Establish foreign-owned logistics company in Vietnam

Vietnam is a country with developed maritime activities due to its more than 3000km by sea as well as its central location in Southeast Asia. Moreover, Vietnam is also a country with many industrial areas carrying out large processing activities, so import and export activities are one of the main activities; entailed the development of the logistics industry. This is also an area of interest to many foreign investors due to its great potential. However, logistics business is a conditional business investment industry listed in the Investment Law 2020, so investors when investing in establishing foreign-owned logistics enterprises in Vietnam need to satisfy the conditions applicable to foreign investors are prescribed in specialized laws and international commitments that Vietnam participates in. Viet An Law Firm would like to synthesize and send to customers some legal information related to foreign Vietnam investment activities in the field of logistics to set up a company in Vietnam as follows:

Legal documents:

• The Schedule of Specific Commitments in Services of Vietnam in WTO;
• The Law On Investment 2020;
• Commercial Law 2005;
• Decree No.31/2021/ND-CP of March 26, 2021;
• Decree No.163/2017/ND-CP of December 30, 2017.

Logistics services, as stipulated in Article 233 the Law on Commerce 2005, are commercial activities whereby traders perform one or some jobs including reception, transportation, warehousing, yard storage of cargoes, completion of customs procedures and other formalities and paperwork, provision of consultancy to customers, services of packaging, marking the delivery of goods, or other services related to goods according to agreements with customers to receive service charges.

Conditions for logistics service business

Traders dealing in specific services of logistics services must meet the conditions of investment and businesses by the provisions of law for such services.

Traders conducting part or all of their logistics business by electronic means connected to the Internet, mobile telecommunication networks, or other open networks, in addition to meeting the provisions of law for specific services specified in Decree 163/2017/NĐ-CP, must also comply with the regulations on e-commerce.

In addition to meeting the above conditions and regulations, foreign investors in foreign countries and territories that are members of the World Trade Organization may provide logistics services under the following conditions:

In case of providing freight services under sea freight services (except inland transport)

• Established companies operating fleets with Vietnamese flags or contributing capital, buying shares or contributed capital in enterprises, in which the capital contribution ratio of foreign investors must not exceed 49%. The total number of foreign crew members working on ships with Vietnamese nationality flags (or registered in Vietnam) owned by these companies in Vietnam must not exceed one-third of the ship’s boundaries. The first captain or vice-captain must be a Vietnamese citizen.
• Foreign shipping companies may establish enterprises or contribute capital, purchase shares, or contributed capital in enterprises.

In case of providing container handling services under the sea freight support services:

(Some areas may be reserved for providing services or applying licensing procedures in these areas), establishing enterprises or contributing capital, buying shares or contributed capital in enterprises, in which the capital contribution ratio of foreign investors must not exceed 50%. Foreign investors are permitted to establish a commercial presence in Vietnam in the form of business cooperation contracts.

In case of providing container handling services under the services supporting all means of transportation

Except for services provided at airports, establish enterprises or contribute capital, buy shares, or contributed capital in enterprises, in which the capital contribution ratio of foreign investors must not exceed 50%.

In case of providing clearance services undersea transport support services

Enterprises may be established or contributed capital purchased shares, or contributed capital in enterprises, including capital contributions of domestic investors. Foreign investors are permitted to establish a commercial presence in Vietnam in the form of business cooperation contracts.

Business cases of other services, including the following activities

Inspection of bills of lading, goods transport brokerage services, an inspection of goods and services of sampling and weight determination; services of receiving and accepting goods; services of preparing transport documents, being established enterprises or contributing capital, buying shares or capital contributions in enterprises, including capital contributed by domestic investors.

In case of providing freight services in inland waterway transport services, freight services under rail transport services

Enterprises may be established or contributed capital purchased shares, or contributed capital in enterprises, in which the capital contribution ratio of foreign investors is not more than 49%.

In case of providing freight services under road transport services

It is done through the form of business cooperation contracts or the establishment of enterprises or capital contribution, purchase of shares, or contributed capital in enterprises, in which the capital contribution ratio of foreign investors must not exceed 51%. 100% of enterprises drivers must be Vietnamese citizens.

In case of provision of air transport services, it shall comply with the provisions of the law on aviation.

Case of provision of technical analysis and inspection services

• For services provided to perform the Government’s competence, which is carried out in the form of enterprises, including capital contributed by domestic investors after three years or in the form of enterprises in which foreign investors’ contributed capital is not restricted after five years, since the private service provider is permitted to do business with such services.
• Inspection services and certificates for means of transport are not allowed.
• The provision of technical analysis and inspection services is restricted from operating in geographical areas determined by competent agencies for defense security reasons.

To make investments in logistics in Vietnam, foreign investors have two choices

• Establishment of foreign-owned logistics companies;
• Contribute capital, purchase shares, or capital portions to economic organizations providing logistics services.

Way 1: Establish a foreign-owned logistics company:

Note: Foreign investors must not own 100% of the contributed capital, so they must cooperate with Vietnamese partners.

Step 1: Investor applying for the investment registration certificate

The documents include:

• An application form for execution of the investment project;
• A document about the investor’s legal status: a copy of the identity card or id card or passport (if it is an individual); a copy of the establishment certificate or equivalent document and passport of the capital manager (if it is an organization);
• Proposal for the investment project including the following main contents: investors implementing projects, objectives, scale and investment capital, plans for capital mobilization, location, duration, investment schedule, labor needs, proposals on the enjoyment of investment incentives, assessment of the impact and socio-economic efficiency of the project;
• Documents proving the financial capacity of the investor including at least one of the following documents: the investor’s financial statements for the last two years; commitment of a parent company to provide financial support; commitment of a financial institution to provide financial support; guarantee for the investor’s financial capacity; other document proving the investor’s financial capacity;
• Proposal of investment project includes the following main contents: investor or form of investor selection, investment objectives, investment scale, investment capital and plan for capital mobilization, location, duration, implementation schedule, information on the current status of land use at the project location and proposal of land use demand (if any), labor needs, proposals for the enjoyment of investment incentives, impacts, socio-economic efficiency of the project, preliminary assessment of environmental impacts (if any) under the law on environmental protection.

In case the law on construction provides for the making of pre-feasibility study reports, investors may submit pre-feasibility study reports in place of investment project proposals;

• In case the investment project does not request the State to assign or lease land or permit the change of land use purposes, it shall submit a copy of the land use right papers or other documents defining the right to use the location for the implementation of the investment project;
• Contents of explanations on technologies used in investment projects for projects subject to appraisal and consultation on technologies under the law on technology transfer;
• Other documents related to investment projects, requirements on conditions and capacity of investors as prescribed by law (if any);
• Authorization Letter for Viet An

Place of application: Department of Planning and Investment where the head office is expected to be located.

Processing sequence: Within 15 days from the date of receiving the complete and valid documents, the Department of Planning and Investment will issue the Investment Registration Certificate to the foreign investor. In case of refusal to issue, the Department of Planning and Investment shall reply in writing and clearly state the reason.

Step 2: Establish a foreign capital logistics company in Vietnam

Apply for a Business Registration Certificate

Business establishment documents include:

• The enterprise registration application form.
• The Company’s Charter;
• The list of founding shareholders; the list of shareholders that are foreign investors. (if it is a joint-stock company); The list of members (if it is a two-member limited liability company);
• Certified copy of identity card or citizen’s identity card or passport  (if personal); to  decide  on  the establishment and certification of enterprise  registration  or equivalent documents and citizen identification cards or   identity cards or  passports enclosed with written authorization for capital managers in Vietnam (if it’s an organization);
• Certified copy of the granted investment registration certificate;
• Authorization Letter for Viet An Law Firm;

Place of application: Department of Planning and Investment where the enterprise headquarter is located

Duration: 03 – 06 working days.

Publication of contents of business registration information

• Enterprises after being granted the Enterprise Registration Certificate must publicly announce on the National Business Registration Portal and pay fees under the provisions of law. The contents of the announcement include the contents of the Enterprise Registration Certificate and the following information:
• Business sectors and trades;
• List of founding shareholders; list of shareholders being foreign investors of joint-stock companies (if any).

• Publication fee: The request for publication of the enterprise registration contents and payment of the fee for announcing the enterprise registration contents shall be made at the time the enterprise submits the enterprise registration documents. In case the enterprise is not granted enterprise registration, the enterprise will be refunded the fee for announcing the enterprise registration contents.
• The declared fee is VND 100,000 as prescribed in Circular 47/2019/TT-BCT.

Business seal

• Seals include seals made at establishments engraving seals or seals in the form of digital signatures per the law on e-transactions.
• The enterprise decides on the type, quantity, form, and contents of the seal of the enterprise, its branches, representative offices, and other units.
• The management and retention of seals shall comply with the provisions of the company’s Charter or regulations promulgated by enterprises, branches, representative offices, or other units of enterprises with seals. Enterprises use seals in transactions as prescribed by law.

Way 2: Contribute capital, buy shares, capital contribution to the economic organization providing logistics services

This method will help investors save more time and costs by not having to apply for an Investment Registration Certificate. However, investors must ensure the ratio of contributed capital of foreign investors under regulations. If this method is chosen, investors only need to carry out procedures for registration of capital contribution, purchase of shares, and contributed capital 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 carry out procedures for reducing industry.

Step 1: Foreign investors register capital contribution, share purchase, capital contribution to economic organizations

Company establishment documents include

• A registration form for capital contribution/purchase of shares/stakes, which contains: enterprise registration information of the business organization to which the foreign investors expects to contribute capital or whose shares/stakes are expected to be purchased by the foreign investors; business lines; list of owners, members and founding shareholders, list of owners, members and founding shareholders that are foreign investors (if any); holding of charter capital by foreign investors before and after the capital contribution/purchase of shares/stakes in the business organization; expected transaction value of the contract for capital contribution/purchase of shares/stakes; information about the business organization’s investment project (if any);
• Copies of legal documents of the individual or organization that contributes capital or purchases shares/stakes and of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors;
• A principal agreement on capital contribution or purchase of shares/stakes between the foreign investors and the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors or between the foreign investors and the shareholders or members of such business organization.
• A copy of the certificate of land use rights of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors if such economic organization has a land use right certificate in islands, communes, wards, border towns, and coastal communes, wards or townships; other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial zones, export processing zones, high-tech parks or economic zones established under the Government’s regulations.
• Authorization Letter for Viet An Law.

Place of application: Department of Planning and Investment where the economic organization is headquartered.

Sequence and procedures: If the capital contribution, purchase of shares or contributed capital of foreign investors meet the conditions on the rate of ownership and form of investment under the Schedule of commitments and laws of Vietnam, within 15 days from the date of receiving the complete documents, the Department of Planning and Investment will be notified in writing. In case the application does not meet the conditions, the Department of Planning and Investment shall notify in writing and clearly state the reason.

Step 2: Carry out procedures for transfer of shares, contributed capital, and change of shareholders, members, owners.

Some questions related to the application for the establishment of a foreign-owned company

What types of companies can foreign investors be established to provide logistics services in Vietnam?

Depending on the number of members and the type of services the investor is selected one of the following types:

• One Member Limited Liability Company;
• Two or more Members Limited Liability Company;
• Joint-stock company.

How much capital can foreign investors own in the company to provide logistics services?

Depending on the type of services, investors can invest 100% or joint venture with domestic investors according to a certain proportional schedule.

Specifically, the ratio of foreign investment capital in logistics service companies with specific services:

Viet An Law legal service

Viet An Law Law firm provides the legal service for Vietnam Investment to establish a company in Vietnam for logistics as follows:

• Advising on conditions for the establishment of foreign-invested capital companies: capital contribution ratio of foreign investors in Vietnam; business conditions of trades; the location of the project; note the procedures before and after the establishment of a foreign-invested company;
• Consultancy on choosing the appropriate type of company for investors: Limited Liability Company or Joint Stock Company;
• Advising on opening capital transfer accounts, capital contribution duration;
• Advising investors on the preparation of necessary documents for the establishment of foreign-invested companies;
• Advising and drafting company establishment documents for investors;
• Representatives of investors working with competent Vietnamese state agencies in the process of carrying out procedures for the establishment of companies for investors (Apply for investment registration certificates, enterprise registration certificates, business licenses, licenses according to specialized requirements, making legal marks and procedures after the establishment of an enterprise,…;

Comprehensive, regular consultancy, accounting services, tax law package activities in the process of doing business in Vietnam for investors.