completing procedures for granting investment certificates and enterprise registration certificates foreign-invested companies need to obtain to qualify for operation.

Step 8: Report on the status of investment project implementation

After being granted an Investment Registration Certificate, during operation, a foreign-invested company must make periodic reports monthly, quarterly, the first 6 months of the year, and annually on the project implementation situation. investment project. Currently, the submission of reports by foreign-invested companies to the Department of Planning and Investment will be through the national website: https://fdi.gov.vn .

Clients request to establish a foreign company in Vietnam for production activities, please contact Viet An Law Firm for the best support!