How to set up a company in Vietnam for foreign investors

How to set up a company in Vietnam for foreign investors

Understanding and properly implementing the process and regulations of each form of investment will help investors save more time and costs.

Forms of foreign direct investment

– Establishing a company with 100% foreign capital: Foreign investors invest 100% of their capital since the beginning of company establishment in Vietnam. Enterprises are owned by foreign investors, investors are self-managed and responsible for business results. Transnational companies often set up companies in this form.

– Establishing a joint venture:The enterprise was established in Vietnam on the basis of a joint venture contract between a Vietnamese company and a foreign company, creating conditions for foreign investors to easily penetrate the Vietnamese market effectively.

– Buying shares and capital contributions of Vietnamese companies:Foreign investors can contribute capital from 1-100% of capital to a Vietnamese company. Depending on the field of operation of the business, there will be regulations limiting the rate of capital contribution of foreign investors.

– Business cooperation contract (BCC):is a form of investment signed between investors for business cooperation and profit sharing without establishing a legal entity. This is the simplest form, does not require cumbersome legal procedures, but foreign investors must depend on the legal entity of the host country, making it difficult to effectively control BCC activities.

Establishing a 100% foreign owned company

Establishing a 100% foreign owned company

Step 1: Register the investment intention at the competent authority

Dossier of application for approval of investment intention of the People’s Committee of the province includes:

  • A written request for permission for execution of the investment project;
  • 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);
  • An investment proposal that specifies: investor(s) in the project, investment objectives, investment scale, investment capital, method of capital rising, location and duration of investment, labor demand, requests for investment incentives, assessment of socio-economic effects of the project;
  • Copies of any of the following documents: financial statements of the last two years of the investor; commitment of the parent company to provide financial support; commitment of a financial institutions to provide financial support; guarantee for investor’s financial capacity; description of investor’s financial capacity;
  • Demand for land use; Office lease agreement, documents proof of the lessor’s right (Certificate of land use right, construction permit, certificate of business registration with the function of real estate business of the lessor or equivalent documents);
  • Explanation for application of technologies to the project mentioned in the List of technologies restricted from transfer under the law on technology transfer, which specifies: names of technologies, origins, technology process diagram, primary specifications, conditions of machinery, equipment and primary technological line;

Step 2: Apply for the Investment Registration Certificate

A dossier needed to apply for the Investment Registration Certificate includes the same documents as an investment intention registration application.

Investors submit dossiers to competent authorities as follows:

  • If the company is located in an industrial park: submit it to the Management Board of Industrial Parks.
  • If the company is located outside the industrial park: submit it at the Department of External Economic Relations – Provincial Department of Planning and Investment.

Duration of application: within 15 working days. In case the application is rejected, this agency must notify the investor in writing and explain the reason.

Step 3: Apply for the Business Registration Certificate

The investor shall carry out the procedures for Business Registration Certificate similar to the procedure for establishing a Vietnamese capital company with the following documents:

  • An application form for business registration.
  • The company’s charter.
  • A list of members (for limited liability company) or stakeholders (for joint-stock company)
  • Certified copies of:

Copies of the ID card or other ID papers of members being individuals;

Decision on Establishment, Business Registration Certificate, or an equivalent document of the organization and the letter of authorization; the ID card or other ID papers of the authorized representatives of members being organizations. If a member is a foreign organization, the copy of the Certificate of Business registration or an equivalent document must be consularly legalized;

  • Decision of capital contribution and appointment of managers; List of authorized representatives
  • The Investment registration certificate of the foreign investors

Authority to issue the Certificate of Business Registration: at the Department of Planning and Investment of the province where the company’s head office is located.

Step 4: Announcement of business registration information

After an enterprise is granted an enterprise registration certificate, it must publicly announce it on the National Business Registration Portal and provide the following information:

  • Line of Business;
  • List of founding shareholders and shareholders being foreign investors for joint-stock companies.

The fee for announcing the contents of business registration is 100,000 VND and is done at the Business Registration Agency – Provincial Department of Planning and Investment.

Step 5: Engraving the company’s seal

The enterprise conducts seal engraving at one of the licensed seal engraving agencies.

According to the provisions of the Enterprise Law 2020, which takes effect from January 1, 2021, the enterprises themselves engrave their own seals, are solely responsible for the use of the company’s legal seal, do not have to publish a notice as before.

Step 6: Issuance of a Business License or an Operational Eligibility License

The business license is only applicable to companies operating in the field of retailing of goods.

For some industries, after completing the procedures for establishing a company, foreign investors must apply for permits related to operating conditions such as: Food hygiene and safety license for food business enterprises, Training license for educational business establishments…

Procedures for establishing a foreign-invested company in the form of capital contribution or share purchase

Establishing a foreign - invested company

Step 1: Establishing a Vietnamese capital company

Foreign investors can only contribute capital to buy shares when there is a company with 100% Vietnamese capital.

Step 2: Dossier for registration of capital contribution, purchase of share and contributed capital of foreign investors

  • A written registration of capital contribution, share purchase or capital contribution comprising the following information: about economic organizations that foreign investors plan to contribute capital, purchase shares or contributed capital; ownership proportion of charter capital of foreign investors after contributing capital, buying shares, or buying contributed capital of economic organizations;
  • Copies of identity card, identity card or passport for individuals; copy of the Establishment Certificate or other equivalent documents certifying the legal status for institutional investors.
  • Written agreement on capital contribution, share purchase, purchase of capital contributions between foreign investors and economic organizations receiving capital contribution, purchase of shares or contributed capital;
  • Declaration document (enclosed with a copy) Certificate of land use right of the economic organization receiving capital contribution, shares or capital contribution of foreign investors.

Step 3: Submit

Foreign investors submit documents at the Investment Registration Office – Department of Planning and Investment where the enterprise’s head office is located.

If the capital contribution, purchase of shares or contributed capital of foreign investors meet all the conditions, the Department of Planning and Investment will notify in writing within 15 days from the date of reveiving the complete dossier

Step 4: Capital contribution, purchase of share and contributed capital

Open a direct investment account for a Vietnamese company if buying from 51% capital of a Vietnamese company, then the foreign investors will contribute the transferred capital and declare the transferred income tax.

Capital transfer members and shareholders shall declare and pay tax upon transfer according to the law on personal income tax and corporate income tax (if any).

Step 5: Adjustment of business registration certificate

The adjustment of business registration record the capital contribution or share purchase by foreign investors. Dossier are submitted to the Department of Planning and Investment of the province where the company’s head office is located, includes:

  • Notice of adjustment of business registration
  • The company’s decision to adjust;
  • Company Minutes of adjustment;
  • The transfer contract and documents certifying that the transfer has been completed, certified by the legal representative of the company;
  • List of foreign contributors or list of foreign shareholders;
  • Notarized copy of passport/Certificate of business registration of the investor.

Step 6: Issuance of a Business License or an Operational Eligibility License

The procedure is the same as step 6 in the procedure for setting up a 100% foreign owned company.

Many foreign investors choose to contribute capital to a Vietnamese company to carry out business activities instead of establishing a legal entity with 100% foreign capital, because this form helps investors to do businessin a number of industries with no limitation on capital contribution ratio such as trading, construction, manufacturing, etc., while the approval procedure is also simpler. Understanding and properly implementing the process and regulations of each investment form will help investors save more time and costs.

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