Establishment of a foreign capital logistics company in Vietnam

Vietnam is a country with developed maritime activities due to its more than 3000km of sea routes as well as its central location in Southeast Asia. Moreover, Vietnam is also a country with many industrial parks carrying out large processing activities, so import and export activities are one of the main activities; leading to the development of the logistics industry. This is also the field is of interest to many foreign investors due to its great potential. However, logistics service business is a conditional business investment line listed in the  Investment Law 2020, so investors when investing  in establishing a logistics enterprise with foreign capital in Vietnam need to satisfy the conditions applicable to foreign investors specified in specialized laws and international commitments to which Vietnam participates.

Viet An Law Firm would like to summarize and send to Clients some legal information related to foreign investment activities in the field of logistics as follows:

Legal bases

• Vietnam’s specific commitments on services at the WTO
• Investment Law 2020;
• 2005 Commercial Law;
• Decree No. 31/2021/ND-CP dated March 26^th 2021;
• Decree No. 163/2017/ND-CP dated December 30^th

Logistics service, as defined in Article 233 of the 2005 Commercial Law, is a commercial activity whereby traders organize the performance of one or several tasks related to goods such as: receiving, transporting, storing, warehousing, customs clearance, other paperwork, etc  Customer consultation, packaging, symbol marking, delivery or other services related to goods as agreed with customers for remuneration.

Conditions for logistics service business

Traders providing specific services under logistics services must satisfy the conditions for investment and business as prescribed by law for such services.

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

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

In case of business in goods transport services under sea transport services (except inland transport)

• To establish companies operating fleets flying the Vietnamese flag or contribute capital, purchase shares or contributed capital in enterprises, in which the capital contribution ratio of foreign investors does not exceed 49%. The total number of foreign seafarers working on ships flying the flag of Vietnamese nationality (or registered in Vietnam) owned by these companies in Vietnam shall not exceed 1/3 of the ship’s boundary. The first captain or deputy must be a Vietnamese citizen.
• Foreign shipping companies may establish enterprises or contribute capital, purchase shares or contributed capital in enterprises.

In case of business in container handling services under sea transport support services

(Some areas may be set aside to provide services or apply licensing procedures in these areas), to establish an enterprise or contribute capital, purchase shares or contributed capital in the enterprise, in which the capital contribution ratio of foreign investors does not exceed 50%. Foreign investors are allowed to establish a commercial presence in Vietnam in the form of business cooperation contracts.

In case of business container handling and unloading services under services supporting all modes of transport

Except for services provided at airports, the establishment of enterprises or capital contribution, purchase of shares or contributed capital in enterprises, in which the capital contribution ratio of foreign investors does not exceed 50%.

In case of business in customs clearance services under sea transport support services

To establish an enterprise or contribute capital, purchase shares or contributed capital in the enterprise, including capital contributed by domestic investors. Foreign investors are allowed to establish a commercial presence in Vietnam in the form of business cooperation contracts.

Business case of other services, including the following activities

Bill of lading inspection, freight brokerage services, cargo inspection, sampling and weight determination services; services for receiving and accepting goods; services of preparing transport documents, establishing an enterprise or contributing capital, buying shares or contributed capital in the enterprise, including capital contributed by domestic investors.

In case of provision of freight transport services under inland waterway transport services, freight transport services under railway transport services

To establish an enterprise or contribute capital, purchase shares or contributed capital in the enterprise, in which the capital contribution ratio of foreign investors does not exceed 49%.

In case of business in goods transport services under road transport services

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

In case of provision of air transport services in accordance with the provisions of aviation law.

In case of business technical inspection and analysis services

• For services provided to exercise the Government’s competence in the form of enterprises in which capital contributed by domestic investors after three years or in the form of enterprises in which there is no restriction on capital contributed by foreign investors after five years, since private service providers are permitted to sell such services.
• It is forbidden to provide inspection and certification services for means of transport.
• The provision of technical analysis and inspection services is restricted to operating in geographical areas determined by competent authorities for security and defense reasons.

To make an investment in the logistics sector in Vietnam, foreign investors have two choices

• Establishment of a logistics company with foreign capital;
• Capital contribution, share purchase, capital contribution to economic organizations providing logistics services.

Option 1: Establish a logistics company with foreign capital:

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

Step 1: Investors apply for an Investment Registration Certificate

The dossier includes:

• A written request for implementation of an investment project;
• Documents on the legal status of the investor: a copy of the identity card or identity card or passport (if an individual); a copy of the certificate of incorporation or equivalent document and the passport of the capital manager (if it is an organization);
• An investment project proposal includes the following contents: investors implementing the project, objectives, scale and investment capital, capital mobilization plan, location, duration, investment progress, labor demand, proposal for investment incentives, impact assessment, socio-economic efficiency of the project;
• Documents proving the financial capacity of the investor include at least one of the following documents: financial statements of the last 02 years of the investor; commitment to financial support of the parent company; commitment to financial support of the financial institution; guarantee on the financial capacity of the investor; other documents proving the financial capacity of the investor;
• An investment project proposal includes the following principal contents: investor or investor selection form, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, implementation progress, information on the current status of land use at the project site and land use demand proposal (if any), demand for labor, proposal for investment incentives, impacts, socio-economic efficiency of the project, preliminary environmental impact assessment (if any) in accordance with the law on environmental protection.

Where the law on construction provides for the preparation of a pre-feasibility study report, the investor may submit the pre-feasibility study report instead of the investment project proposal;

• In case the investment project does not request the State to allocate land, lease land, permit change of land use purpose, submit copies of land use right papers or other documents determining the right to use the location for the implementation of the investment project;
• Contents of explanation of technologies used in investment projects, for projects subject to appraisal and collection of opinions on technologies 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.

Order of processing: Within 15 days from the date of receipt of a complete and valid dossier, the Department of Planning and Investment will issue an Investment Registration Certificate to the foreign investor. In case of refusal to grant a grant, the Department of Planning and Investment will reply in writing clearly stating the reason.

Step 2: Establish a foreign capital logistics company in Vietnam

Apply for an Enterprise Registration Certificate

A dossier of business establishment includes:

• Application for registration of the enterprise;
• The company’s charter;
• List of founding shareholders and shareholders being foreign investors (if they are joint-stock companies); List of members (if it is a two-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 identity card or identity card or passport with written authorization for the capital manager in Vietnam (if it is an organization);
• A certified copy of the granted Investment Registration Certificate;
• Power of attorney for Viet An Law Firm;

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

Duration: 03 – 06 working days.

Disclosure of contents of business registration information

• After being granted the Certificate of Business Registration, an enterprise must publicly announce it on the National Business Registration Portal and pay fees as prescribed by law. The contents of the announcement include the contents of the Certificate of Business Registration and the following information:
• Business lines;
• List of founding shareholders; list of shareholders being foreign investors, for joint-stock companies (if any).
• Publication fee: The request for publication of enterprise registration contents and payment of fees for disclosure of enterprise registration contents shall be made at the time the enterprise submits the enterprise registration dossier. In case an enterprise is not granted enterprise registration, the enterprise will be refunded the fee for announcing enterprise registration contents.
• The announced fee is VND 100,000 as prescribed in Circular 47/2019/TT-BCT.

Mark of the business

• 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 e-transactions.
• The enterprise decides on the type of seal, quantity, form and content of the seal of the enterprise, branches, representative offices and other units of the enterprise.
• The management and retention of the seal shall comply with the provisions of the company’s charter or regulations promulgated by the enterprise, branch, representative office or other unit of the enterprise bearing the seal. Enterprises use seals in transactions in accordance with the provisions of law.

Option 2: Capital contribution, share purchase, capital contribution to economic organizations 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 proportion of capital contributed by foreign investors in accordance with regulations. If choosing this method, 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 perform, it is necessary to consider and carry out procedures for reducing industries.

Step 1: Foreign investors register for capital contribution, purchase of shares, capital contribution to economic organizations

Company establishment dossiers include

• A document of registration of capital contribution, share purchase or purchase of contributed capital includes the following contents: information on enterprise registration of economic organizations to which foreign investors plan to contribute capital, purchase shares or purchase contributed capital; business lines; list of owners, members, founding shareholders, list of owners, members, shareholders being foreign investors (if any); the percentage of ownership of charter capital of foreign investors before and after capital contribution, share purchase or purchase of contributed capital to economic organizations; expected transaction value of contracts for capital contribution, share purchase, purchase of contributed capital; information on investment projects of economic organizations (if any);
• Copies of legal papers of individuals, organizations contributing capital, buying shares, purchasing contributed capital and economic organizations with foreign investors contributing capital, buying shares or purchasing contributed capital: Passport (if an individual); Business license or equivalent document and passport of the person authorized to manage the capital portion in Vietnam (if it is an organization);
• A written agreement in principle on capital contribution, share purchase or purchase of contributed capital between foreign investors and economic organizations in which foreign investors contribute capital, purchase shares, purchase contributed capital or between foreign investors and shareholders or members of such economic organizations;
• A copy of the land use right certificate of an economic organization in which foreign investors contribute capital, purchase shares or purchase contributed capital if such economic organization has a land use right certificate in islands, communes, wards, border towns and coastal communes, wards and townships; other areas affecting national defense and security, except economic organizations implementing investment projects in industrial parks, export processing zones, hi-tech parks or 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 is headquartered.

Order and procedures: If the capital  contribution, share purchase or capital contribution of foreign investors satisfies 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 clearly stating the reason.

Step 2: Carry out procedures for transferring shares, contributed capital and changing shareholders, members and owners.

Some questions related to the dossier of establishment of a foreign capital company

Which types of companies can foreign investors establish to provide logistics 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 Company;
• Limited liability companies with two or more members;
• Joint stock company.

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

Depending on the type of service, investors can invest 100% or enter into joint ventures with domestic investors according to a certain rate schedule.

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

Services of establishing foreign capital companies of Viet An Law Firm

• Advising on conditions for establishing a foreign capital company: capital contribution ratio of foreign investors in Vietnam; business conditions for trades; project implementation location; note the procedures before and after the establishment of a foreign capital company;
• Advising on choosing the right type of company for investors: Limited company or joint stock company;
• Advising on opening a capital transfer account, capital contribution duration;
• Consulting and guiding investors to prepare necessary documents to establish a foreign capital company;
• Advising and drafting company establishment documents for investors;
• Representing investors to work with competent state agencies of Vietnam in the process of carrying out company establishment procedures for investors (Application for Investment Registration Certificate, Business Registration Certificate, Business License,  License according to specialized requirements,  make legal entity seals, procedures after company establishment,…;
• Comprehensive, regular consultancy, accounting services, tax law package of activities arising in the process of conducting business in Vietnam for investors.