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Many investors who invest in Vietnam have opted for the establishment of foreign-funded companies as the method to conduct investment and business activities
Read further as we analyze the process of establishing foreign-funded companies and the benefits of such establishments in this article.
Foreign-Funded Companies, What Are They?
Foreign-funded companies are companies whose charter capital is, whether in whole or in part, directly contributed by foreign individuals or organizations under the law of Vietnam to conduct investment and business activities in Vietnam.
Establishment Of Foreign-Funded Companies – What To Consider
Prior to the establishment of any foreign-funded company, a foreign investor is encouraged to be fully aware of the aspects that directly affect such establishments, as follows:
Investor Nationality
The nationality of foreign investors is one of the prerequisites for the establishing a foreign-funded company. When investing in Vietnam, foreign investors must have the nationality of member countries of the WTO – World Trade Organization, international treaties to which Vietnam is a member, and/or bilateral agreements.
By determining the nationality of foreign investors, the feasibility of investment in Vietnam by such investors is determined.
Business Lines
In Vietnam, investments are not made arbitrarily as there are certain business lines in which restrictions are present. According to Vietnams current regulations, there are 33 business lines in which foreign investors are not allowed to operate, 59 business lines in which investments by foreign investors are restricted with conditions, and the remaining business lines are unrestricted.
Early determination of business lines allows investors to prepare for the conditions of restricted business lines or to switch to another business line lest the intended business lines are those in which foreign investors are not allowed to operate.
Business Location
The business location of foreign-funded companies is chosen by foreign investors upon establishment, and that location may affect conditions on location for project implementation, benefits granted to investors, and which competent administrative authorities will be involved.
Types of Enterprises
Depending on the purpose and available resources, investors may choose the most appropriate type of enterprise.
Investors establishing companies in Vietnam may choose one of the following types of enterprises:
- Joint Stock Companies
- Limited Liability Companies
- Partnerships
Each type of enterprise has its own merits and demerits, therefore, to make an informed choice regarding the type of enterprise, readers will want to learn more about this topic via the article below.
>>> See more: 5 common types of enterprises in Vietnam.
Conditions For Foreign-Funded Companies To Be Established
To establish a foreign-funded company in Vietnam, a foreign investor must satisfy certain requirements and conditions, including:
- Market access conditions applicable to foreign investors;
Foreign investors establishing companies must satisfy requirements pertaining to the:
- Ratio of charter capital ownership by foreign investors within the economic organization;
- Method of investment;
- Scope of investment activities;
- Investor’s capabilities;
- Partner in investment activities;
- Miscellaneous conditions set out by the laws.
- Conditions on national defense and security;
- Compliance with laws on land, conditions for allocation of land, conditions to use land located on islands, and coastal and border areas.
Procedure For Establishment Of Foreign-Funded Companies
For foreign-funded companies to be established in Vietnam, Investment Registration Certificates must be obtained. In case approval for investment guidelines are required, investors must obtain approval from competent authorities, namely, Provincial People’s Committees, the Prime Minister, or the National Assembly.
Below are the steps to establish foreign-funded companies in which no investment guidelines need to be approved.
Step 1: Obtain the Investment Registration Certificate to establish foreign-funded companies
Application for Investment Registration Certificate must include:
- Requests for implementation of an investment project;
Including the warranty to bear any incurred costs, and risk if not approved.
- Legal identification documents of investors;
If the investor is an individual: copies of citizen identification card or passport
If the investor is an organization: copies of the establishment certificate or its equivalent confirming the legal identity of the investor.
- Investment policy statement;
The investment policy statement includes the following content: investor or method for investor selection, investment objective, scale of investment, investment capital and capital mobilization plan, duration, schedule, information on the current state of land on which projects will be implemented, (if any), proposal for land use (if any), proposal for labor force, proposal for investment benefits, project’s influence and economic-societal effect, preliminary evaluation of the effect on the environment (if any) in accordance with laws on environment.
- Proof of entitlement to use the business location;
If the investment project does not require land allocation, a land lease, a change of land use purpose by the state, then copies of land use rights documentation, or other documentation proving entitlement to use the business location must be submitted.
- Explanation of technology usage;
Explanation of technology usage must be submitted for projects that use technology with transfer restrictions in accordance with the regulations on technology transfer. The explanation should include: the name of the technology, origin of the technology, a chart of how the technology functions; technical specifications; current status of the machinery and equipment, as well as the main technological lines;
- Other documentation relevant to the implementation of the investment project, requirements on the resources and capabilities of investors in accordance with the law (if any).
Attention: Documentation of foreign origin must undergo consular legalization, unless the foregoing is exempted from consular legalization under international treaties to which Vietnam and the relevant foreign country are members, the principle of reciprocity, or the laws of Vietnam; these documents must also be translated into Vietnamese and notarized or verified in accordance with the laws of Vietnam.
Procedure for obtaining the Investment Registration Certificate for foreign-funded companies
Step 1: List your information on the National Foreign Investment Information System
Prior to the application for Investment Registration Certificate, investors must list the information of the investment project on the National Foreign Investment Information System. Within 15 days of the online listing, investors submit the application for the Investment Registration Certificate to the Investment Registration Authority.
Subsequent to submission of the application to the Investment Registration Authority, investors are granted an account on the National Foreign Investment Information System for access and application processing status.
The Investment Registration Authority uses the National Foreign Investment Information System to receive, process, and return results of applications, provide application processing status, and issue investment project codes.
Step 2: Direct submission of the application for Investment Registration Certificate
Investors submit applications for the Investment Registration Certificate to:
- Management Board of Industrial Zones, provided that the company’s headquarters are located within an industrial zone
- International Economic Office – Provincial Department of Planning and Investment, provided that the company’s headquarters are located outside an industrial zone
Step 3: Issuing the Investment Registration Certificate
Within 15 days of submitting a complete and valid application, the investment registration authority will issue the Investment Registration Certificate. Rejected applications are followed up with a written response of rejection along with a detailed explanation.
Step 2: Obtain the Enterprise Registration Certificate of foreign-funded companies
After obtaining the Investment Registration Certificate, investors may proceed with the procedure to obtain the Enterprise Registration Certificate.
Application for Enterprise Registration Certificate includes:
- Registration form;
- Company Charter;
- Member List (Limited Liability Company) or List of Founding Shareholders and Foreign Shareholders (Joint Stock Company);
- Company documentation for the legal identity of each member;
Individual investors: copies of citizen identification/citizen identity card or passport
Organizational investors: copies of the establishment certificate or its equivalent confirming the legal identity of investors.
- Investment Registration Certificate;
- Power of Attorney
Applications for Enterprise Registration Certificate of foreign-funded companies may be submitted the Department of Planning and Investment for which the company’s headquarters is located.
Duration: 5-business days from the date submission of a complete and valid application.
Step 3: Post-licensing
Prior to initiating commercial activities, investors must complete the post-licensing step which involves administrative activities, such as
Step 4: Obtaining Operational Permits and/or Licenses
Lastly, don’t forget to obtain any special permits, licenses, and/or approvals before opening for business. Although this is an optional step, there are areas of practice that require investors obtain one or more of these special provisions.
For example, business lines involving the sale of food, certificates of food hygiene and safety are required; business lines involving supply of personnel, permits for labor lease or employment service licenses are required, etc.
Merits Of Establishing Foreign-Funded Companies In Vietnam
The reasons behind the popularity of establishing foreign-funded companies are the merits offered by this method of investment.
Access to a developing market
Vietnam’s economy is among those with explosive growth worldwide, with an enormous and gradually growing consumer market. This brings about ample opportunities for investors to expand their business and increase income.
Tax Discount and Investment Promotion Policy
At present, Vietnam offers various incentive tax incentives for foreign investors, including the exemption of corporate income tax, import tax, and value-added tax. Furthermore, there is also policy on support for land and infrastructure of large investment projects.
Abundant Human Recourses with ample potentials
Vietnam has young and energetic workforce that is gradually developing essential skills-sets, thereby incentivizing foreign-funded companies to recruit and train personnel.
Strategic location
Vietnam is gifted with an advantageous geographical location, situated near important commercial paths of the Asian region. This allows easier access to more prominent markets such as China, Japan, South Korea, and ASEAN
Policies favor globalization and international integration
Vietnam has participated in multiple Free Trade Agreements (FTA) with various countries and regions, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union – Vietnam Free Trade Agreement (EVTFA). This facilitates trade, export and import of goods and services by foreign-funded companies.
Political Stability and Modern Infrastructure
Vietnam enjoys political stability, a sustainable economy, and a developing infrastructure such as traffic systems, harbors, airports, and telecommunications. This affords investors much needed peace of mind for their long-term investment decisions and facilitating business activities of foreign-funded companies.
Access to ample natural resources
Vietnam has ample natural resources and is currently one of the leading export countries for agricultural products, aquatic products, and minerals. As such, Vietnam is in position to help foreign enterprises in acquiring necessary resources.
Improved Market Environment
Vietnam’s Government has been and continues to improve the market environment by simplifying administrative procedures, enhancing transparency, curtailing corruption, and facilitating business activities of foreign companies.
Succinctly, the establishment of foreign-funded companies would not only help investors expand their own scope of business but also bring about various benefits pertaining to costs, tax, personnel, and opportunities for global growth.
Via this article, we hope that readers will have a better understanding of the procedure and merits of establishing foreign-funded companies in Vietnam. For clarification and/or further support in establishing companies, please contact us via the information provided below.
Thele.blog
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Ho Chi Minh, Vietnam
Website: https://thele.blog/
Mail: hi@thele.blog
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