8 Priorities to Establish a Business in Vietnam Saturday, Jun 08, 2019 by: Adminposted in: Insights, Investment and Corporate comments: 2 8-Priorities to Establish a Business in Vietnam Establishing a company in Vietnam has become commonplace among foreign investors entering the Vietnamese market. Many questions, regarding how to set up a company in Vietnam, evolved over the years. Outlined, below, are frequently-asked questions that concern investors the most while establishing a business in Vietnam. 8-Priorities to Establish a Business in Vietnam The Process of Establishing a Company in Vietnam Under current law, there are two basic steps for foreign investors to establish a company in Vietnam: (1) Obtaining an Investment Registration Certificate, and; (2) Obtaining an Enterprise Registration Certificate. 2 steps to set up a company in Vietnam Notes: Prior to 2014, the legal framework on foreign investments required only that Investors conduct one step – obtaining the Investment Registration Certificate. The Investment Registration Certificate obtained by investors, at that time, functioned as both the government’s recognition of the investment project and as incorporation of a company. As of July 1, 2015, Vietnam’s new investment and enterprise laws took effect. Promptly thereafter, the investment process became known as the investment project (meaning to obtain an Investment Registration Certificate) and the incorporation of a company (meaning: to obtain an Enterprise Registration Certificate) Therefore, a separate Enterprise Registration Certificate is required. It is, however, recommended that investment projects – that obtained the Investment Registration Certificates prior to July 1, 2015 – conduct the updated procedure to obtain the Enterprise Registration Certificate separately and independently from the Investment Registration Certificate by using this Form II 5 to obtain Enterprise Registration Certificate, and using this Form I 12 to obtain Investment Registration Certificate. Doing so, will likely simplify investors business implementation and activities as well as potential flexibility of the business. Procuring the Investment Registration Certificate The Investment Registration Certificate is recognized evidence – of the hosting country or countries – of the investor’s investment project proposal and intent to invest exclusively in Vietnam. Therefore, investors must submit investment registration reports (specified below) to the investment registration agency to be granted an Investment Registration Certificate. Should the investment project be subjected to issuance of an investment policy decision, the investor must obtain such decision by the competent authority prior to applying for an investment registration certificate. The criteria is based upon how the investments policy decision is categorized, as shown: Categories of criteria based upon which investment policy decision is required. Once the decision by the competent authority has been obtained, the registry office will issue the Investment Registration Certificate to the investor within five (5) working days from the receipt of investment policy decision. Procuring an Enterprise Registration Certificate Once the Investment Registration Certificate has been granted, the Investor then conducts the necessary procedure to register enterprise establishment. An investors registration for enterprise establishment should be based on resources, content of investment projects, and reference to relevant legal provisions for selecting the appropriate type of enterprise. The investor then submits an application for a business registration certificate. Upon obtaining the enterprise registration certificate, investors are eligible to register as many investment projects as possible, which is cost effective and saves time. Additionally, investors will find it easier to expand their business. Conditions for Establishing a Company in Vietnam Any and all investors intending to invest and/or establish a company in Vietnam must satisfy the following conditions to be granted an Investment Registration Certificate and incorporate thereafter, viz-: Conditions for obtaining an Investment Registration Certificate From an ownership perspective and with some exceptions, foreign investors may own an indefinite percentage of the capital invested in business organizations: Foreign investor holdings of listed companies, public companies, securities-trading organizations, and securities investment funds are consistent with regulations outlined in the law on securities. Foreign investor holdings of equitized or converted state-owned companies are consistent with the regulations provided for in the law on equitization and conversion of state-owned companies. In other cases, relevant regulations of the law, along with international agreements to which the Socialist Republic of Vietnam is a signatory, will apply. Vietnam’s commitment to open its market, type of investments, scope of operations, Vietnamese partners, and other facets is consistent with international agreements for which the Socialist Republic of Vietnam is a signatory. This includes the Schedule of Specific Commitments in Services 318/CK/ WTO for which accession to the WTO plays an important part in forming the legal framework, among other AFTAs based on which Vietnam opens its market to the worldwide investors. Additionally, there are specific areas in which Vietnamese law requires enterprises to register their business line, which must meet corresponding conditions, include, licensing, charter capital, human resources, facilities, etc. This is called a conditional business line. For a list of conditional business lines, please click here. Competent Authorities Investment and company registration authorities vary, depending largely on the place where investment projects are located (inside or outside industrial parks and export-processing, hi-tech, and economic zones, etc.). Furthermore, due to a wide variety of reasons – diversity of the investment project proposals, acknowledgement servants (governmental staff), applications and enforcement of the relevant laws, facilities, and cooperation among various departments, to name a few – it is worth noting that each application is managed differently within the various competent authorities. Succinctly, investment and company registration authorities are classified accordingly: Business Registration Bodies/Licensing Authorities Expected and Anticipated Duration With the exception of where investment projects require investment policy decisions to be made, the estimated timeline to obtain an Investment Registration Certificate is within 15-days from the submission date of the application. Likewise, unless an application requires revisions or modifications that competent authorities may reasonably advise on, the estimated time for obtaining an Enterprise Registration Certificate is within 3-working days from the submission date of the application. Valuable Tips: Because investment policy decisions regarding issuance vary greatly from each provincial level people’s committee to the Prime Minister, and the National Assembly, care must be taken while conducting procedures to obtain the investment policy decisions to ensure proper licensing bodies are appropriately addressed to obtain their opinion. In most instances – varying from case to case and from time to time – delays are anticipated and will occur. Elimination of bureaucracy and corruption remains to be seen any time soon, however, the National Business Registration Portal at https://dangkykinhdoanh.gov.vn/ helps investors and all project stakeholders to effectively submit and obtain the Enterprise Registration Certificate. Costs incurred? Costs associated with establishing a company is relative to each procedure and divided into three separate amounts: State costs: Company registration: 100,000 VND Information disclosure (a/k/a announcement fee, 300,000 VND) Processing Fee (2,000,000 VND - 3,000,000 VND) is contingent upon the amount of registered capital. The business license fee for Enterprises established later than June 30th is prorated at 50-percent of the prescribed fee. A deposit of 1,000,000 VND (from the business) is due upon opening a deposit account. The amount deposited must be maintained throughout the duration of the project and/or the account is closed, at which time the 1,000,000 VND will be refunded - in full - to the business upon closure. External Purchasing Costs: Red-rubber authorization stamp (400,000 VND –500,000 VND) Digital signatures (12-month package: 1,600,000 VND). Larger packages of 24 and 36 months are available at a discounted price. Invoice printing expenses (330,000 VND). Bulk discounts are available. Consultation Fees Consultation costs vary depending on the company. CNC’s hourly rate for initial consultation sessions ranges from $180.00 USD to $280.00 USD, and contingent upon the seniority level of the lawyer(s) assigned to each consultation session. Required Documents No. Documents Q’t Notes I Investment Registration Certificate (IRC) Procurement 1 Written application for investment project implementation 03 Original 2 Investor’s ID card/Passport (individual) OR 03 Notarized copy Certificate of establishment (enterprise) 01 Legalized copy 3 Investment project proposal 03 Original 4 Proof of financial capacity being in any form of the following: 4.1 Responsibility of financial institutions to provide financial support; OR 01 Legalized copy 4.2 Third party guarantee (financial institution or bank) proving financial capability/stability of the investor; OR 4.3 Stability of the investor (bank statement, etc.) 5 Need for land use proposal OR 03 Original Site lease agreement and land use rights certificate justifying that the investor has the right to use the site for implementation of the investment project. 01 Notarized copy No. Documents Q’t Notes II Enterprise Registration Certificate (ERC) Procurement 1 Request (application) for enterprise registration 03 Original 2 Company Charter/Article of Association (draft) 03 Original 3 Copy of investor’s Passport/ID Card 03 Notarized copy 4 Investment Registration Certificate 03 Notarized copy 5 Member list 03 Original 6 Additional documents applicable to organization as investor include 6.1 Business Owner’s Registration/Establishment Certificate (or equivalent document) 03 Legalized copy 6.2 List of authorized representatives 03 Original 6.3 Letter of appointment of authorized representatives, and 03 Original 6.4 ID/Passport of Authorized Representatives. 03 Notarized copy Opening Bank Accounts In order to perform foreign direct investment activities in Vietnam, for the purpose of receipt and expenditure transactions, foreign investment entities are entitled to open their foreign currency and Vietnamese dong accounts of direct investment at ONE of the authorized banks. Learn more about How to open a direct bank account and/or the function of each bank account. Post-Licensing Requirements Upon completion of the procedures for establishing a company, it is necessary to perform the following activities to bring the enterprise into operation: Declaration of initial tax and tax payment license. Order/print Value Added Tax (VAT) invoices. Generation of enterprise ledgers: Ledgers must be opened at the beginning of the annual or fiscal accounting period. Calculations in the ledgers of newly established enterprises, must begin from the date of establishment. Transfer capital contributions and ownership of assets. Signage. Implement relevant procedures congruent with business conditions for registered conditional business lines. Organize meetings, organizational structure. How We Will Help Contact us today at firstname.lastname@example.org or (+84-28) 6276 9900 to discuss how CNC will assist your investment project to efficiently and effectively execute business in Vietnam with peace of mind.