4. Start a Business
The Vietnamese Investment Law amended in 2014 provides various options for structuring investment activities of foreign investors investing in Vietnam. The most popular choice for foreign investors is to set up a company by 100% foreign owned capital or joint with local individual(s) or company(ies) to set up joint venture company. Foreign investor/founder can be individual or company depending on the decision of the investor.
Forms of company, under the Enterprise law, the amended one in 2014 are:
- One member limited liability company (one individual or legal entity investor).
- Two and above members limited liability company (two to fifty individuals or legal entities investors).
- Joint stock company (JSC) (minimum three individuals/ legal entities investors – no limit for maximum).
Operation term of company: 2014 Enterprise Law does not regulate the operation term of a company. However operation term of a foreign invested company is followed by term of project. The Investment Law regulates the maximum term of project is 50 years. In special cases, the term of project would be considered to be longer but not exceed 70 years. Projects term is allowed to be extended by an application sending to licensing body within six months before end of the term.
Besides, under the Investment Law, foreign investors have other options for their investment in Vietnam:
- Business Co-operation Contract (BCC), a form of investment applied to project co-operated between one or some local investor(s) with one or some foreign investor(s) usually by legal entities. This form of investment does not create a new entity but managed by board of members appointed by the investors.
- Purchasing shares or to contribute capital in existing local company
- Investment in the carrying out of a merger and acquisition of an enterprise
- Public private Partnership (PPP). Investors or project Enterprise sign PPP contracts with competent state agency to implement investment project to build or renovate, upgrade, extend, manage and operate infrastructure works or to provide public services (Legal entity is not appeared).
Other forms of business but under the Commercial Law: Branch and Representative Office. Representative office is not a legal entity. Foreign company is allowed to open its representative office in Vietnam for carrying out the following non income jobs:
- Performing the function of a liaison office.
- Promoting cooperation projects of the company in Vietnam.
- Doing market research to promote the business opportunities for the company;
- Monitoring, speeding up the implementation of contracts signed between the company and Vietnamese partners or related to Vietnam market.
Representative offices of foreign services suppliers are permitted to be established in Viet Nam, but they shall not engage in any direct profit-making activities.
Branch: Unless otherwise indicated in each specific sector or sub-sector of WTO commitment Schedule Accession of Vietnam, the establishment of branches is unbound.
Foreign entities are also allowed to do business in Vietnam by contractor agreement under the Law on Tendering. Foreign contractor or machinery provider can participate into international bidding tender to build factory, construction work offered by Vietnamese organizations. Based on the contractor agreement, foreign contractor is allowed to set up contractor’s office in Vietnam to manage, perform the agreement.
Foreign investor starting business in Vietnam must apply for Investment Registration Certificate. Investment Law of Vietnam requires foreign investor that (regardless of joining or not joining with local investor) firstly apply for doing business in Vietnam must have a project or a business plan (so called project) and register to Investment registration certificate before setting up a company to operate the project. One company is allowed to have one or more projects. Application for Business Registration Certificate is submitted right after issuance of Investment Registration Certificate.
Representative office (RO) of foreign company to Vietnam is set up by registration and application for establishment licence.
Post license procedures
Five days after getting the Investment Registration Certificate, so called license, Business registration certificate for setting up the company would be granted. The newly set up company has to:
- Register company’s stamp at national electronic information gate
- Register to pay annual existence tax and applying for acceptance of tax invoice
- Opening company’s bank account
- Registration of employment
- Registration of personal tax code for employee (if any)
- Other conditional licenses as requested by the law on e.x. education, food, hospital, etc.
The Provincial department of planning and investment grants Investment registration certificate. to project located in such province but outside the planned industrial zones, import-export; processing zones and special economic zone.
The Provincial Management Board of industrial, import-export, processing and special economic zones grant licence to project located in such zones.
Some big or conditional projects must be approved firstly by the Parliament, Prime Minister or provincial People’s Committee (depending on scale and sector of the project) before applying for license at provincial licensing authority. Here under are investment fields under this condition:
1. Projects with serious environmental impacts or a latent possibility of causing serious environmental impacts, including:
a/ Nuclear power factory;
b/ Change of land use purposes of national parks, nature reserves, landscape protection areas and scientific research and experiment forests of 50 hectares or larger; headwater protection forests of 50 hectares or larger; wind-break, sand-break and tide-break protection forests, sea encroachment forests and environmental protection forests of 500 hectares or larger; industrial forests of 1,000 hectares or larger;
2. Land-using projects requiring change of the using purpose of at least 500 hectares of paddy fields with 2 or more crops per year;
3. Relocation and resettlement projects involving 20,000 or more people in mountainous regions or 50,000 or more people in other regions;
4. Projects requiring application of special mechanisms and policies subject to decision by the National Assembly.
1. Projects of one of the following cases, regardless of their capital sources:
a/ Relocation and resettlement of 10,000 or more people in mountainous regions or 20,000 or more people in other regions;
b/ Building and operating of airports; air transport;
c/ Building and operating of national seaports;
d/ Petroleum prospection, exploitation and processing;
dd/ Betting and casino business;
e/ Cigarette production;
g/ Development of infrastructure of industrial parks, export-processing zones and functional sub-zones in economic zones;
h/ Building and operating of golf courses;
2. Projects other than those prescribed in Clause 1 above, which are capitalized at VND 5,000 billion or more;
3. Projects of foreign investors in the sectors of sea transport, provision of telecommunications services with network infrastructure, forest plantation, publishing, press, establishment of wholly foreign-owned science and technology organizations and science and technology enterprises;
4. Other projects subject to investment policy decision or investment decision by the Prime Minister in accordance with law.
Provincial People’s Committee:
a/ Projects using land site leased from the State not through any auction, bidding or transference; projects requiring change of land use purpose;
b/ Projects using technology on the list of technologies restricted from transfer into Vietnam in accordance with the law on technology transfer.
The Provincial department of Industry and Trade grants license for establishment of representative office of foreign company operating in commercial sector in such province. Representative office of company dealing in specific industries like tourism, insurance, finance, banking is licensed by other provincial professional department/ authority.
Where to submit the application dossier: Application dossier for Investment Registration certificate is submitted to Provincial department of Planning and Investment in case of project located outside planned industrial zone; and to Provincial Management Board of Industrial, import-export processing, economic zones in case of inside such areas.
Range of business activities/ or investment fields
Vietnamese law does require that a company is allowed to engage only in the business activities that registered, applied and got in the investment certificate.
Investment law of Vietnam regulates the list of incentive, special incentive and conditional investment fields. See Annex IV - List of Conditional sectors;
Besides, business activities of services are regulated by commitments of Vietnam’s accession to WTO.
Depend on the form of enterprise to be set up in Vietnam, foreign investor must appoint Chairman, Board of management and legal representative of the company; While the Chairman and Board of management is self-controlled by the investor, legal representative of the company must have permanent residence in Vietnam, and must leave authorization to other person in case of absence over 30 days in Vietnam.
The law also allows companies to have more than one legal representative. One of the legal representatives of a company must have permanent residence in Vietnam.
The company may be dissolved, e.g.:
- When bankruptcy proceedings are cancelled under certain conditions
- By resolution of the General Meeting
- When the period for which it was established has expired.
- By a court decision
- Due to other reasons stipulated in the Founder’s Deed (Agreement).