Once a foreign individual or organization wants to find out about the process of setting up a 100% foreign-owned company or a joint venture in Vietnam, they might need to learn about legal procedures and get advice from local lawyers and professional firms, who truly understand Vietnam laws, experience and are fluent in English.
When a foreign individual or organization wants to invest and open a company in Vietnam, how do they need to go through the process? And what are the considerations for foreign investors in Vietnam when establishing a company in Vietnam?
Why should you establish a Foreign Invested Enterprise in Vietnam?
Fitch Ratings affirms Vietnam’s sovereign rating at ‘BB’ with positive outlook, ranked as one of the fastest-growing countries in Asia-Pacific (2019, Fitch Ratings). Vietnam is also on the path of strong integration with the signing of many free trade agreements, such as the WTO Commitments, the Trans-Pacific Partnership Agreement (TPP) and the ASEAN Common Economic Community (AEC).
The second advantage belongs to the population with more than 95 million people and the economy is on the way of development, foreign direct investment (FDI) to Vietnam has been constantly increasing. In 2019, according to Vietnam’s Ministry of Planning and Investment’s Foreign Investment Agency (FIA), FDI pledges for new projects, capital supplements and stake acquisitions in Vietnam rose 7.2 percent year-on-year to $38 billion, marking a 10-year high. Country’s economic expansion had been driven by strong foreign investment and steady export growth. Therefore, foreign investors are pouring capital into establishing a company in Vietnam which is hot and growing steadily in the past 10 years, large multinational corporations such as Samsung, LG, Toyota, GE, Intel, etc. At the same pace, leading Vietnamese companies are selling capital to investors such as Nguyenkim are also heating the market up day by day.
VietCham Singapore, we provide documents and in-depth knowledge as well as assisting foreign investors and businesses in preparing procedures for establishing foreign-owned companies in Vietnam.
Who is entitled to establish a foreign capital company in Vietnam?
Foreign organizations, companies (having been operating for 1 year and above) or foreign individuals wishing to invest in the form of setting up companies (joint-stock company, joint-venture company, one or two members limited liability company) in Vietnam.
How do foreigners open companies in Vietnam?
Currently, depending on requirements and desires of each foreign investor, VietCham will support foreigners to open companies in Vietnam in two main ways:
- Option 1: Establish a company with 100% foreign capital
- With this option, first and foremost the investor will need to apply for an investment license. Once the investment registration certificate has been obtained, the company may be established.
- Normally, with this option, you will need about 30-40 days and the cost will be much higher than the second way due to the cost of obtaining an investment license is expensive.
- Option 2: Establish foreign-invested companies with capital contributions from foreign investors.
- Time to set up the company in this way will usually take about 20 – 30 days.
Foreigners who open companies in Vietnam will choose either of the two options: (1) Establish a company with 100% foreign capital or (2) Establish foreign-invested companies with capital contributions from foreign investors depending on the practical and desired conditions.
What are the required documents should I prepare?
- Request for issuance of investment certificate according to form I-3. Please refer to the instructions on how to fill the above document in Appendix IV-1 of Decision 1088/2006/QD-BKH dated October 19, 2006 of the Ministry of Planning and Investment).
- Report of Financial Capacity which is independently prepared and responsible by the investor. The content of the report must clearly indicate the investment capital that the investor uses for investment and the investor has financial capability to implement the project.
Investors may submit:
- Confirmation of bank account balance (for individual investors)
- Financial Statement (for the investor is a legal entity)
- The draft constitution of the Company corresponds to each type of enterprise (1 member limited liability company, limited liability company with 2 or more members, joint stock company). The draft constitution of the company must be fully signed.
For limited liability company: Legal representative, company owner, members or authorized representative.
For joint stock company: Legal representative, founding shareholders or authorized representative of founding shareholders.
The contents of the draft company constitution must be fully complied in accordance with Article 22 of the Law on Enterprises.
- List of members corresponding to each type of enterprise (according to form I-8 or I-9 of Decision 1088/2006/QD-BKH dated September 21, 2006 or form II-4 of Circular 14/2010/TT-BKH dated June 4, 2010 of the Ministry of Planning and Investment).
- Documents certifying the legal status of the Investors:
For individual investors:
- Copy of ID card or passport (notarized copy or consular legalization at Vietnamese diplomatic missions abroad – including passport book);
- Confirmation of bank account balance of the investor corresponds to the proposed investment capital in Vietnam (if certified by a foreign bank, a notarized copy and consular legalization at Vietnamese diplomatic missions abroad is required)
- Office lease agreement, proof of the lessor’s right (land use right certificate, construction permit, business registration certificate with the function of real estate business of the lessor or equivalent documents)
For institutional investors (foreign companies contributed, invested capital to establish company in Vietnam):
- Certificate of Business Registration or other equivalent document certifying the legal status of the investor (required to be certified by notary public, consular legalization at Vietnamese diplomatic missions abroad).
- A copy of one of the following documents: Financial Statements of the latest 2 years of the investor; financial commitment of the parent company; financial institutions’ commitment to financial support; guarantee of financial capacity of the investor; confirmation of bank account balance of the investor corresponds to the proposed investment capital in Vietnam (required to be certified by notary public, consular legalization at Vietnamese diplomatic missions abroad).
- Copy of passport of the legal representative of the company in foreign countries (notarized copy and consular legalization at Vietnamese diplomatic missions abroad);
- Copy of passport of Director – legal representative of the company in Vietnam (for foreigner, a notarized and consular legalized copy at the Vietnamese diplomatic mission abroad is required)
- Office lease agreement, proof of the lessor’s right (land use right certificate, construction permit, business registration certificate with the function of real estate business of the lessor or equivalent documents)
- If the project uses technology, an explanation of the use of technology must be attached to the project, covering the following: technology name, technology origin, technological process diagram; main specifications, use status of main machines, equipment and technology lines;
- Authorization decision / authorization document of the investor for the authorized person in case the investor is an organization and a valid copy (notarized copy) one of the personal identification documents of the authorized representative.
- Joint venture contract for the form of investment in the establishment of a joint-venture between domestic investors and foreign investors (Refer to Article 54 of Decree 108/2006/ND-CP dated September 22, 2006)
- In case an investment project uses state capital, there must be a written approval of the use of state capital for investment by a competent agency.
In addition, investors need to provide:
i. Documents proving the lawful use right of the enterprise’s headquarters (lease agreement from organization that has legal house/office rental function)
ii. Capacity profile of the investor
Process of establishing a foreign-owned company
Step 1: Register the investment policy with the Municipal/Provincial People’s Committee
Foreign investors entering Vietnam to implement a project must follow the procedures to apply for an Investment Registration Certificate. However, before carrying out the application for an Investment Registration Certificate, in some cases, the investor must register an investment policy with the People’s Committee of the province/city (the very first step in the process of setting up foreign invested companies).
Registration dossier including the documents mentioned above
- For investment projects not subject to investment policy decision: 15 to 20 working days from the date of receiving complete and valid dossiers.
- For investment projects subject to investment policy decision: 05 to 10 working days from the date of receiving the investment policy decision.
Step 2: Issuance of Investment Registration Certificate (IRC)
Registration dossier including:
- Application for enterprise registration.
- Company constitution.
- List of founding shareholders and foreign investors (list of authorized representatives if any)
- Copy of the following documents:
- Passports or other lawful personal identification of members are individuals;
- Enterprise Registration Certificate (ERC)
For members being foreign organizations, the copy of the enterprise registration certificate or equivalent documents must be consular legalized;
This step is very critical, you won’t be able to set up a company if not obtain an IRC.
Sample of Investment Registration Certificate (IRC)
Step 3: Issuance of Enterprise Registration Certificate (ERC)
- After the investment policy decision is approved by the Municipal/Provincial People’s Committee, investors is allowed for applying for Enterprise Registration Certificate
- Time for applying for ERC is 5 working days.
Sample of Enterprise Registration Certificate (ERC)
Step 4: Publish notice on establishment of new foreign invested company in the Official Gazette
Enterprises, after being granted enterprise registration certificates, must publicly notify the National Business Registration Portal and pay fees according to regulations.
The content to be published includes the contents of the Certificate of Business Registration and the following information:
- Business lines;
- List of founding shareholders and foreign investors for joint stock companies.
Implementing Agency: Notice publication department of the business registration agency
Step 5: Making the company seal for foreign invested company
Once investors have obtained the Enterprise Registration Certificate and publish notice on the Official Gazette accordingly. The enterprise may make seals at one of the licensed seal making companies. Enterprises may decide by themselves on the number and form of seals within the permitted law.
Step 6: Publish the seal sample of the company on National Business Registration Portal (see rules)
After having the seal, the company will post the seal sample on the National Business Registration Portal and be granted a certificate of seal specimen posting by the Department of Planning and Investment.
Implementing Agency: Notice publication department of the business registration agency
Duration: 03 working days from the date of receipt of complete and valid dossier.
Step 7: Open a bank account (payment account) and initial tax returns, issue invoices
- Declare and pay license fee
- Declaration of one-time license fee when new fee payers start their business, no later than the last day of the month in which they start production and business activities.
- In case the fee payer has just set up a business establishment but has not yet conducted production and business activities, he/she must declare the license fee within 30 days from the date of receiving ERC, investment registration certificate and tax registration certificate.
- The deadline for paying license fees when starting business activities is the last day of the time limit for filing fee declaration dossiers.
- License tax declaration dossier is license fee declaration.
- After the enterprise comes into operation, annually the license fee must be paid no later than January 30 every year.
- Notice of application of Value-Added Tax calculation method (Form 06/GTGT)
Note about form 06/GTGT: from November 5, 2017, enterprises do not have to submit Form 06/GTGT to register and convert the method of VAT calculation, which has been stated clearly in circular no. 93/2017/TT-BTC dated September 19, 2017 of the Ministry of Finance.
There are two methods of calculating VAT: (1) Deduction method (using VAT invoice) and (2) Direct method (using sales invoice).
To apply the deduction method, the enterprise shall notify the tax office via form no. 06/GTGT; the time limit for submitting form 06/GTGT is before the deadline for submitting the first tax declaration dossiers.
Form no. 06/GTGT
- Notice of use of tax agent service (if any)
If the taxpayer uses the tax preparation and filing service through a tax agent, the taxpayer must notify the supervisory tax authority in writing with a copy of the service contract which has been certified by the taxpayer. This must be done within 05 working days at the latest before the tax agent makes the first tax declaration stated in the service contract.
- Register your personal tax code
Enterprise is obliged to withhold personal income tax when paying salaries and wages to employees and making tax code registration for employees (if the employee has not had a tax code).
Individuals earning income from salaries or wages authorized through income-paying units (the enterprise) to carry out procedures for tax registration and dependent registration with the tax office.
- Register electronic transactions with tax office
From February 10, 2020, businesses, organizations and individuals use the eTax system at https://thuedientu.gdt.gov.vn to perform tax registration, declaration, payment and refund.
Step 8: Open a capital account and transfer money to contribute capital
Regulations on capital account of foreign investors are prescribed in (1) Circular no. 05/2014/TT-NHNN dated March 12, 2014 of the State Bank of Vietnam (SBV) guiding on the opening and use of indirect investment capital accounts to carry out foreign indirect investment activities in Vietnam and (2) Circular no. 19/2014/TT-NHNN dated August 11, 2014 of the State Bank of Vietnam (SBV) guiding on the management of foreign exchange for foreign direct investment activities into Vietnam.
Estimated time of establishment of foreign-invested company?
- Application dossier: 04 sets (including 01 original, by Vietnamese or Vietnamese and common foreign languages), each is formatted in book template.
- Time for issuance of Investment Certificate: 15 working days from the date of receiving complete and valid dossiers.
- Time for registration and issuance of Tax Registration Certificate (Tax Code): 05 working days from the date of receiving Investment Certificate.
- Time for making company seal: 04 working days from the date of receiving Tax code.
If you want to set up a foreign invested company, please contact VietCham via:
- Hotline in Vietnam: (+84) 90 100 6565 or (+84) 84 800 65 65 (Zalo/Viber/WhatsApp/WeChat/Call/SMS)
- Hotline in Singapore: (+65) 8468 8892 (Zalo/Viber/WhatsApp/WeChat/Call/SMS)
- Website: https://MoCongtySingapore.com
- Facebook page: https://www.facebook.com/MoCongTySingapore
- Email: contact@vietcham.org.sg
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