Foreign investment in vietnam’s hospitality company

The demand for tourism is increasing, creating favorable conditions for tourism services to develop, especially accommodation services such as hotels. As a result, many foreign investors consider contributing capital to hospitality companies in Vietnam. But there are some legal procedures that these foreign investors have to know before thinking about how to run the business. The procedures to contribute capital in hospitality company are regulated by the Law on Investment  2014, Enterprise Law 2014, the Law on Tourism and the Commitments on Services of Vietnam in the WTO.

First is the conditions that foreign investors have to fulfill:

• The form of investment, operating scope, Vietnamese partners, and other aspects are conformable with the international agreements to which the Socialist Republic of Vietnam is a signatory.
  • On the form of investment: Investors are entitled to contribute capital, buy shares, or buy capital contributions of business organizations.
• The investor’s charter capital: According to WTO Protocol to Accession, there is no limit of the investor’s charter capital but with the condition: “for a period of 8 years from the accession date the services provided should be in parallel with investment in hotel construction, renovation, restoration or acquisition”. Since Vietnam has been a WTO signatory for 10 years, that condition is no longer effective. Foreign investor can now establish foreign-invested tourism accommadation service company.
• Due to the fact that tourism accommadation service such as hotel is a conditional business line, foreign investors have to carry out the procedure to register the capital contribution, purchase of shares, or capital contributions.

An application for registration of capital contribution or purchase of shares/capital contribution:

• A written for registration of capital contribution or purchase of shares/capital contributions, which specify information about the business organization to which investment is made; the holding of the foreign investor after making investment;
• A copy of the ID card or passport (if the investor is an individual); a copy of the Certificate of establishment or an equivalent paper that certifies the legal status of the investor (if the investor is an organization);
• A procuration or service contract (in case company’s legal presentative does not directly do the formality to file and receive the result).

Procedures for registration of capital contribution or purchase of shares/capital contributions:

• The investor shall submit the application prescribed above at the Service of Planning and Investment of the province where the headquarter of the business organization is situated;
• If the contribution of capital, purchase of shares/capital contributions satisfies the conditions of the Law on Investment 2014, the Service of Planning and Investment shall send a written notification to the investor within 15 days from the day on which the satisfactory application is received. If conditions are not satisfied, the Service of Planning and Investment shall notify the investor in writing and provide explanation.

After receiving the permit, foreigners shall contribute capital to the hospitality company. The company receiving the capital contribution will carry out procedures for changing its members/shareholders in accordance with the law. But if foreign investors wish to contribute capital to establish a foreign-invested hospitality company, the implementation procedure are more complicated:

The investors should focus on the conditions of the location, the facilities and equipment, fire safety systems, qualified security, food safety (in case the company provide catering food and drinks service).

First, the foreign investor has to apply for Certificate of Investment registration. Then establishing a hospitality company. Besides, the investor also need to apply for Certificate of fire safty systems and Certificate of qualified security and other certificate prescribed by law. Within three months after commencement of operation, the owners of tourist accommodation establishments shall submit dossiers of registration of the class of tourist accommodation establishments to competent state agencies in charge of tourism for appraisal and classification of their establishments.

Due to the fact that these procedures require many paperwork and take really long time, it would be easier for the foreigners to contact with a law firm for details.