Establishing a company with foreign capital. Currently, Vietnam is becoming an ideal investment environment for foreign investors and FDI capital flows. According to data published by the Ministry of Planning and Investment, from the beginning of the year to January 20, 2023, the total FDI capital registered in Vietnam (including newly registered capital, adjusted registered capital and price value of capital contribution and share purchase by foreign investors) reached 1.69 billion USD, down 19.8% over the same period last year. Although the total FDI capital registered in Vietnam in January 2023 decreased by nearly 20% compared to the same period in 2022, there is a positive point that in January 2023, there were 153 newly granted projects, with a total capital Registered capital reached 1.2 billion USD, an increase of 48.5% in the number of projects and 3.1 times more in registered capital compared to the same period last year. From the numbers, it shows that Vietnam is still an ideal investment environment for foreign investors and FDI capital flows. Therefore, establishing a foreign-invested company is an essential thing to help investors conduct investment and business in Vietnam. So, what are the conditions and procedures for establishing a foreign-invested enterprise? Please follow the following article with Law Quoc Bao
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Mục lục
- 1 1. Conditions for establishing a company with foreign capital
- 2 2. People with the right to establish foreign invested companies
- 3 3. Forms of establishing foreign-invested enterprises/companies
- 4 4. Documents needed to prepare to establish a company with foreign capital
- 5 5. Procedures for establishing a company with foreign capital
- 6 6. Competent authority to issue investment certificates to establish foreign invested companies
- 7 7. What are the advantages of establishing a limited liability company for foreigners compared to a joint stock company?
- 8 8. Advantages and disadvantages related to investment procedures for foreigners in Vietnam:
- 9 9. Some notes before establishing a foreign-invested company in Vietnam
- 10 10. Cost of establishing a company with foreign capital in Vietnam
- 11 11. Common legal problems when establishing a foreign-invested company.
- 12 12. Service of establishing foreign invested companies of Quoc Bao law firm
1. Conditions for establishing a company with foreign capital
Legal grounds:
Schedule of specific commitments on trade and services of Vietnam in the WTO
ASIAN Comprehensive Investment Agreement (ACIA)
ASEAN Framework Agreement on Services (AFAS)
Vietnam – Japan Economic Partnership Agreement (VJEPA)
Vietnam – Korea Free Trade Agreement (VKFTA)
Vietnam – EU Free Trade Agreement (EVFTA)
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Decree 31/2021/ND-CP.
Based on the above legal bases, Pham Do Law will advise on principles for determining investment conditions for foreign investors as follows:
1/ Conditions on business lines
For the manufacturing sector: Requires investors to establish projects in planned industrial parks and industrial clusters that allow the production of goods that the investor intends to trade. See list of industrial parks here.
For the service provision sector: The capital contribution ratio of foreign investors in the service provision industry also needs to comply with the provisions of Vietnam’s Schedule of Specific Commitments on Trade and Services in the WTO and Agreements that Vietnam has signed.
– Industries that allow the establishment of 100% foreign-owned companies:
Computer services and related services (CPC 841-845, CPC 849)
Market research services (CPC 864, except 86402)
Management consulting services (CPC 865)
Services providing food (CPC 642) and beverages (CPC 643)
– Industries that limit the capital contribution ratio of foreign investors: For example: Road transport services: Requires the establishment of a joint venture to provide freight transport services, in which the capital contribution ratio is of the foreign side must not exceed 51%.
In cases where foreign investors want to invest in industries that have not yet committed to market access or want to own a higher capital contribution ratio as prescribed in Vietnam’s Schedule of Specific Commitments on Trade and Services in the WTO and the Agreements that Vietnam has signed, the investment registration authority will apply for approval from the ministerial-level agency in charge of managing that industry.
2/ Conditions on investor’s nationality
The investor’s nationality must be a member of the WTO or a member of the Agreements that Vietnam has signed. In cases not falling under the above regulations, investment approval must be obtained from the ministerial-level agency in charge of managing the proposed business line.
3/ Conditions on Investment Capital
The schedule of specific commitments on trade and services of Vietnam in the WTO and the Agreements that Vietnam has signed, as well as the provisions of Vietnamese law, do not have minimum or maximum capital requirements, but must be reasonable and ensure the business is profitable. Therefore, investors can register with a small capital of about 200 million to 1 billion for simple industries such as: Consulting, computer software… For more specific industries, a larger budget is required. .
The law also requires investors to prove they have enough financial capacity to contribute capital after being licensed. For example: For individuals, they can provide confirmation of bank account balance with an amount equal to or greater than the registered investment capital; or documents proving that there is a guarantor to contribute the full amount of capital as registered.
Capital contributions by foreign investors need to be made through a bank account called direct investment account (“DICA”). That is, after being granted a business registration certificate and investment registration certificate, the investor needs to go to a bank in Vietnam to open an account and make capital contributions according to the deadline specified above. license.
4/ Conditions for project location planning
Depending on different industries and each locality’s planning, the licensing agency will agree to allow the investor to carry out the project at the registered location or not. Normally, for manufacturing industries, they will be planned into industrial parks and industrial clusters to ensure adequate environmental and fire protection conditions. If you want to locate a factory outside the industrial park, the investor needs to check the planning carefully and formally to ensure that after signing the lease contract or depositing the rent on the location, they will definitely be granted a license. permission. Don’t make mistakes and then when you submit your application, it gets rejected.
For the service industry, there will be a number of industries that need to pay attention to planning: Education centers, Sports centers, Food services, hotels…
Investors should hire a lawyer or expert to advise you on the legality of your business location before signing any contract or agreement with the landlord. Because even if you are not affected by state planning factors, you will still have trouble with landlord issues such as fire protection, personal income tax due to renting a house…
5/ Conditions of machinery and technology
Perhaps foreign investors will wonder why licensing agencies consider machinery and technology conditions when investing in Vietnam. Firstly, machinery that is too outdated will not ensure capacity, making it difficult to achieve expected revenue and tax payments to the state. Using workers to control outdated technological machinery will not make Vietnamese people upgrade their skills. High level of experience and skills, sometimes it is easy to cause unnecessary labor accidents. Second, if machinery and technology are outdated, it can cause environmental pollution, so licensing agencies often give priority to investors with more modern machinery and technology.\
Perhaps foreign investors will wonder why licensing agencies consider machinery and technology conditions when investing in Vietnam. Firstly, machinery that is too outdated will not ensure capacity, making it difficult to achieve expected revenue and tax payments to the state. Using workers to control outdated technological machinery will not make Vietnamese people upgrade their skills. High level of experience and skills, sometimes it is easy to cause unnecessary labor accidents. Second, if machinery and technology are outdated, it can cause environmental pollution, so licensing agencies often give priority to investors with more modern machinery and technology.\
2. People with the right to establish foreign invested companies
Persons with the right to establish foreign-invested companies are listed and clearly defined in the law below:
The current Enterprise Law stipulates: Right to establish, contribute capital, buy shares, purchase capital contributions and manage enterprises.
1. Organizations and individuals have the right to establish and manage enterprises in Vietnam according to the provisions of this Law, except for the cases specified in Clause 2 of this Article.
2. The following organizations and individuals do not have the right to establish and manage businesses in Vietnam:
a) State agencies and people’s armed forces units use state assets to establish business enterprises to make private profits for their agencies and units.
b) Cadres, civil servants and public employees according to the provisions of law on cadres, civil servants and public employees.
c) Officers, non-commissioned officers, professional soldiers, workers, and defense officials in agencies and units of the People’s Army; Professional officers and non-commissioned officers in agencies and units of the Vietnam People’s Police, except those appointed as authorized representatives to manage the State’s capital contribution in enterprises
d) Leaders and professional managers in state-owned enterprises, except those appointed as authorized representatives to manage the State’s capital contribution in other enterprises
d) Minors; people with limited civil act capacity or lost civil act capacity; organizations without legal status.
e) People who are being prosecuted for criminal liability, serving prison sentences, administrative handling decisions at compulsory detoxification facilities, compulsory education establishments or are banned from practicing business or holding positions. perform certain tasks or jobs related to business according to the Court’s decision; Other cases as prescribed by law on bankruptcy and anti-corruption.
If requested by the Business Registration Authority, the person registering to establish a business must submit a criminal record card to the Business Registration Authority.
3. Organizations and individuals have the right to contribute capital, purchase shares, and purchase capital contributions to joint stock companies, limited liability companies, and partnerships according to the provisions of this Law, except for the following cases:
a) State agencies and people’s armed forces units use state assets to contribute capital to enterprises to gain private profits for their agencies and units.
b) Subjects who are not allowed to contribute capital to the enterprise according to the provisions of law on officials and civil servants.
4. Gaining private profits for your agency or unit according to Point a, Clause 2 and Point a, Clause 3 of this Article is the use of income in any form obtained from business activities, capital contributions, share purchases, Purchase capital contributions for one of the following purposes:
a) Divided in any form to some or all of the people specified in Points b and c, Clause 2 of this Article
b) Adding to the operating budget of agencies and unit’s contrary to the provisions of law on state budget
c) Establish a fund or add to it to serve the private interests of agencies and units.
3. Forms of establishing foreign-invested enterprises/companies
Establish a foreign-invested company in the form of investors contributing capital from the beginning.
Accordingly, foreign investors will contribute capital right from the beginning of establishing a company in Vietnam. Accordingly, foreign investors’ capital contribution, depending on the field of activity, can range from 1% to 100% of the company’s charter capital.
Establishing a company with foreign investment capital in the form of capital contribution and share purchase.
With this form, foreign investors will contribute capital to a Vietnamese company that already has a Business Registration Certificate. Foreign investors, depending on the field of activity, can contribute capital from 1% to 100% of capital into Vietnamese companies. Foreign investors will carry out procedures for purchasing capital contributions and shares of Vietnamese companies. After that, the Vietnamese company became a foreign-invested company.
*** Business forms
– Limited liability company with two or more members
A limited liability company with two or more members is an enterprise with from 02 to 50 members who are organizations and individuals. Members are responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise, except in the following cases:
In case there are members who have not contributed capital or have not contributed the full amount of capital as committed, the company must register to change charter capital, with the proportion of members’ capital contribution equal to the amount of capital contributed within 30 days from the date of registration. The last day to contribute the full capital contribution according to regulations (Capital contribution period is 90 days from the date of issuance of the Business Registration Certificate). Members who have not contributed capital or have not contributed the full amount of capital as committed must be responsible in proportion to the committed capital contribution ratio for the company’s financial obligations arising in the period before the date of company registration. Sign changes to charter capital and capital contribution ratio of members.
Members’ capital contributions can only be transferred according to the following regulations:
Buyback of capital contribution: A company member has the right to request the company to buy back his or her capital contribution if that member has voted against the resolution or decision of the Board of Members on the following issues: :
Amending and supplementing contents in the Company’s Charter related to the rights and obligations of members and the Board of Members.
Reorganize the company.
Other cases as prescribed in the Company’s Charter.
Transfer of capital contribution: Company members have the right to transfer capital contribution according to the following regulations:
Offer to sell that capital contribution to the remaining members in proportion to their capital contribution in the company with the same offering conditions.
Transfer with the same offering conditions for the remaining members specified in Point a of this Clause to non-members if the remaining members of the company do not buy or do not buy all within 30 days from the date of purchase. from the date of offering.
In addition, a member’s capital contribution can be handled in some special cases such as inheritance, donation, debt repayment, member being detained or temporarily detained…
A limited liability company with two or more members has legal status from the date of issuance of the Business Registration Certificate.
A limited liability company with two or more members is not allowed to issue shares, except to convert into a joint stock company.
Limited liability companies with two or more members may issue bonds according to the provisions of this Law and other relevant laws; The issuance of individual bonds must comply with the provisions of law.
– One-member limited liability company
A single-member limited liability company is an enterprise owned by an organization or individual (hereinafter referred to as the company owner). The company owner is responsible for the company’s debts and other property obligations within the company’s charter capital.
A one-member limited liability company has legal status from the date of issuance of the Business Registration Certificate.
A single-member limited liability company is not allowed to issue shares, except to convert into a joint stock company.
A one-member limited liability company may issue bonds according to the provisions of this Law and other relevant laws, issuance of individual bonds according to the provisions of law.
The charter capital of a one-member limited liability company when registering to establish a business is the total value of assets committed to contribute by the company owner and recorded in the company charter.
The company owner must contribute capital to the company with sufficient and correct types of assets as committed when registering to establish a business within 90 days from the date of issuance of the Business Registration Certificate, excluding operation time. Transfer and import capital contribution assets, carry out administrative procedures to transfer asset ownership. During this period, the company owner has rights and obligations corresponding to the committed capital contribution.
– Joint stock company
A joint stock company is an enterprise in which:
Charter capital is divided into equal parts called shares.
Shareholders can be organizations or individuals; The minimum number of shareholders is 03 and there is no limit to the maximum number.
Shareholders are only responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise.
Shareholders have the right to freely transfer their shares to others, except in the following cases:
Within 03 years from the date the company is granted the Business Registration Certificate, common shares of founding shareholders are freely transferable to other founding shareholders and can only be transferred to persons who are not founding shareholders if approved by the General Meeting of Shareholders. In this case, the founding shareholders intending to transfer common shares do not have the right to vote on the transfer of those shares. (Clause 3, Article 120 of the Enterprise Law 2020)
Shares are freely transferable, except for the cases specified in Clause 3, Article 120 of the 2020 Enterprise Law and the Company Charter has regulations restricting the transfer of shares. In case the company charter has restrictions on the transfer of shares, these regulations are only effective when clearly stated in the shares of the corresponding shares. (Clause 1, Article 127 of the Enterprise Law 2020)
A joint stock company has legal status from the date of issuance of the Business Registration Certificate.
A joint stock company has the right to issue shares, bonds and other securities of the company.
– Partnerships
A partnership is an enterprise in which:
There must be at least 02 members who are joint owners of the company, doing business together under a common name (hereinafter referred to as partnership members). In addition to general partners, the company may have additional capital contributing members.
General partners must be individuals, responsible with all their assets for the company’s obligations.
Capital contributing members are organizations and individuals and are only responsible for the company’s debts within the amount of capital committed to contributing to the company.
A partnership company has legal status from the date of issuance of the Business Registration Certificate.
Partnership companies are not allowed to issue any type of securities.
Partnership members and capital contributing members must contribute the committed capital amount in full and on time.
A general partner who fails to contribute the committed capital in full and on time, causing damage to the company, must be responsible for compensating the company for damages.
In case a capital contributing member fails to contribute the committed capital amount in full and on time, the not yet fully contributed capital is considered that member’s debt to the company; In this case, the relevant capital contributing member may be expelled from the company according to the decision of the Board of Members.
– Private enterprise
A private enterprise is a business owned by an individual who is solely responsible for all activities of the business with his or her entire assets.
Private enterprises are not allowed to issue any type of securities.
Each individual is only entitled to establish one private enterprise. The owner of a private enterprise cannot simultaneously be the owner of a business household or a general partner of a partnership.
Private enterprises are not entitled to contribute capital to establish or purchase shares or capital contributions in partnerships, limited liability companies or joint stock companies.
The investment capital of a private business owner is registered by the business owner himself. Private enterprise owners are obliged to accurately register the total investment capital, clearly stating the capital amount in Vietnam Dong, freely convertible foreign currencies, gold and other assets; For capital in other assets, the type of asset, quantity and remaining value of each type of asset must also be clearly stated.
All capital and assets, including loans and leased assets, used in the enterprise’s business activities must be fully recorded in the enterprise’s accounting books and financial reports according to the provisions of law.
4. Documents needed to prepare to establish a company with foreign capital
According to Clause 15, Article 2 of Decree 31/2021/ND-CP guiding the 2020 Investment Law: “Documents on the investor’s legal status are valid copies of personal identification documents or documents confirming employment. establishment and operation of economic organizations, including: …b) Valid copy of one of the following documents: Business registration certificate, Establishment certificate, Establishment decision or Other documents have equivalent legal value for the organization.” Therefore, documents to establish a foreign invested company will include:
Written request to implement the investment project, including a commitment to bear all costs and risks if the project is not approved.
Documents on the investor’s legal status (Authenticated copy of the individual investor’s passport and Copy of the investor’s business license, operating license or other equivalent document confirming the investor’s status legal for investors)
Documents proving the investor’s financial capacity include at least one of the following documents: the investor’s most recent 2-year financial statements; commitment to financial support from the parent company; commitment to financial support from financial institutions; guarantee of the investor’s financial capacity; Other documents proving the investor’s financial capacity.
Investment project proposal includes the following main contents: investor or form of investor selection, investment objective, investment scale, investment capital and capital mobilization plan, location, time deadline, implementation progress, information on current land use at the project location and proposed land use needs (if any), labor needs, proposals for investment incentives, and impacts. impact, socio-economic efficiency of the project, preliminary assessment of environmental impact (if any) according to the provisions of law on environmental protection. (In case the law on construction stipulates the preparation of a pre-feasibility study report, the investor may submit a pre-feasibility study report instead of the investment project proposal).
In case the investment project does not request the State to allocate land, lease land, or allow change of land use purpose, submit a copy of land use rights documents or other documents determining the right to use the location for implementation. current investment project.
Content explaining the technology used in investment projects for projects subject to appraisal and consultation on technology according to the provisions of law on technology transfer.
Other documents related to the investment project, conditions and capacity requirements of the investor according to the provisions of law (if any).
Request for issuance of Business Registration Certificate
The company charter is appropriate to the type of business chosen.
List of shareholders, members and list of authorized representatives (If any)
5. Procedures for establishing a company with foreign capital
5.1 Procedures for establishing a foreign-invested company/enterprise when investors contribute capital from the beginning
Procedures for establishing a company with foreign investment from 1% to 100% of capital contributed by foreign investors immediately upon establishment are carried out according to the following steps:
Step 1: Prepare documents for Investment Registration Certificate
Dossier to request issuance of Investment Registration Certificate includes:
Document requesting implementation of investment project.
Documents proving legal status:
For institutional investors: copy of the Certificate of Establishment or other equivalent document certifying the legal status of the institutional investor.
For individual investors: Copy of ID card/ID card or passport for individual investors.
Investment project proposal includes the following contents: investor implementing the project, investment objective, investment scale, investment capital. and capital mobilization plan, location, deadline, investment progress, labor needs, proposals for investment incentives, and assessment of the project’s socio-economic impact and efficiency.
Document proving the investor’s financial capacity:
For institutional investors: the investor’s 02 most recent financial statements. Or commit to financial support from the parent company. Or commit to financial support from a financial institution. Or guarantee the investor’s financial capacity. Or documents explaining the investor’s financial capacity.
For individual investors: confirm account balance, savings book.
Head office lease contract, Documents proving the lessor’s leasing rights (Certificate of land use rights, Construction permit, Business registration certificate with real estate business function of the lessor or equivalent documents).
Propose land use needs; In case the project does not request the State to allocate land, lease land, or allow change of land use purpose, submit a copy of the location lease agreement or other documents certifying that the investor has the right to use the location for implementation. current investment project.
Explanation on the use of technology in investment projects for projects using technology on the List of technologies restricted from transfer according to the provisions of law on technology transfer, including the following contents: name of technology, technology origin, technology process diagram; Main technical parameters, usage status of main machinery, equipment and technological lines.
Step 2: Submit application for Investment Registration Certificate
Procedures for granting Investment Registration Certificates to investment projects that are not subject to investment policy decisions are as follows:
Online declaration of information about investment projects on the National Information System on Foreign Investment
Before carrying out the procedures for granting the Investment Registration Certificate, the investor declares information about the investment project online on the National Information System on Foreign Investment. Within 15 days from the date of online declaration, the investor submits the application for an Investment Registration Certificate to the Investment Registration Authority.
After the Investment Registration Authority receives the application, the investor will be granted an account to access the National Information System on Foreign Investment to monitor the application processing status.
The investment registration agency uses the National Information System on Foreign Investment to receive, process, and return results of investment registration dossiers, update dossier processing status, and issue project codes. investment project.
Submit application directly for Investment Registration Certificate
Investors submit applications for Investment Certificates at the investment registration agency according to their authority as follows:
Department of Planning and Investment of the province where the company is headquartered:
Investment projects outside industrial parks, export processing zones, high-tech zones, and economic zones
Investment projects to develop infrastructure of industrial parks, export processing zones, high-tech zones and investment projects in industrial parks, export processing zones, and high-tech zones in localities that have not yet established a Management Board industrial parks export processing zones and high-tech zones.
Investment projects implemented in many provinces and centrally run cities.
Investment projects are implemented simultaneously inside and outside industrial parks, export processing zones, high-tech parks and economic zones.
Management board of industrial parks, export processing zones, high-tech zones and economic zones of the province where the company is headquartered.
Investment projects to develop infrastructure of industrial parks, export processing zones, and high-tech zones.
Investment projects implemented in industrial parks, export processing zones, high-tech zones, and economic zones.
Step 3: Issue Investment Registration Certificate
Within 15 days from the date of receiving complete documents, the investment registration agency shall issue an Investment Registration Certificate. In case of refusal, the investor must be notified in writing and clearly state the reason.
Step 4: Prepare documents and submit application for Business Registration Certificate
After a foreign-invested company is granted an investment registration certificate, the investor carries out the procedures for granting a Business Registration Certificate similar to the procedures for establishing a Vietnamese capital company.
Application dossier for issuance of Business Registration Certificate
Application for business registration.
Company rules.
List of members (for LLCs with two or more members) or List of founding shareholders and shareholders who are foreign investors (list of authorized representatives if there are institutional shareholders).
Copies of the following documents: Citizen identification card, ID card, passport or other legal personal identification of individual members.
Establishment decision, Business registration certificate or other equivalent documents of the organization and authorization documents; Citizen identification card, ID card, passport or other legal personal identification of the authorized representative of the organizational member
For members that are foreign organizations, a copy of the Business Registration Certificate or equivalent document must be consular legalized.
Decide to contribute capital and appoint managers; List of authorized representatives (for organizational members)
Investment registration certificate for investors has been issued.
Authority to issue Business Registration Certificate:
Department of Planning and Investment of the province where the company’s headquarters is located.
Step 5: Announce the content of business registration information.
After being granted a Business Registration Certificate, an enterprise must make a public announcement on the National Business Registration Portal. At the same time, the publication fee must be paid according to the provisions of law. The published content includes the contents of the Business Registration Certificate and the following information:
Business.
List of founding shareholders; List of shareholders who are foreign investors for joint stock companies (if any).
Fee for publishing business registration content:
The request for publication of business registration contents and payment of fees for publication of business registration contents are made at the time the enterprise submits its business registration dossier.
Step 6: Engrave the company seal.
Stamps include stamps made at a seal engraving facility or stamps in the form of digital signatures in accordance with the law on electronic transactions.
The enterprise decides the type of seal, quantity, form and content of the seal of the enterprise, branches, representative offices and other units of the enterprise.
The management and storage of seals is carried out in accordance with the provisions of the company charter or regulations issued by the enterprise, branch, representative office or other unit of the enterprise with the seal. Enterprises use seals in transactions according to the provisions of law.
Step 7: Issue a business license or operating license.
Business License issuance only applies to companies doing business in the field of retailing goods to consumers or setting up retail establishments.
For some industries, after completing procedures for establishing a company, foreign investors must apply for licenses related to operating conditions. For example: a food business applies for a food hygiene, safety and environmental license. Education business: Training license. Travel business: Travel license…
General conditions for being granted a business license in the field of retail goods for foreign investors.
In cases where foreign investors belong to countries or territories participating in international treaties to which Vietnam is a member and commit to opening the market for goods purchase and sale activities and activities directly related to purchase and sale, goods.
Meets market access conditions in international treaties to which Vietnam is a member.
Have a financial plan to carry out the activities requested for a Business License.
No overdue tax debt in case established in Vietnam for 1 year or more.
In case the foreign investor does not belong to a country or territory participating in an international treaty to which Vietnam is a member.
Meets market access conditions in international treaties to which Vietnam is a member.
Have a financial plan to carry out the activities requested for a Business License.
No overdue tax debt in case established in Vietnam for 1 year or more.
Conditions by industry to be granted a retail business license.
In accordance with specialized legal regulations.
Consistent with the level of competition of domestic enterprises in the same field of operation.
Ability to create jobs for domestic workers.
Ability and level of contribution to the state budget.
Application for a retail business license for foreign-invested enterprises
Application for Business License (Form No. 01 in Appendix issued with Decree 09/2018/ND-CP).
The explanation contains:
Explanation of the conditions for granting the corresponding Business License according to the provisions of Article 9 of Decree 09/2018/ND-CP.
Business plan: Describes the content and methods of implementing business activities; present business plans and market development; labor needs; Evaluate the socio-economic impact and efficiency of the business plan.
Financial plan: Report on business performance results on the basis of audited financial statements of the most recent year in case established in Vietnam for 01 year or more; explanation of capital, capital sources and capital mobilization plans; Attached are financial documents.
Business situation of buying and selling goods and activities directly related to buying and selling goods. The financial situation of the foreign-invested economic organization as of the time of application for a Business License.
Tax authority documents proving no overdue tax debt.
Copy: Business registration certificate; Investment registration certificate for projects selling and buying goods and activities directly related to buying and selling goods (if any).
Authority to grant retail business licenses to foreign-invested enterprises.
Department of Industry and Trade where the enterprise is headquartered.
Processing time: about 30-45 working days.
Step 8: Open a foreign direct investment capital account.
After completing the procedures for establishing a foreign-invested company, the investor opens a foreign direct investment capital account. The investor transfers capital to this capital account according to the capital contribution period recorded in the Investment Certificate.
In addition, companies with foreign investment capital need to open additional transaction accounts to receive money from the investment capital account to carry out revenue and expenditure procedures in Vietnam.
Step 9: The foreign-invested company carries out the following procedures for establishing the company.
After the company is established, investors need to follow the same post-establishment procedures as a Vietnamese company. Specifically:
Hang signs at headquarters.
Register for a digital signature to pay taxes electronically and report taxes via the Internet.
Buy electronic digital signatures to make electronic tax payments.
Proposal to issue electronic invoices.
Report on project implementation status according to regulations in the Investment Registration Certificate.
Declare and pay taxes according to regulations.
Step 1: Establish a company with Vietnamese capital.
Foreign investors can only contribute capital to buy shares when there is a Vietnamese company. In case the company establishment procedures have not yet been completed, the Vietnamese partner must proceed with establishing a company with 100% Vietnamese capital.
Step 2: Prepare documents to register to purchase capital contributions and shares from foreign investors.
Application for registration of capital contribution, purchase of capital contribution, purchase of shares of foreign investors in Vietnamese enterprises
Document to register capital contribution, share purchase, capital contribution. The registration document for capital contribution, share purchase, or capital contribution includes the following contents: information about the economic organization to which the foreign investor intends to contribute capital, buy shares, or contribute capital. Charter capital ownership ratio of foreign investors after contributing capital, purchasing shares, or capital contributions to economic organizations.
Copy of ID card, ID card or passport for individual investors. Copy of Certificate of Establishment or other equivalent document certifying legal status for institutional investors.
Written agreement on capital contribution, share purchase, capital contribution purchase between the foreign investor and the economic organization receiving capital contribution, stock purchase, capital contribution.
Declaration document (attached with a copy) of the Certificate of land use rights of the economic organization receiving capital contributions, shares, or capital contributions from foreign investors.
Step 3: Submit application to register to purchase capital contributions and shares from foreign investors.
Foreign investors submit applications at the Investment Registration Office – Department of Accounting and Investment where the enterprise is headquartered.
Within 15 working days from the date of receipt of valid documents, the Department of Accounting and Investment shall issue a Notice of meeting the conditions for capital contribution, share purchase, capital contribution and Vietnamese enterprises.
Step 4: Foreign investors contribute capital, buy shares, capital contributions and Vietnamese enterprises.
In case the foreign investor contributes more than 51% of capital, the Vietnamese Company will open a direct investment capital account. Investors make capital contributions and transfer capital through direct investment capital accounts.
Members and shareholders transferring capital must declare and pay taxes upon transfer according to the law on personal income tax and corporate income tax (if any).
Step 5: Change the business registration certificate.
After the foreign investor completes the capital contribution, the company carries out procedures to change business registration. Changing business registration to record capital contribution and share purchase by foreign investors in business registration documents at competent state agencies.
Application for change of business registration certificate
Notice of change in business registration content
Deciding on company changes
Minutes of meetings about changing companies
Transfer contract and documents certifying that the transfer has been completed, certified by the company’s legal representative.
List of capital contributing members or List of foreign shareholders
Notarized copy of investor’s passport/Business registration certificate.
Authority to issue changes to the Business Registration Certificate:
Department of Planning and Investment of the province where the company’s headquarters is located.
Step 6: Issue Business License and Operating License
Similar to step 7 above.
Competent authority issues investment certificates to establish foreign-invested companies.
Pursuant to the provisions of Article 39 of the Investment Law 2020, there are provisions as follows:
“Article 39. Authority to issue, adjust and revoke Investment Registration Certificates
1. The Management Board of industrial parks, export processing zones, high-tech zones, and economic zones issues, adjusts, and revokes Investment Registration Certificates for investment projects in industrial parks, export processing zones, high-tech zones and economic zones, except for the cases specified in Clause 3 of this Article.
2. The Department of Planning and Investment issues, adjusts, and revokes Investment Registration Certificates for investment projects outside industrial parks, export processing zones, high-tech zones, and economic zones, except for cases prescribed specified in Clause 3 of this Article.
3. The investment registration agency where the investor implements the investment project, places or plans to locate an executive office to implement the investment project shall issue, adjust and revoke the Investment Registration Certificate for with the following investment projects:
a) Investment projects implemented in 02 or more provincial administrative units.
b) Investment projects implemented inside and outside industrial parks, export processing zones, high-tech parks and economic zones.
c) Investment projects in industrial parks, export processing zones, high-tech zones, economic zones where the Management Board of industrial parks, export processing zones, high-tech zones, economic zones have not been established or is not within the scope of management of the Management Board of industrial parks, export processing zones, high-tech zones, and economic zones.
4. The agency receiving investment project documents is the agency competent to issue the Investment Registration Certificate, except for the cases specified in Article 34 and Article 35 of this Law.”
Thus, the competent authority to issue the Investment Registration Certificate in this case will be the Industrial Park Management Board and the investment registration agency where the investor implements the investment project, places or plans. Set up an executive office to carry out investment projects and grant you an Investment Registration Certificate.
7. What are the advantages of establishing a limited liability company for foreigners compared to a joint stock company?
Experience in consulting on establishing foreign companies, Lawyer Tri Nam finds that the LLC type will be more suitable for foreign investors, because:
Joint stock companies are always considered by everyone to have the ability to mobilize capital quickly according to the Enterprise Law 2020. However, for foreign investors, this advantage is almost worthless because: Main methods of capital mobilization Foreign-invested companies, especially companies whose owners are foreign legal entities, often use it to register short-term loans, medium and long-term foreign loans from the parent company. This loan source is considered and approved by the State Bank based on the mobilized capital specified in the Investment Registration Certificate. Therefore, whether a foreign-invested company operates as a joint stock company or a limited liability company is essentially the same, there is no difference.
When a joint stock company transfers shares, it is not required to notify the Business Registration Office. However, this regulation only applies to the transfer of shares by domestic investors. When transferring shares with foreign elements, procedures for changing the business registration content at the Business Registration Office must be carried out, and at the same time adjusting the capital contribution ratio on the Investment Registration Certificate. Thus, whether operating under the model of a joint stock company or a limited liability company, the transfer of capital by foreigners must still be registered the same.
Foreign investors investing in Vietnam must transfer money through the investment capital account established by the company, so to establish a limited liability company or a joint stock company, they must contribute full charter capital. within 90 days by bank transfer method. In case the time limit for full capital contribution is longer than 90 days, this content must be recorded on the Investment Registration Certificate. Thus, the type of enterprise does not create advantages in terms of capital contribution period and capital contribution method.
When transferring shares, a tax of 0.1% will be charged (See: How to calculate tax from transferring shares) but transferring capital contributions in a limited liability company at equal value is tax-free.
The popular business model of foreign legal entities, especially Korean ones, is a family company, so most foreign legal entities themselves are registered as limited liability companies (Co., Ltd). The laws of other countries are similar, so choosing to establish a limited liability company in Vietnam also helps investors easily manage and operate their business.
The LLC model is more durable in binding investors together. This is the plus point that foreign investors prioritize the most because they come to Vietnam to invest and do business and do not want disputes or fluctuations to occur, so they need to control the free transfer of capital by co-investors.
Advantage:
Rapid economic growth: Vietnam is experiencing significant economic growth and is one of the fastest growing economies in Southeast Asia.
Large consumer market: With more than 90 million people, Vietnam is a large and growing consumer market, creating opportunities to reach potential customers.
Cheap labor: Vietnam has cheap labor, making the country an attractive investment destination for industries with a lot of direct labor.
Strategic geographical location: Vietnam is located close to major markets such as China, India, Japan and Korea, making the country a strategic investment destination to expand business scale to other countries. neighboring market.
Developing infrastructure system: The infrastructure system in Vietnam is being upgraded and developed, including seaports, railways, roads, and airports.
Rights and protection of investors’ rights: Vietnamese law ensures the rights and freedom of legal operations of foreign investors in Vietnam and provides mechanisms to resolve disputes and conflicts invest.
Defect:
Complicated procedures: Foreign investment procedures in Vietnam can be complicated and require a lot of paperwork and time to complete.
Language and culture: Language and cultural differences can make transactions and project management difficult for foreign investors.
Legal conflicts: Handling legal and contractual conflicts can take a lot of time and money.
Political fluctuations: Political fluctuations can affect the business and investment environment in Vietnam.
Complex tax laws: The tax law system in Vietnam can be complex and requires an in-depth understanding of tax regulations.
Market risks: Like any other market, Vietnam also has business risks, including market, financial, and political risks.
Despite its disadvantages, Vietnam is still considered an attractive investment destination for foreign investors due to its growth opportunities and economic development potential.
9. Some notes before establishing a foreign-invested company in Vietnam
Foreign investors, including foreign individuals and foreign companies, can establish companies in Vietnam with capital ownership from 1 to 100% capital depending on the investment field.
Conditions for establishing a foreign-invested company depend on the field in which the investor is establishing: According to WTO commitments and Vietnamese law, some fields can be easily established in Vietnam such as: trade, import-export, investment consulting, management consulting, software, real estate, construction, restaurants, tourism, manufacturing (needs a factory in an industrial park), …
Except for industries requiring legal capital, the capital contributed by investors does not have a minimum level but must be consistent with the scale of operation of the registered company. However, the amount of capital contributed affects the application for a work permit and temporary residence card for the investor, accordingly the investor and the representative managing the capital contribution are only exempted from the work permit and issued a card. For temporary residence, if the capital contribution is 3 billion VND or more, and the investor contributes a high capital contribution, the temporary residence card period will also be granted longer.
If foreign investors contribute capital right after establishment, they need to prove their finances through: savings book, deposit balance, etc. For individuals, deposit balances, tax reports, profitable financial reports, etc. for companies. But if a foreign investor contributes capital to buy shares, it is not necessary to provide these documents.
For procedures to establish a foreign-invested company, it is necessary to provide a house or office rental contract or loan contract and real estate documents of the rented house or office to submit with the establishment documents. Meanwhile, for Vietnamese companies or capital contribution purchase procedures, this condition is not required.
The director, legal representative, and capital contribution manager of a foreign-invested company can be a foreigner or Vietnamese.
Foreign-invested companies are also granted Enterprise Registration Certificates (ERC) by the Business Registration Office – Department of Planning and Investment where the company is headquartered as Vietnamese capital companies.
For companies with foreign investors contributing capital from the beginning from 1% and foreign-invested companies operating in the field of education, the procedure for issuance of an Investment Registration Certificate (IRC) must be carried out.
The biggest difference between a foreign-invested company and a Vietnamese-invested company is that the company needs to open an investment capital account to contribute capital and transfer profits back to the country later.
Unlike Vietnamese-invested companies, which are responsible for their own capital contributions, foreign-invested companies are required to make capital contributions to their capital account and are supervised on capital contributions through investment reports. capital contribution period.
The capital contribution period of a foreign-invested company is clearly recorded in the Investment Registration Certificate. Accordingly, if the investor has not yet contributed capital by the due date, the bank opening the investment capital account will not accept late capital contributions. To be able to carry out capital contribution procedures as committed, the company needs to make adjustments to the Investment Registration Certificate to extend the capital contribution deadline.
Tax declaration procedures, VAT rates, and Corporate Income Tax of foreign-invested companies are similar to those of Vietnamese-invested companies. However, foreign-invested companies must audit their year-end financial statements.
In addition, foreign-invested companies that are granted Investment Registration Certificates must annually carry out investment reporting procedures, investment monitoring and evaluation reports, and report on project implementation status to the public. investment registration agency.
10. Cost of establishing a company with foreign capital in Vietnam
The price list of establishing a foreign-invested company accounts for 50-100% of charter capital.
| BTI | Profession | USD Price |
| 1 | Service industry | 1.000 |
| 2 | Trade – Import export | 1.700 |
| 3 | Manufacturing | 2.500 |
| 4 | Conditional trades | 3.000 |
| 5 | Projects over 300 billion | Agreement |
Price list for establishment of a foreign-owned company is less than 50% of charter capital.
| BTI | Profession | USD Price |
| 1 | Service industry, Trade – Import and export, Manufacturing industry. | 650 |
| Conditional trades | 650 | |
| 5 | Projects over 300 billion | Agreement |
Price list for establishment of branches, representative offices and dependent establishments of foreign-invested companies
| BTI | Content | USD Price |
| 1 | Establishment of branches of independent accounting foreign-invested companies. | 100 |
| 2 | Establishment of branches of foreign-invested companies with dependent accounting. | 100 |
| 3 | Establishment of representative offices of foreign-invested companies. | 100 |
| 4 | Establishment of establishments under foreign-invested companies. | 100
|
11. Common legal problems when establishing a foreign-invested company.
Can foreign investors contribute capital in cash?
According to regulations in Circular 06/2019/TT-NHNN. Capital contribution by foreign investors must be through an investment capital account opened at a bank in Vietnam. In case you contribute in cash, it will not be recorded as a legal capital contribution. And you may be fined for not contributing capital according to regulations. Fines range from 20,000,000 VND to 30,000,000 VND if violating this regulation (Decree 122/2021/ND-CP).
Regulations on retail business in Vietnam for foreign-invested companies
Retail business is a very popular form. And many foreign investors also want to do this profession. The retail business is also not in the list of conditional industries for foreign investors as stated in the above principles. However, according to Decree 09/2018/ND-CP, companies with foreign capital in Vietnam that want to carry out retail activities need to apply for a business license (in case of online sales, not setting up retail establishments). or License to establish a retail establishment (if establishing a retail establishment).
Can foreign investors be granted investment visas?
Currently there are 4 types of investment visas for foreigners. Including Visa DT 1, DT 2, DT 3, DT 4. The DT4 visa type is the most popular visa type in visa procedures for investors.
Investment visa DT4 – Issued to foreign investors in Vietnam; and representatives of foreign companies investing in Vietnam; have contributed capital worth less than 03 billion VND. Maximum visa duration is 1 year (12 months).
Investment visa DT1 – Issued to foreign investors in Vietnam; and representatives of foreign companies investing in Vietnam; have contributed capital worth 100 billion VND or more; or invest in industries and occupations with investment incentives; Investment incentive areas are decided by the Government.
Investment visa DT2 – Issued to foreign investors in Vietnam; and representatives of foreign companies investing in Vietnam; have contributed capital worth from 50 billion VND to under 100 billion VND; or invest in industries and occupations that encourage investment and development as decided by the Government.
Investment visa DT3 – Issued to foreign investors in Vietnam; and representatives of foreign companies investing in Vietnam; with contributed capital worth from 03 billion VND to less than 50 billion VND.
12. Service of establishing foreign invested companies of Quoc Bao law firm
Consulting on conditions for establishing foreign invested companies: capital contribution ratio of foreign investors in Vietnam; business conditions of various industries; project implementation location; Note the procedures before and after establishing a foreign invested company.
Consulting on choosing the appropriate company type for investors: Limited Company or Joint Stock Company;
Consulting on opening a capital transfer account, capital contribution deadline;
Consulting and guiding investors to prepare necessary documents to establish foreign-invested companies;
Consulting and drafting company establishment documents for investors;
Investor representative works with competent Vietnamese state agencies in the process of implementing company establishment procedures for investors (Application for Investment Registration Certificate, Registration Certificate enterprises, business licenses, licenses according to specialized requirements, making legal seals, announcing seal samples, procedures after establishing a company,…;
Comprehensive, regular consulting, accounting services, tax law package of activities arising during the process of conducting business in Vietnam for investors.
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