What is the process of setting up a business by a foreigner in Vietnam?

Vietnam government passed the new law on Investment No. 67/2014/QH13 (New LOI) in 2014, and the new law on Enterprises No. 68/2014/QH13 (New LOE), which replace the previous laws as from July 1, 2015. Certain notable provisions of the new laws are asbelow.

● Requirements Capital: There is no requirements on foreign investment amount and registered capital in Vietnam. But registered capital can not less than 30% of total investment amount. The registered capital of encouraged/ large investment project can be reduced to 20%.

● Structure Foreign investors (company/ individual) can adopt one among following three structures when setting up company/ factory in Vietnam:

1. Direct investment by foreign company / individual; 

2. Indirect Investment through one holding company (single holding ); 

3. Indirect investment through two holding companies (double holding ).

The 2nd and/or 3rd structure is widely used. There are some advantages through holding company: 

1. Unlimited deferred offshore profits which can be used for re-investment; 

2. Limited liability on overseas lawsuits (civil and criminal ), and financial liabilities against parent company. 

The disadvantages of the single holding structure will occur when selling foreign assets, the parent company will be taxed for the profits. The parent company/individual will be exposed to unpredictable foreign risks and faces double-taxation problems. Therefore, the third structure - double holding is recommended.

● Procedures:

1. Setting up offshore holding company; 

2. Collecting holding company documents; 

3. Documents translation/ embassy notarization; 

4. Checking proposed Vietnam company name; 

5. Prepare the M&A and application form; 

6. Evaluation of investment project by related authorities; 

7. Issuance of the enterprise registration certificate; 

8. Publish in newspaper gazette; 

9. Seal registration, open bank account; 

10. Tax, customs, and environmental protection registration.

Source: Quora

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Is Vietnam's government stable enough to smoothly set-up a foreign start-up business?

Vietnam became the 150th member of the World Trade Organisation (WHO) in 2007. This opened the entranceway for foreigners to get and operate businesses in Vietnam. Individuals and organisations are permitted to choose their area of investment, the structure of their business and the technique where capital is raised, so long as their choices are in compliance with Vietnamese law, international treaties and commitments.

Before starting a business in Vietnam, there are a few things you should keep in mind:

Setting-up a foreign-owned business in Vietnam can be done and even encouraged by the Vietnamese government, although the laws are complex and the procedure could be complicated. Modern business law is in its infancy in Vietnam. Regulations could be incomplete, ambiguous and at the mercy of conflicting interpretations by different government agencies. Getting the help of a skilled and well-connected Vietnamese lawyer is strongly suggested.

Foreigners are permitted to possess and operate their own businesses in Vietnam, either through indirect or direct foreign investment. Indirect investment could be created by individuals or organisations that may buy shares in Vietnamese firms or invest through stocks, investment funds or use other intermediate financial instruments. Businesses that are wholly foreign-owned or are taking part in joint ventures with a Vietnamese business are believed to be foreign direct investments (or FDI).

Exercising rights of importation and distribution:

According to regulated at Provision 1, Article 4, Decree 23/2007/ND-CP dated February 12 2007 of the federal government providing detailed guidance of Law of Commerce’s regulations on goods trading and directly related activities of FIEs in Vietnam (So called known as “Decree 23/2007/ND-CP”), an FIE is permitted exercise its rights to import and distribute goods in Vietnam if it meets the next requirements:

- The Investor is from a country or territory which really is a member of international treaties to which Vietnam is engaged and focused on open markets for goods trading activities and related;

- Type of investment should be in keeping with the roadmap of commitments under international treaties to which Vietnam is an associate and relative to regulations of Vietnam;

- Goods and services should be relative to market opening commitments of Vietnam and with of regulations of Vietnam;

- Scope of operation should be relative to the marketplace access commitments of Vietnam and with regulations of Vietnam;

- The business gets the approval of the competent authorities in Vietnam.

According to Vietnam's commitments to the WTO, since 2009, foreign investors have entitlement to import and distribute goods by means of a company with 100% foreign capital.

To guarantee the eligibility for licensing, as well as the above conditions, you additionally have to guarantee the following requirements:

- You must be considered a manufacturer of electric and electronic products likely to be distributed in Vietnam or be considered a trusted trader of electric and electronic products in the your country;

- The results of business operation in the your country should be positive, shown in the audited financial statements of the last 2 yrs;

- Registered office of the business or wholesale, shops must be in keeping with the look of Vietnam. Normally, investors will need to have accommodations office within a workplace for the Company’s hq and/ or a location for wholesale and retail at a planned-in-advance trade center;

- Investment capital should be sufficient to guarantee the feasibility to implement business projects in Vietnam.

Vietnam is among the better places in Asia for for foreign investors - given its recent rises in number of national economic centers, industrial parks, rental factory, and warehouses. Even though Vietnamese government is encouraging foreign investors (as a way to bring in foreign currency), they are not paying enough attention to improve the legal procedure and legal structure in regards to foreign investment.

Source: quora

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Hanoi calls on IT firms to set up shop

HANOI – The government of Hanoi City gives priority to the information technology (IT) sector, thereby facilitating companies to set up shop there, according to Nguyen Duc Chung, chairman of the capital city, at a dialogue with the startup community on August 25.

He said Hanoi is about to launch Vietnam’s startup opportunity finder startupcity.vn on October 10, with an aim to connect technology ecosystem players with new business opportunities.

Phan Lan Tu, director of the municipal Department of Information and Communications, said the city has 16,700 startups, with 800 of them active in the IT sector.

Many incubators like the IT Firms Incubator and the CMC Creativity Center have been set up in Hanoi so far this year. To date, the city is home to 15 incubators.

The director noted the number of incubators and startup-supporting centers in Hanoi has been rising, but they still lack the connection with each other, as well as the absence of policies to establish a single network of these centers to help them share experiences, facilities, mentors and investors.

She said the city will establish a startup ecosystem portal and a startup database. In particular, the portal in both Vietnamese and English languages will provide necessary information for startups and investors.

Besides, municipal authorities will find ways to build a shared service area to support startups. The facility will include co-working space, meeting and training rooms, incubators, and other facilities.

Notably, Hanoi will come up with mechanisms and policies which encourage private investors to set up venture capital funds.

Nguyen Trung Chinh, chairman of CMC Corporation, said at the dialogue that Hanoi should offer incentive policies on land rent and corporate income tax to hi-tech companies, including personal income tax incentives for experts in the sector.

Especially, Chinh said, the administrative procedures should be streamlined so as to create the most optimal conditions for local firms, especially startups, to grow.

He also proposed the municipal government give creative and private companies the green light to implement solutions on urban management, e-governments and smart cities. Besides, Hanoi should let them develop public services under the public-private partnerships.

Hanoi should have sufficient land to build centers for creative technology research. CMC is willing to develop the creative technology research zone that has research centers, incubators and labs, he said.

Hanoi City Chairman Chung pledged to create utmost favorable conditions for startups. The municipal government will team up with central management agencies to formulate policies.

Chung also said the city will kick off work on a software park on Vo Nguyen Giap Street in October.  Hanoi will hand over the land to enterprises responsible for building the zone.

Source: The Saigon Times

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Propose to Remove Nearly 2,000 Business Conditions

The Ministry of Planning and Investment has proposed to remove nearly 2,000 business conditions from ministries and sectors that are thought to cause difficulties and obstacles for businesses.

According to the report of the Ministry of Planning and Investment submitted to the Government, this agency proposed to remove 1,930 requirements and conditions on business that are considered as sublicenses hinder business for a long time. Of these, the Ministry proposed removing all or part of 302 financial conditions. In addition, 85 business conditions on location and 1,336 conditions on production capacity, 127 conditions on business methods, 80 conditions on planning… are proposed to be abandoned entirely.

In addition, other business conditions related to human resources issues (except for some professions that require professional qualifications and experiences such as doctor and auditor) and some conditions with inappropriate contents, the Ministry also recommends the abolition of all or part.

According to the report of the Central Institute for Economic Management (CIEM), there are about 4,284 business conditions, corresponding with 243 conditional investment businesses. Of these, the Ministry of Industry and Trade has the highest number of business conditions with 1,152 conditions; next is the Ministry of Agriculture and Rural Development, Ministry of Health…

Most of these business conditions are creating unreasonable barriers to investment, entry into the market, limiting the number of newly registered businesses, increasing production costs, discouraging businesses.

Moreover, business conditions also reduce market competition, productivity and competitiveness of the economy. Businesses also face with many risks in the process of operation when many business conditions are unclear, creating opportunities for the arbitrariness of state management agencies and the harassment of officials… These effects are going backwards and hinder the Government’s resolve to improve the business environment and cut costs for businesses.

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Process Setting-up Foreign Owned Import Export Business in Vietnam

If a foreign-invested company wishes to apply for export/import or distribution rights, it has to submit the below listed documentation to the competent authorities:

1. Export/Import rights:

The foreign investors who invest to exercise right to export, right to import must follow procedures for grant of investment certificates; the foreign-invested enterprises in Vietnam which supplement the operational business activities for exercise of right to export, right to import must follow procedures for adjustment of investment certificates:

a. Dossier of verification for grant or adjustment of investment certificate as prescribed by law on investment;

b. A written explanation about the satisfaction of conditions in exercise of goods trading and directly related activities;

c. Documents proving the financial capability and experiences of investor in exercise of right to export and right to import;

d. Vouchers of tax agencies on performing the enterprise income tax liability within two consecutive years in the case the foreign-invested enterprises wish to supplement the exercise of right to export, right to import.

2. Trading activities/Distribution

The foreign investors with investment projects on exercise of goods trading and directly related activities in association with the setting up of enterprises must follow procedures for grant of investment certificates.

a. A dossier comprises:

i) Dossier of verification for grant of investment certificate as prescribed by law on investment;

ii) A written explanation about the satisfaction of conditions in exemrcise of goods trading and directly related activities according to the form MD-6 promulgated together with this Circular;

iii) Documents proving the financial capability and experiences of investor in exercise of busienss operation of goods trading and directly related activities.

b. After having acceptance opinion of the Ministry of Industry and Trade, the competent state agencies shall grant investment certificate. The investment certificate shall concurrently be business license.  Although not stipulated in the law, before granting an investment certificate with these business lines, the authorities usually consider application on case by case basis, taking into account market stability, population density in the area where the company is located and the consistency of the investment project with the master plan of the said area.

For these business lines the competent authorities must obtain the approval of the Ministry of Industry and Trade before issuing the investment certificate.

3. License for setting up retail establishments

If a foreign-invested enterprise wishes to set up a retail establishment in addition to the first retail establishment, it must follow procedures for license for setting up retail establishment, a dossier comprises:

a. Dossier of verification for grant or adjustment of investment certificate as prescribed by law on investment;

b. Dossier of license for setting up retail establishments, comprising:

i) Application for license to set up retail establishment;

ii) A written explanation about the satisfaction of conditions of setting retail establishments as per the law;

iii) Document of provincial People’s Committee that approves the working result of the Council of checking the

economic demand to consider the conformity of setting up of a retail establishment in addition to the first retail establishment.

iv) Report on exercise of goods trading and directly related activities of licensed projects;

v)Vouchers, which are issued by tax agencies, about exercise of enterprise income tax liability in two adjacent years.

After having acceptance of the Ministry of Industry and Trade, the competent state agency shall grant the license for the setting up of retail establishments.

Our lawyers of foreign investment practice at ANT Lawyers, a law firm in Vietnam are available to advise and provide client with service and representation in Vietnam.

In order to seek further advice, please contact us at ant@antlawyers.vn or call + 84 912 817 823.

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HCMC has 400 household businesses upgraded into firms

There have been 413 household businesses upgraded into firms in HCMC this year as the city has been trying to persuade household business owners to register as companies.

A report on the city’s economic performance showed January-May has seen 15,500 enterprises in the city receiving business registration certificates with total registered capital of VND193.8 trillion (about US$8.53 billion), up 10.4% and 54.2% respectively.

Meanwhile, fresh foreign direct investment approvals, including for mergers and acquisitions (M&A),in the first five months of 2017 in the city have shot up 46% against the same period last year to US$1.37 billion.

South Korea is the city’s biggest foreign investor with total investment pledges of US$95.11 million, 27.8% of the total, followed by Malaysia with US$45.07 million (13.2%), Singapore with US$39.91 million (11.7%) and Japan with US$38.9 million (11.4%).

The city government said that in the coming months, the city will continue fostering the startup ecosystem and support the upgrade of household businesses to companies.

The city looks to have 60,000 enterprises newly registered this year and the total number of firms in the city will rise to half a million by 2020. The total number of sactive firm here at the moment is around 300,000.

A recent report of the HCMC Tax Department showed the city has more than 36,472 household businesses eligible for upgrade to firms. The city expects 21,000 of them to become firms this year.

Once upgraded to firms, household businesses will have the opportunity to expand operations, promote brands, and gain easier access to bank loans and other benefits. In case of losses, they will be exempted from corporate income tax and can carry forward losses to the following years.

Source: The SaigonTimes

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