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

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

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

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

1. Direct investment by foreign company / individual; 

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

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

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

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

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

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

● Procedures:

1. Setting up offshore holding company; 

2. Collecting holding company documents; 

3. Documents translation/ embassy notarization; 

4. Checking proposed Vietnam company name; 

5. Prepare the M&A and application form; 

6. Evaluation of investment project by related authorities; 

7. Issuance of the enterprise registration certificate; 

8. Publish in newspaper gazette; 

9. Seal registration, open bank account; 

10. Tax, customs, and environmental protection registration.

Source: Quora

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

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

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

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

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

Exercising rights of importation and distribution:

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: quora

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New foreign investment approvals in Jan-Apr drop sharply

A view of downtown HCMC. The real estate sector recorded the second largest foreign investment in January-April.

HCMC – Total foreign investments pledged in the year’s first four months fell by a sharp 23.9% to US$8.06 billion, according to the Foreign Investment Agency.

Of the fresh foreign investment approvals in the period, pledges by existing and new projects declined significantly.

In particular, 883 new projects that had been approved in the year to April 20 had total registered capital of US$3.55 billion, a fall of nearly 24% against last year’s same period. Besides, 303 operational projects registered to adjust their investment capital up by US$2.24 billion, a year-on-year drop of 48.5%.

Regarding foreign indirect investment, the four-month period recorded 1,863 cases of foreign investors contributing funds or acquiring local shares with a combined value of US$2.26 billion, up 67% against the same period a year earlier. Of these, there were 1,087 cases of foreign investors increasing their paid-in capital of enterprises (US$1.56 billion) and 776 cases of stake acquisitions (US$703.5 million) which did not change chartered capital of enterprises.

It can be seen that investment capital of foreign investors tends to rise in M&A deals rather than direct investments.

Foreign direct investment (FDI) projects disbursed US$5.1 billion in January-April, rising by 6.3% year-on-year.

Regarding outbound shipments in the period, the FDI sector exported US$53.48 billion worth of products, including crude oil, up 18.9% year-on-year and equivalent to 72.5% of the country’s export turnover. Without crude oil, exports of the sector were US$52.81 billion.

Meanwhile, the FDI sector’s imports were US$42.31 billion, picking up 9.3% and accounting for 60.1% of total imports. This resulted in a trade surplus of US$11.17 billion with crude oil included and US$10.5 billion with crude oil excluded.

Of the 17 sectors foreign investors invested in, the processing-manufacturing sector attracted the highest amount of capital with US$4.52 billion (56.1% of total registered capital). It was followed by real estate with US$807.5 million (10%) and wholesale-retail with US$779 million (9.7%).

South Korea made up the biggest foreign investment amount among 82 countries and territories investing in Vietnam with US$2.32 billion (28.7%). Japan came second when investing some US$1.29 billion (16%) and Singapore third with US$808 million (10%).

Source: The Saigon Times

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Policies on labour and trade coming into force from the middle of April, 2018

03 policies on labour and trade coming into force from the middle of April, 2018 (April 11 – 20, 2018).

1. Employment litigation involving sending of workers abroad

This is the most noticeable content of the Decree No. 24/2018/ND-CP on settlement of complaints and denunciations in the fields of labour, vocational education, sending of Vietnamese employees to work abroad under labour contracts, employment, occupational safety and hygiene.

According to the Decree, procedures for lodging complaints about sending of Vietnamese employees to work abroad under labour contracts are as follows:

- File the first-tier complaint to the complaint handling officer or make the complaint to the court;

- File the second-tier complaint or make the complaint to the court if the complainant is not satisfied with the outcome of handling the first-tier complaint;

- Make the complaint to the court if the complainant is not satisfied with the outcome of handling the second-tier complaint or the complaint is not handled within the required time limit; 

If the respondent is not satisfied with the outcome of handling the second-tier complaint, he/she has the right to initiate the administrative lawsuit to the court.

Further details are available in the Decree No. 24/2018/ND-CP coming into force from April 15, 2018.

2. Taxation policies on transfer of motor vehicles of entities enjoying privileges in Vietnam

Decision No. 10/2018/QD-TTg dated March 01, 2018 provides amendments to the Decision No. 53/2013/QD-TTg on temporary import, re-export, destruction, and transfer of motor vehicles and two-wheeled mopeds of entities enjoying diplomatic immunity and privileges in Vietnam.

According to the Decision, taxation policies on transfer of motor vehicles of these entities are as follows:

- Regulations on import duties applied to second-hand motor vehicles prescribed in Decree No. 122/2016/ND-CP and Decree No. 125/2017/ND-CP shall apply;

- The date of transfer associated with these entities is the date on which the use purpose of the vehicle is changed according to the transaction papers made between the buyer and the vehicle owner;

The date of transfer associated with diplomatic officials, administrative and technical coordinators of diplomatic missions must also correspond to the expiration of term of office of vehicle owner in Vietnam.

- These entities shall declare and pay taxes and fees as prescribed.

The Decision No. 10/2018/QD-TTg is coming into force as from April 20, 2018.

3. Promulgation of 24 forms used in commercial mediation

On February 26, 2018, the Ministry of Justice promulgated the Circular No. 02/2018/TT-BTP providing guidance on forms used in commercial mediation.

24 forms used in commercial mediation are issued together with the Circular, including:

- The application form for accreditation as ad hoc commercial mediator;

- The application form for establishment of a commercial mediation center;

- The application form for addition of commercial mediation activities of an arbitration center;

- The record of commercial mediation activities;

- Mediators record;

- The records of mediation remunerations.

This Circular also provides for reporting on commercial mediation as follows:

- Each of commercial mediation institutions and Vietnam-based branches or representative offices of foreign commercial mediation institutions shall submit annual reports on its organization and commercial mediation activities to the Department of Justice of province where the its head office is located.

- An annual report presents the period from January 01 to December 31 and includes:

+ Actual data obtained from January 01 to October 31 inclusively; and

+ Estimated date obtained from November 01 to December 31 inclusively.

- Annual reports must be submitted by November 15.

The Circular No.02/2018/TT-BTP is coming into force from April 20, 2018.

Source: thuvienphapluat

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