Establish Japanese companies in Vietnam

Vietnam and Japan officially established diplomatic relation on September 21^st 1973, lasting for nearly 45 years of development and cooperation. In accordance with statistics reports by the Foreign Investment Agency, in the first 4 months of 2017, the total registered foreign capital is 4.88 billion USD, in which capital from Japan is 1.85 billion USD, ranking second and making 17.54% of the total registered capital. In the current years, Japan is always one of the countries invest in Vietnam the most. Investment sectors Japanese investors pay much attention are manufacturing, construction, industrial zone infrastructure, machines and automobile devices and green agriculture. Vietnam-Japan Economic Partnership Agreement (VJEPA) signed on December 25^th, 2008 and took effects on October 1^st, 2009 is considered as a great milestone encouraging trade relation among two countries. According to Article 16 of this Agreement, Vietnam and Japan promise to cut customs duty on products from both Parties following the promised schedules. Simultaneously, the laws of Vietnam has some new regulations on investment; hence, the investment flows from Japan to Vietnam even increase more. However, with many years of experiences in consulting and working with Japanese Clients, Viet An Law Firm has realized that foreign investors still have troubles with investment procedures. In order to give our Clients a hand, Viet An Law Firm collects and provides some information as follows:

Legal documents need to be read:

• Vietnam Japan Economic Partnership Agreement (VJEPA);
• The Law on Investment 2014;
• The Law on Enterprises 2014.

When investing in Vietnam, investors may establish Japanese companies in Vietnam. Japanese investors may own up to 100% or less of the charter capital, detailed as follows:

• 100% Japanese-owned companies: when VJEPA and the laws of Vietnam do not regulate on foreign capital limitations;
• Japanese-owned companies: investors shall comply with any regulation on foreign capital limitations stipulated in VJEPA (if any). If VJEPA does not stipulate, investors shall base on specialized laws of Vietnam to determine the maximum foreign capital ownership.

The process for establishment of Japanese companies in Vietnam:

Step 1: Apply for the Investment Registration Certificate

• A written request for permission for project execution;
• Individual investors: copies of ID or passport of each individual;
• Organization investors: copies of Establishment Certificate or equivalent paper confirming the legal status;
• Project proposal specifying: the investors, project’s objectives and scale; capital and capital rising method; location, duration and schedule of the project; labor demand;
• Copies of financial statements in the current 02 years or financial support commitment of the parent company or financial institutions; guarantee for investors’ financial capacity, description of investors’ financial capacity; request for investment incentives; assessment of socio-economic effects of the project;
• Land use demand. If the project does not use land allocated or leased by the State or does not require the State to change land use purpose, the copies of the lease agreement or equivalent papers proving that investors have rights to use the location shall be submitted;
• If the project use any technology in the List of technologies restricted from transfer, investors have to submit the explanation on technology transfer.

Submit the application at: The Department of Planning and Investment.

The process: Within 15 days from the receipt date of the valid application, the Department of Planning and Investment will grant the Investment Registration Certificate to foreign investors. If the Department of Planning and Investment refuse to grant, they will respond in notices and explain the reasons.

Step 2: Establish Japanese companies in Vietnam

Apply for the Business Registration Certificate:

An application includes:

• A written request for business registration;
• The Articles of Associates;
• The list of members of the multi-member limited liability company or the list of partners of partnership;
• Notarized copies of ID or valid passport of each individual member; notarized copies of the Business Registration Certificate/Establishment Certificate of each organization member; notarized copies of ID or valid passport of each legal representative of each organization;
• Power of attorney (Clients grant to Viet An);
• Certificate of Investment Registration of foreign investors.

Submission place: The Department of Planning and Investment.

Duration: 03 – 06 working days.

Announce the business registration contents:

• Business registration information must be announced publicly on the National Portal of Business Registration within 30 days from the date of issuance of the Business Registration Certificate. The contents of the announcement are all the information stated in the Business Registration Certificate.
• Notice: In accordance with Clause 1 Article 26 of the Decree 50/2016/NĐ-CP, if the company does not announce or lately announce the business registration information on National Portal of Business Registration, they are fined an amount of money from 1.000.000 VND to 2.000.000 VND.

Engrave the seal and publish the seal sample:

• The company can authorized Viet An Law Firm or can engrave the seal by itself then announce the seal sample to the Department of Planning and Investment. The company is allowed to decide about the appearance, quantity and the contents of the deal but it must contain the name and the code of the company;
• After receiving the announcement on the seal sample, the Business Registry Office shall grant the receipt to the company, post the announcement on the National Portal of Business Registration and issue the Announcement on Publication of the seal sample to the company.

Some issues need to be paid attention:

In order to determine whether investors can establish 100% Japanese-owned companies or not, they need to base on intended business sectors of the company in Vietnam. Therefrom, we shall come to a conclusion based on specific regulations.

Commitments in services among two countries are recorded in Annex 5 – Vietnam Japan Economic Partnership Agreement (VJEPA). For example, regarding Medical and Dental Services (CPC 9312), Japanese investors may establish 100% Japanese-owned with the minimum investment capital must be at least 20 billion USD for a hospital, 2 million USD for a policlinic and 200,000 USD for a specialty unit.

Besides that, other issues that Japanese and foreign investors have to face are sublicense and business conditions. Sublicenses and business conditions are stipulated in specialized laws of Vietnam. Depending on each business sector, investors shall rely on different laws. For example, regarding distribution services, foreign companies as well as Japanese companies in Vietnam shall apply for the Business License at the Department of Industry and Trade of provinces.

When Clients provide us more detailed information about intended business sectors, Viet An Law Firm shall research and give specific advice on foreign capital limitations of Japanese, business sectors and sublicenses if any.

Another method which is much simpler than establishing Japanese companies is to contribute capital, purchase shares, purchase capital contributions to Vietnamese companies which are established and operated legitimately. Its procedures are simple and save time as investors shall not apply for Investment Registration Certificate except for registration of capital contribution, shares purchase, capital contribution purchase the Department of Planning and Investment. However, please notice that although investing through this method, Japanese investors shall comply foreign capital limitations, business conditions and sublicenses if any.

Step 1: Foreign investors register to contribute capital, purchase shares/capital contributions to the company

Application includes:

• Application for capital contribution, shares/capital contributions purchase indicating: the information of the target company, the foreign capital contribution after completing the procedures;
• Copies of the ID or passport of each individual investor; copies of Establishment Certificate or equivalent papers confirming the legal status of each investor who is an organization.

Submission place: The Department of Planning and Investment.

The process: If the capital contribution, shares purchase, capital contribution purchase of foreign investors comply with the regulations on investment forms and foreign capital contribution, within 15 days from the date of receipt of the valid application, the Department of Planning and Investment will grant a written announcement. If the application does not satisfies conditions, the Department of Planning and Investment will grant a written announcement providing reasons and explanation.

Step 2: Transfer the shares, capital contributions and change the shareholders or members of the company

Foreign investment services in Viet An Law Firm:

• Consult about regulations and procedures related to establishment of Japanese companies in Vietnam, such as: apply for the Investment Registration Certificate, Business Registration Certificate, documents need to be prepared, business conditions of each sector, sublicenses, investment incentives…;
• Draft and submit the application and deal with state-authorized agencies when Clients grant authorization;
• Consult about after-establishing issues: Japanese employees, Vietnamese employees, contracts, intellectual property, tax, accounting…

If you need advice about regulations and procedures related to establishment of Japanese companies in Vietnam, please feel free to contact Viet An Law Firm for more information!