Some Modifications on Business Registration from October 10th, 2018

Decree no.108/2018/ND-CP amending and supplementing a number of articles of Decree No.78/2015/ND-CP effective from October 10th, 2018 has provided many new procedures of business registration.

The new decree stipulates clarification on some contents about the procedure on business registration, of which, the highlight are the procedures that do not to require the seal stamped on the dossier on business registration and that the power of attorney for a person whom establishes the company does not need notarization, authentication at Clause 1 and 2 of Article 1 Decree No. 108/2018/ND-CP. In the past, due to the lack of clarification on the above matters, some competent authorities require to affix the seal on the dossier of business registration and request the notarization of the power of attorney. These procedures created some troublesome in practice.

Another regulation that facilitate the business transaction is that previously enterprises can only set up business locations in the province or city under central authority where their head office or branch is located. It means that if an enterprise wishes to set up another business location where the office is located, it has to go through two procedures: setting up a branch first then setting up a business location. The procedure of setting up a branch is more complex more than the establishment of business locations. With the changes in the decree 108/2018/ND-CP, enterprises are allowed to set up business locations in other provinces or centrally-run cities where their head offices or branches are opened. The scope of work is simpler and more cost-effective, the transactions of the place of business are accounted for by the parent company, thereby reducing the workload for the accountant of the company.

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Conditional Investment Sectors and Investment Conditions in Vietnam

When setting up a trading company in Vietnam, beside other conditions, the foreign investors have to prove experience in trading area. Areas such as banking, financial services, real estate, security services will require minimum investment. Foreign investment lawyers should be consulted for advice on investment licensing matters.

In general, foreign investors making investment in Vietnam are encouraged. However, there are areas although not prohibited, but are “conditional” areas including the project could affect national defense, security, social order and safety; finance and banking; field that affect public health; culture, information, press, publishing; entertainment services; the real estate business; prospecting, exploring and exploiting of natural resources, ecological projects and the environment; education and training, and professional services i.e. legal, accounting, tax…

The conditions required by Vietnam laws on investment toward the foreign investors are business requirements that the investor must meet after the incorporation of the company, not as a condition for receiving the investment license. However, in the case of a foreign investor applies for an investment license for a new project, the law requires that all business conditions must be satisfied before the grant of the investment license.

Conditions that the foreign investors have to meet when investing in conditional business could be related to the forms of the investment, the nationality of foreign investors, the professional expertise of the investor, the scale of investment projects, type of goods and services, time implementation of investment projects.

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Which Authority Approves Business Setting up in Vietnam?

Investment projects in Vietnam could be evaluated and approved for business setting up at top level of the government, at ministerial levels or at the provincial levels.

The licensing authorities for business setting up in Vietnam has been divided to distribute workloads at different state agencies with aim to speed up the process and attract more quality investment projects in Vietnam.

In practice, the process for establishing companies or executing investment projects in Vietnam would take from one month for simple project, three to six month for areas categorized under conditional investment areas, requiring sub-licenses, or additional time for more complicated projects. At the provincial levels, there might be inconsistency between cities and provinces due to different interpretation of laws. For investment project with difficulty to manage, the provincial levels would need to consult with technical department of central government agencies, as such the time taken to process the investment certificate would be lengthen.

Understanding the mechanism and the work division of Vietnam authorities that evaluate and approve business licensing at different government agencies would help foreign investors to smoothen the process and improve their experience in Vietnam.

It is notable that, the government level will be focusing on significant projects, in special area at large investment capital with impact on social economic situations. Most of the investment licensing procedures will be carried out at the provincial levels where the investment projects exist.

The following will point out directions for foreigners to approach respective agencies based on the particular area of interests, scale, and nature of the investment. However, to avoid delay and increase effectiveness, it is advisable that the foreign clients would consult with Vietnam law firms to help advise and represent them in preparing and executing the investment in Vietnam.

I. Projects evaluated and granted investment licensing at government level

Depending on the business nature, industry sector, investment scale, and investment policy, the Vietnam Prime Minister, on behalf of the government will evaluate and approve investment licensing for setting up business.

1. The investment project in Vietnam the government will evaluate and approve regardless of funding, the scale of investment are in the following areas:

a) Development and commercialization of airports and air transport;

b) Development and commercialization of national port;

c) Exploration, mining and processing of oil and gas; exploration and exploitation of minerals;

d) Radio, television;

e) Casino;

f) Production of cigarettes;

g) Establishment of university level educational institute;

h) Establishment of industrial zones, export processing zones, high-tech zones and economic zones.

2. Although investment projects which do not fall under the cases listed above, but the government of Vietnam also evaluates and approves investment project with investment capital of VND 1,500 billion (around USD 75 mil) upwards regardless of funding and in the following areas:

a) Sales of electricity, mineral processing, metallurgical;

b) Construction of railway infrastructure, roads, inland waterways;

c) Production, sales of wine and beer.

3. Further, the government of Vietnam also evaluates and approve investment projects with foreign investment in the following areas:

a) Maritime transport;

b) Establishment of networks and provision of postal services, courier, telecommunication and internet; network setup and signal transmission;

c) Printing and distribution of newspapers; publication;

d) Establishment of independent scientific research.

4. Where the investment projects specified in the above cases are in the plan which the Prime Minister has approved or authorized other agencies to approve, and that the investment projects meet the conditions prescribed by law and treaties to which Vietnam Nam is a member, the agency granted investment certificates perform the procedure for issuance of investment certificates is not required to submit to the Prime Minister to decide on the investment policy.

5. Where the investment projects specified in the above case is not in the plan which has been approved by the Vietnam Prime Minister or authorized other agency to approve, and that the projects do not meet the conditions for market access provisions in international treaties which Vietnam is a member, the agency granted investment certificates shall consult with other of relevant industries and submit to the Prime Minister for investment policy decision.

II. Projects evaluated and granted investment licensing at ministerial level

1. The Vietnam Ministry of Planning and Investment shall evaluate and approve licensing for investment projects in the form of BOT, BTO, BT.

2. Other ministries will be evaluating and granting license for investment in some sectors.

a.Vietnam Ministry of Commerce and Industry shall evaluate and approve licensing for investment project in oil and gas sector;

b. Vietnam State Bank shall grant licensing for financial institutions;

c. Vietnam Ministry of Finance shall be responsible for issuing license for investment project of insurance business.

III. Projects evaluated and granted investment licensing at provincial levels

1. Department of Planning and Investment shall be the single point of contact that receive the application and evaluate the investment plan of the foreign investors wishing to establish business in Vietnam for projects

a. Outside of Industrial Zone, Industrial Processing Zone;

b. Infrastructure development project for Industrial Zone, Industrial Processing Zone which management board of industrial zone and industrial processing zone are not yet established.

2. The management board of Industrial Zone, and Industrial Processing Zone:

a. For investment projects within the Industrial Zone, and Industrial Processing Zone which are not under the authority of the Prime Minister;

b. Infrastructure development project to for industrial zone and industrial processing zone.

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Hau Giang Reduces 50% Investment Licensing Time

Hau Giang province affirmed to speed up administrative procedures reformation, reducing 50% of the time for granting investment licenses and business registration, creating favorable conditions for investors when they set up business.

In which, Hau Giang province is calling for investment in 7 key projects, including industrial zone infrastructure development, hi-tech agriculture and ecotourism… with a total investment of nearly 300 million USD.

According to the vice chairman of Hau Giang People’s Committee, besides the policies in accordance with general regulations, localities also have their own incentive mechanisms for investors such as tax incentives, land rent exemption and reduction, investment support for manufacturing, preservation and processing facilities…, especially projects for sustainable development of agriculture and high technology application…

Furthermore, Department of Planning and Investment of Hau Giang province affirmed that the local authorities will shorten the maximum time for carrying out procedures, creating favorable conditions for enterprises and investors. Specifically, the business registration procedure is 3 days according to the law, but the locality can complete in 1.5 days. Regarding the investment policy, the law regulates 32 days but it is shortened to 15 days by the locality; time to receive and appraise for issuing investment certificate is only 3 days; discounted 2 days as prescribed.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Attorneys in Hanoi, Attorneys in Ho Chi Minh and Attorneys in Danang.

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Where Foreign Investors Obtain Investment License in Vietnam?

To set up a business in Vietnam through foreign direct investment, foreign investors need to register the investment license from Vietnam Ministry of Planning and Investment (MPI).

Depending on investment business lines, investment conditions, scale of the projects, where investment project is located, other Vietnam State authorities would be involved. MPI in Vietnam takes charge of developing legislation, guiding, consulting and coordinating with other State authority in regard to all investment in Vietnam. Foreign investors apply for investment license at MPI which is acting as the contact point. People’s Committee will be the government body that administer investment activities within its city or province and issue the investment license to the foreign investor.

In case the foreign investor setting-up a business within an industrial zone, the management board of an industrial zone will have authority over the investment licensing process. For investment project which is larger than VND 300 billion (around USD 14.2 million) or in conditional investment area, MPI and other ministries will be involved in the evaluation process to recommend to the Prime Minister for approval. Other ministries involved in investment project licensing would be Ministry of Trade and Commerce and Minsitry of Finance for setting up a trading company in Vietnam; Ministry of Science and Technology for investment in high-tech projects in Vietnam; Ministry of Education and Training for setting up education institute; Ministry of Health for investment in hospital in Vietnam, etc to ensure they are complying with the specific industry’s regulations.

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What Foreign Investors Should Consider in Making Investment in Conditional Areas?

In the context of integration and globalization, the number of foreign investors whom wish to make investment and establish business in Vietnam has increased due to the attractiveness of the growing middle class population, availability of skilled resources, and Vietnam openness policies. To register a business in Vietnam, however, foreign investors must meet the requirements of Vietnam and international treaties to which Vietnam is a party.

Firstly, the field in which foreign investors wish to conduct business must not be on the list of industries that have been denied entry to the market for foreign investors or are prohibited from doing so under the Law on Investment.

Secondly, foreign investors may be restricted to the percentage of charter capital ownership in some economic organizations. For example, foreign investors ownership could only be up to 30% of charter capital of a commercial bank in Vietnam. Limiting the amount of charter capital is indirectly restricting the management and control rights of investors. Instead of freely making policies or decisions, foreign investors have to depend on other members of the company, namely domestic investors. The investors are suggested to consult with corporate lawyers in Vietnam or banking and finance lawyers in Vietnam for specific details in the specialized area like banking or finance.

Thirdly, foreign investors must consider the type of firm they want to register. A foreign insurance enterprise, for example, may operate in Vietnam as an insurance limited liability company or as a branch of a foreign non-life insurance enterprise. If the investor registers the establishment of an enterprise that is not under Vietnam law and the international treaties that Vietnam has signed, the application for registration is considered invalid. In addition, each type will also have certain limitations. For example, setting up a joint stock company might not be suitable for all investors. In the governance of a joint stock company, the decision-making process is complicated and time-consuming with different sequences and procedures.

Finally, the Vietnam law also have requirements on the legal status, financial status, and competence of investors in certain professions. To establish a company in Vietnam, foreign investors must meet all the prescribed conditions.

In conclusion, the foreign investors would need to undertake the legal research into the business it wish to register in Vietnam, and make strategic decision considering the legal and business requirements to maximize the benefits Vietnam would bring.

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How Vietnam Support Start-up Company in Vietnam?

Start-up company is a topic that is receiving much attention in Vietnam, especially in the context of the country’s strong integration with the world economy. Starting a business is expected to create economic growth, make a positive contribution to socio-economic development. From start-up ideas gradually appears startup businesses in Vietnam. Every year, Vietnam has hundreds of new businesses established, in which the number of small and medium enterprises account for the majority. Because they are small and medium-sized enterprises, it is inevitable to face great competitive pressure from large traditional enterprises as well as competitors.

The identification of small and medium enterprises is the basis for the State to have supportive policies to help enterprises face competitive pressure in the market. Criteria to determine small and medium enterprises include: field of operation, average number of employees participating in social insurance per year, total revenue or total capital of the enterprise.

Firstly, micro-enterprise in the field of agriculture, forestry, aquaculture; industry and construction that has an average annual number of employees who participate in social insurance not exceeding 10 people and the total revenue in the year not exceeding 3 billion VND or the total capital of the year is not more than 3 billion VND. Micro enterprises in the field of commerce and services employing no more than 10 employees per year on average with social insurance contributions and total annual revenue is not more than 10 billion VND or the year’s total capital is not more than 3 billion VND.

Second, small enterprise in the field of agriculture, forestry, aquaculture; industry and construction that has an average annual number of employees who participate in social insurance not exceeding 100 people, total revenue in the year not exceeding 50 billion VND or total capital of the year not exceeding 20 billion VND, except micro-enterprises. Small enterprises in the field of commerce and service that have an average annual number of employees who participate in social insurance no more than 50 employees total revenue in the year is not more than 100 billion VND or total capital of the year is not more than 30 billion VND, except micro enterprises.

Third, medium enterprise in the field of agriculture, forestry, aquaculture; industry and construction that has an average annual number of employees who participate in social insurance not exceeding 200 people, total revenue in the year not exceeding 200 billion VND or total capital of the year not exceeding 100 billion VND but not micro-enterprises and small enterprises. Medium enterprises in the field of commerce and service that have an average annual number of employees who participate in social insurance no more than 100 employees, total revenue in the year is not more than 300 billion VND or total capital of the year is not more than 100 billion VND but not micro enterprises and small enterprises.

Because there are a large number of enterprises in the Vietnamese market, the State has introduced policies to support small and medium enterprises such as technology support, information support, consulting support, supporting human resource development, supporting small and medium enterprises to transform from household businesses, small and medium enterprises to innovative start-ups, small and medium enterprises joining industry clusters, value chains. Small and medium enterprises play an increasingly important role in the economic development of countries around the world. With the ability to create business opportunities and effective jobs, this business model is increasingly encouraged to develop and receive support from state agencies to expand and develop this business model in Vietnam.

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What Foreign Investors Should Know When Setting up company in Vietnam in 2022?

In the period of global economic integration, especially Post-Covid-19 era, Vietnam – a developing country is considered one of the countries with potential markets that foreign investors choose to establish the business here taking advantage of the government policy to promote the economy i.e. “new normal” adaption living with Covid-19, quick opening of border allowing tourists to visit Vietnam since Apr 2022, tax reduction, public investment increase…

Whom can set up business in Vietnam?

First, the objects allowed to establish and manage enterprises in Vietnam are all organizations and individuals who are not in the following cases: (i) Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons; (ii) People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, is not able to control his/her own behaviors, is banned by the court from holding certain positions or doing certain works; other cases prescribed by the Law on Bankruptcy and the Anti-corruption Law. At the same time, individuals with foreign nationality implementing business investment activities in Vietnam are considered foreign investors. The implementation of investment forms; the scope of operation as well as related procedures must meet the conditions under the Investment Law; related legal documents; other conditions of international treaties that Vietnam is a member.

How to invest and set up business in Vietnam?

Second, foreigners, foreign investors must explore legal forms of investment in Vietnam including: (i) Investing in establishing economic organizations; (ii) Invest in capital contribution, share purchase and purchase capital; (iii) Implementing investment project; (iv) Investment in the form of BCC contract; (v) Forms of investment and new economic organizations according to the Government’s regulations. They need to consider projects planning to invest in Vietnam in case of requesting approval of investment policy of 2020 Investment Law. The investment project of foreign investors is required to carry out procedures for granting investment registration certificates. If the case must be proposed to approve the investment policy, they must prepare dossiers and carry out procedures to request approval of investment policies. When completing the procedure, they will be granted a written decision on investment policy and investment registration certificates. If not falling in the case of approval of investment policy, foreign investors conduct procedures for applying for investment registration certificates.

What documents required to set up company in Vietnam?

Third, after being granted a certificate of foreign investment registration, foreign investors shall continue the procedures for enterprise registration. Vietnam laws do not have to limit the type of enterprise to foreign investors, hence investors can choose: One member limited liability Company; Two-member limited liability companies or more; Joint stock company; Partnerships. Each type of business has different advantages and disadvantages, and foreign investors should base on the purpose and investment scale to choose the type of suitable form of investment. In addition, the investment under the conditional business lines need to fully meet the conditions according to the provisions of law. Depending on the type of business, there will be the document requirements that need to register accordingly. And most importantly, foreign investors must prepare necessary conditions and sufficient conditions (validated documents for use in Vietnam, business name, head office address, business line, charter capital, legal representative,…) attached to the understanding and implementation of the order and procedures when they want to establish a certain type of enterprise in accordance with the Enterprise Law 2020.

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10 Questions to Ask Before Setting up Company in Vietnam

Foreigners are encouraged to make investment in Vietnam through direct investment by Setting up company in Vietnam.

However there are restrictions in some cases in regard to investment capital, investment area, special licenses required. The investor is suggested to consult with a law firms in Vietnam for advice and service offering.

Before setting up business in Vietnam, ask yourself the following questions:

1. Which business should I invest in Vietnam?

There are non-conditional investment areas and conditional investment areas. Establishing company in the non-conditional investment areas are more simple than in conditional investment areas. Investment in IT services, manufacturing, management consulting, business promotion are a few samples of non-conditional investment areas. Example of conditional investment areas are real estate, trading, travel agencies, freight forwarding… which are more complicated with investment conditions. Investment conditions might also be changed over the time depending on the WTO commitments which Vietnam enters.

2. What should I name the business in Vietnam?

The company in Vietnam has to have Vietnamese name, and English name. The company could also have abbreviated name. The name of the company in Vietnam indicates the structure of the company, the business lines, and the name that differentiate against other businesses. For instance, the company could be named Alpha consulting limited liability company.

3. Where should I register the address of the business in Vietnam?

Not every address could be used to register a company. The address has to be an address of a house with leasing agreement or office building which owner has license to operate as office building.

4. What is the legal structure of the company?

Depending on the number of investor contributing capital, company could be set-up as one member limited liability company or two ore more member limited liability company or joint stocks company.

5. How much capital is required to set-up a company in Vietnam?

The investment amount depends on the business plan and is subject to the approval of the provincial Department of Planning and Investment evaluating application dossier. In some business areas like real estate, banking and finance, minimum capital is required. In general for non-conditional investment area, the law does not specify the minimum capital to establish a company in Vietnam however the State agencies that evaluate investment plan could reject the investment project which are not feasible. Bank statement in foreign banks could be used to prove sufficient fund of investment capital.

6. Whom will be legal representative and work permit in Vietnam?

The investor will need to appoint the legal representative in Vietnam to oversee the business performance and take legal responsibility in Vietnam. If the legal representative is an expatriate, whom is a capital contributing member or owner of a limited liability company or a member of the Board of Management of a shareholding company which is registered to operate in Vietnam, he or she will be exempted from work permit in Vietnam. Otherwise, he or she will need to have a work permit to work in Vietnam legally. The work permit holder would then apply for temporary residence card to live in Vietnam as long as the work permit allows.

7. How long does it take to set-up a company in Vietnam?

It depends on what type, scale, and whether or not conditions are required. For a simple minimum capital without conditions to set-up, it would take 30 working days. For setting up company in conditional investment areas i.e. trading company in Vietnam, time would be lengthen due to the involvement of a number of State agencies approving the investment project and it would take 60 working days. For setting up company in other investments in areas requiring conditions to meet, time might be taken depending on the type of conditions and the government agencies evaluating the conditions of investment.

8. Whom will be granting the investment license in Vietnam?

For most of the investment projects, the provincial state agencies with the approval of the Department of Planning and Investment (DPI) will be granting the Investment Certificate in Vietnam. However, depending on the type, scale, and whether or not conditions are required, other Vietnam State agencies might be involved. For the case of trading company, ministry of trade and commerce, ministry of finance, provincial people’s committee will be reviewing the investment application dossier as well.

9. What are the tax liability in Vietnam?

Major taxes in Vietnam are corporate income tax, import and export tax, value added tax, and personal income tax in Vietnam. In some special areas, there are other taxes. The corporate income tax is currently at 22% and will reduce to 20% beginning 2016. Export is mostly encouraged as such the export tax is 0 however there are special cases when export tax is larger than 0. Import tax varies according to tariff. Value added tax is mostly at 10% however in some cases, VAT could be 5% or 0%. Personal Income tax varies according to income level and is applicable from VND 9,000,000 above.

10. What are mandatory reports submissions requirement in Vietnam?

Companies are required to keep accounting books, prepare and submit tax reports on monthly, quarterly and annually. Foreign companies are also required to have financial audit taken before the financial year end. The financial year in Vietnam is from January to December and the deadline to submit financial report is March 30th for the previous year. Other reports are required to be submitted at other State agencies.

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Startup Company in Vietnam

From 2015 onwards, the wave of small and medium-sized startups in Vietnam has been developing rapidly. This development is followed by government’s support in forming legal corridors, scheme to favour startup ecosystem and encourage science and technology organizations, research institute, technology incubator, etc. To be deemed as a startup, an individual or business must start their own business along with an innovative idea. Currently, startup is the legal term as recognized under the laws, especially on Law on Small and Medium Enterprises Assistance 2017.

For clarification, small and medium startups are small and medium enterprise (“SME”) established to implement its business ideas based on the utilization of intellectual property, technology and new business models and are able to grow rapidly. These enterprises are in the stage of getting a business up and running, attaches to science and technology or find out new business models, provide products and services to new market segmentation, growth rapidly and make a difference to domestic and foreign enterprises.

Directive 9/CT-TTg dated on February 18th, 2020 of the Prime Minister requires relevant ministries and agencies such as the Ministry of Planning and Investment, Science and Technology, etc. to implement solutions, remove barriers and resolve difficulties, issue policies to create favorable conditions for startups. These include the proposal to amend the Law on Investment in the direction of facilitating foreign investors to establish, contribute capital, purchase shares, or contributed capital of startup investment funds in Vietnam. Before establishing an economic organization, the foreign investor must have an investment project and carry out the procedures for issuance or amendment of the Investment Registration Certificate, except for the establishment of small and medium-sized startups and startup investment funds in accordance with the Law on Small and Medium Enterprises Assistance. Although the Law on Small and Medium Enterprises Assistance 2017 and guiding decrees have taken effect, it is not clear what procedures the foreign investors are required to do to set up a SME startup. It is necessary to wait for specific instructions for startup formation.

Moreover, according to the Law on Investment 2020, startup investment projects are included in the beneficiaries of investment incentives as recently added. Technology and intellectual property exploitation are two of subjects which are considered as startup projects. The technology sector, before the Law on Investment 2020 takes effect, has achieved a number of tax incentives for eligible enterprises, for example: enjoying enterprise income tax at rate of 10% for 15 year or tax exemption for four years, 50% reduction of taxable for the next nine years, not subject to value added tax. Furthermore, SME startups selected for SME support project are entitled to enjoy the following assistances: (i) consultation on intellectual property, intellectual property utilization and development; (ii) procedures for technical regulations and standards, quality measurement, testing and improvement of new products and business model; (iii) technology uses and transfers; (iv) training, information, trade promotion and commercialization; (v) use of technical facilities, incubators, and common working areas according to Decree No. 39/2018/ND-CP.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Attorneys in Hanoi, Attorneys in Ho Chi Minh and Attorneys in Danang, will help customers conveniently drafting contracts, Debt Recovery, Set up business, Foreign invest, Real estate ....

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