Establishment of foreign-invested enterprise in Vietnam

By 2020, it is considered that there will be quite a lot of legal documents on mechanisms and policies on investment incentives in economic sectors in Vietnam for foreign investors to take effect and the regulations have just come into effect. Accordingly, businesses entering 2020 need to understand the new regulations and investment incentives when investing in setting up a company in Vietnam. Wishing to best support foreign investors with the legal corridor and procedures as well as provide legal services to establish foreign-invested companies in Vietnam. Viet An Law Firm details the procedures for establishing a foreign-invested enterprise as follows:

A – Objects of application on the establishment of foreign-invested companies:

Foreign investors must follow the procedures for issuing an Investment Certificate when establishing a foreign-invested company, including:

1. The company has from 1% to 100% of the capital contributed by foreign investors from the beginning;
2. Foreign-invested companies (which has been granted Investment Registration Certificates in Vietnam) continue to set up more economic organizations; investment in capital contribution, purchase of shares or contributed capital of economic organizations; investing under BCC in one of the following cases must carry out the procedures for granting Investment Certificates:

• Newly establish or contribute capital from 1% to 100% of the company’s charter capital;

3. Cases in which foreign investors contribute capital or purchase shares in Vietnamese companies that already have business registration certificates (including cases where up to 100% of company’s contributed capital is bought) are not required to implement procedures for issuance of Investment Registration Certificates. Except for companies doing business in the field of education and training, if foreign investors purchase from 1% of the contributed capital, they need to apply for an Investment Registration Certificate.
4. For companies doing business in the field of retailing goods to consumers or setting up goods retail establishments, it is necessary to apply for additional business licenses;
5. Provisions for foreign-invested companies established before 1st July, 2015: If foreign-invested economic organizations already established in Vietnam have new investment projects,  they will be allowed to carry out procedures for the implementation of that new investment project without establishing a new economic organization.

Note: In 2020, for foreign investors contributing capital with Vietnamese investors to set up companies (i.e. joint ventures between Vietnamese and foreign investors), the optimal plan to minimize procedures should follow this order:

• Step 1: Establish Vietnamese companies;
• Step 2: Apply for an eligible business license for conditional trades;
• Step 3: Transfer the contributed capital to foreign investors;
• Step 4: Apply for a business license (The procedure for granting a Business License only applies to companies doing business in the field of retailing goods to end-consumers or setting up a retail outlet).

For this plan, the company with foreign-invested capital, even if its members are foreign investors, does not have to carry out the procedures for granting investment certificates. Enterprises without investment certificates will carry out a reduced procedure when there is a change in the contents of business registration with government agencies. Specifically:

• The simple procedure of change: Having only an Enterprise Registration Certificate, a company with foreign-invested capital only has to perform the procedure when there is a change like a Vietnamese enterprise;
• There is no obligation to report the project implementation situation, investment supervision report, …;
• It is not necessary to carry out procedures for updating investment information on the investment management system.

B – Procedures for granting Investment Registration Certificate

For investment projects subject to investment policy decision, the investment registration agency shall grant an Investment Registration Certificate to investors within 05 working days after receiving an investment policy decision.

For investment projects not subject to investment policy decision, investors shall carry out the procedures for granting of Investment Registration Certificates according to the following provisions:

1.  Implementation process:

• Before carrying out the procedure for issuing the Investment Registration Certificate, the investor shall declare information about the investment project online on the National portal for foreign investment. Within 15 days from the date of online filing, the investor submits the application files for granting the Investment Registration Certificate to the Investment Registration agency.
• After the Investment Registration Agency receives the application, the investor is provided an account to access the National portal for foreign investment to monitor the application processing.
• The Investment Registration Agency uses the National portal for foreign investment to receive, process and return results of investment registration documents, update application processing and issue codes to investment projects.

2.  Documents submitted by the Investor to the Investment Registration Agency include:
   • Application for investment project implementation;
   • Copies of identity card/citizen identity card or passport for individual investors; copy of the Establishment Certificate or other equivalent documents certifying the legal status for institutional investors;
   • Proposal of investment project including the following contents: investor implementing the project, investment objectives, investment scale, investment capital and capital raising plan, location, duration, schedule of investment, demand for labor, proposal of investment incentives, impact assessment, socio-economic efficiency of the project;
   • Copies of one of the following documents: financial statements of the last 02 years of the investor; financial commitment of the parent company; financial institutions’ commitment to financial support; guarantee of financial capacity of the investor; documents explaining the financial capacity of the investor;
   • Office lease agreement, proof of the lessor’s right (Certificates of land use rights, construction permit, business registration certificate with the real estate business function of the lessor or equivalent documents).
   • Proposal of land use demand; In case the project does not request the Government to allocate, lease land, or permit the change of land use purpose, then submit a copy of the venue leasing agreement or other documents certifying that the investor has the right to use the location to implement the investment projects;
   • Explanation on technology use for investment projects for projects using technology on the List of technologies restricted from transfer as prescribed by law on technology transfer, including: technology name, technology origin, technology process diagram; main specifications, use status of main machines, equipment and main technology lines;
   • BCC contracts for investment projects in the form of BCC contracts.

3.  Duration for processing documents:

• Within 15 days after receiving a complete dossier, the Investment Registration Agency shall grant an Investment Registration Certificate; In case of refusal, the Agency must notify investor in writing, clearly stating the reason therefor.

4.  Contents of an Investment Registration Certificate:

• The code of the investment project.
• Name and address of the investor.
• Name of the investment project.
• Objectives and scale of investment projects.
• Location of investment project; project area used.
• Investment capital of the project (including capital contributed by investors and mobilized capital), progress of capital contribution and capital mobilization.
• Operation duration of the project.
• Progress of investment project implementation: progress of construction and putting the work into operation (if any); the progress of the project’s operational objectives and major items, in case the project is implemented in each stage, investor must specify the objectives, duration and operation contents of each stage.
• Incentives, investment support and grounds, conditions for application (if any).
• Provisions for investors implementing the project.
• Conditions for the investor to implement the project (if any).

5.  Competence to grant Investment Certificates:

Department of Planning and Investment shall receive, grant, adjust and revoke Iinvestment Registration Certificate for the following investment projects.:

• Investment projects outside industrial parks, export processing zones, hi-tech parks and economic zones;
• Investment projects on development of infrastructure of industrial parks, export processing zones and hi-tech parks and investment projects in industrial parks, export processing zones and hi-tech parks in localities where management boards of industrial parks, export processing zones and high-tech zones have not yet been established.

Management boards of industrial parks, export processing zones, hi-tech parks and economic zones receive, issue, adjust and revoke Investment Registration Certificates for investment projects in industrial parks, export processing zones, hi-tech parks and economic zones, including:

• Investment project on development of infrastructure of industrial parks, export processing zones and hi-tech parks;
• Investment projects implemented in industrial parks, export processing zones, hi-tech parks and economic zones.

Department of Planning and Investment of where the investor locates or intends to locate its head office or executive office to implement an investment project receives, issues, adjusts and revokes an Investment Registration Certificate for the following investment projects:

• Investment projects implemented in many provinces and cities under (the jurisdiction of) the central government;
• Investment projects implemented simultaneously inside and outside industrial parks, export processing zones, hi-tech parks and economic zones.

C – Procedures for establishing a company after the issuance of an Investment Registration Certificate

For limited liability companies:

Dossier include:

• Application for business registration.
• Company charter.
• List of members (for limited liability companies with two or more members).
• Copies of the following documents: Citizen identity card, identity card, passport or other lawful personal identification of the individual members;
• Establishment decision, Enterprise Registration Certificate or other equivalent document of the organization and the authorization document; Citizen identity card, identity card, passport or other lawful personal identification of the authorized representative of a member being an organization
• For members being foreign organizations, the copy of the Enterprise Registration Certificate or equivalent document must be consular legalized;
• Decision to contribute capital and appoint manager; List of authorized representatives (for members being organizations);
• The Investment Registration Certificate has been issued for the investor.

For joint stock company:

Dossier includes:

• Application for business registration.
• Company charter.
• List of founding shareholders and shareholders being foreign investors (list of authorized representatives if the shareholder is an organization)
• Copies of the following documents: Citizen identity card, identity card, passport or other lawful personal identification of the individual members;
• Establishment decision, Enterprise Registration Certificate or other equivalent document of the organization and the authorization document; Citizen identity card, identity card, passport or other lawful personal identification of the authorized representative of a member being an organization
• For members being foreign organizations, the copy of the Enterprise Registration Certificate or equivalent documents must be consular legalized;
• Decision to contribute capital and appoint manager; List of authorized representatives (for members being organizations);
• The Investment Registration Certificate has been issued for the investor.

Engrave and announce the company’s seal

The company engrave and announce the use of seal on the National Portal for Business Registration.

The company reserves the right to decide on the seal sample and the number of seals.

Receiving agency: Business Registration Office – Department of Planning and Investment where the enterprise is headquartered.

Processing time: About 5-8 working days.

D – Procedures for issuance of a Business License (Only apply to companies doing business in the field of retailing goods to consumers or setting up retail outlets).

Conditions for granting business licenses

In case foreign investors belong to countries or territories participating in treaties to which Vietnam is a member and commits to open the market for goods trading and activities directly related to the purchase of goods.

• Satisfying market access conditions in international treaties to which Vietnam is a member;
• Having a financial plan to carry out the application for a Business License;
• There is no overdue tax debt in case the company has been established in Vietnam for 1 year or more.

In case foreign investors do not belong to countries or territories participating in treaties to which Vietnam is a member

• Satisfying market access conditions in international treaties to which Vietnam is a member;
• Having a financial plan to carry out the application for a Business License;
• There is no overdue tax debt in case the company has been established in Vietnam for 1 year or more.
• Meet the following criteria:

• Compliance with specialized laws;
• In accordance with the level of competition of domestic enterprises in the same field of operation;
• Ability to create jobs for domestic workers;
• Capability and level of contribution to the Government budget.

Dossier for granting Business License

• Application for business license (Form 01 in the Appendix enclosed herewith this Decree).
• The explanation contains:

• An explanation for conditions of issuing Business License corresponding to provisions as prescribed in Article 9 of this Decree;
• Business plan: Describing the content, method of conducting business activities; presenting business plan and market development; demand for labor; impact assessment, socio-economic efficiency of business plans;
• Financial plan: Report the results of business activities on the basis of the audited financial statements of the latest year in case it has been established in Vietnam for 1 year or more; explanation of capital, capital origins and capital raising plan; enclose financial documents;
• Business operation of goods trading and activities directly related to goods trading; the financial status of foreign-invested economic organizations up to the time of applying for Business license.

• Documents of tax authority proving that the tax debts are no longer overdue.
• Copy: Enterprise Registration Certificate; Investment Registration Certificate of projects on goods trading and activities directly related to goods trading (if any).

Receiving agency: Department of Industry and Trade where the enterprise is headquartered.

Processing time: About 30-45 working days.

Service for establishing foreign-invested enterprises of Viet An Law Firm:

• Consulting on the rate of capital contribution of foreign investors in Vietnam;
• Consulting on choosing the right type of company for investors: Limited liability company or joint-stock company, address of head office, capital, business lines, the opening of capital transfer account, capital contribution duration;
• Consulting on conditions and guiding investors to prepare necessary documents for setting up foreign-invested companies;
• Consulting, drafting documents to establish company for investors;
• Authorized representative of investors working with Vietnamese competent authorities in the process of establishing enterprise for investors (Applying for Investment Registration Certificate, Enterprise Registration Certificate, making seal of legal entity, announcing seal sample, procedures after establishing the company, consultancy services on tax regulations – accounting, transfer of profits abroad, labor – insurance, issues related to ownership of intellectual property …;
• Comprehensive consultancy about activities arising in the process of doing business in Vietnam.