SBLAW provides legal advices for establishment of wholly foreign invested company (hereinafter referred to as “FIC”) for (i) importing and trading industrial machines and (ii) providing maintenance and warranties services for customers in Vietnam as follows;
I. General Introduction
The establishment of a FIC in Vietnam requires an Investment Certificate from the licensing authority. Depending upon the location of the company, the licensing authority may be the Provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones).
We would like to clarify that the procedure for establishment of a FIC in Vietnam generally takes a rather long time in comparison with other countries in the region. Our practical experiences show that although the total time for establishment of a foreign invested company as stipulated under Vietnam Investment Law 2005 is only 45 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to evaluate the investment project.
Under Vietnam Law on Investment, for incorporating a foreign invested company (Hereinafter referred to as “FIC”), you are required to propose an Investment Project initially to obtain Investment certificate. The relevant licensing authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine on granting of the Investment Certificate on the following basis:
1.the legal framework including Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the FIC shall register its head-office.
2.Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
3.Head office of the FIC should be in line with master plan of the City.
II.Setting up FIC for importing and trading industrial machines
With the respect to the importation and trading activities of FIC, according to the Item 1, Article No. 4 of Decree No.23/2007/ND-CP dated 12 February 2007 of the Government providing regulation for implementation of commercial law regarding purchase and sale of goods and activities directly related to the purchase and sale of goods by enterprises with foreign owned capital in Vietnam (Hereinafter referred to as “Decree No.23/2007/ND-CP”), foreign investors who satisfy following conditions shall be entitled to license for activities of trading in Vietnam:
– It is an investor belonging to a country or territory participating in an international treaty of which the Socialist Republic of Vietnam is a member and in such treaty Vietnam has undertaken to open the market on activities of purchase and sale of goods and activities directly related to purchase and sale of goods;
– The form of investment is consistent with the schedule/s undertaken in international treaties of which the Socialist Republic of Vietnam is a member and is consistent with the law of Vietnam;
– The goods and services in which business is conducted are consistent with Vietnam’s undertaking to open the market and are consistent with the law of Vietnam;
– The scope of operation is consistent with Vietnam’s undertaking to open the market and is consistent with the law of Vietnam;
– It has approval from the State body authorized in Vietnam.
In addition, under Vietnam WTO’s Commitments, from the year of 2009, foreign investor is entitled to join goods import and trading activities in Vietnam. China has been a member of WTO. Thus, Client is entitled to setup a FIC for importing and trading cosmetic and health food products in Vietnam.
We also would like to note that, trading goods is considered as conditional investment sector in Vietnam and therefore following key factors shall be taken in account:
– Capital:Vietnam Law does not stipulate minimum capital amount for this industries. However, according to our practical experience in previous case, an amount of 400,000USD upward should be reasonable. The Vietnam Government can also recommend you to increase the Capital Amount if the number of goods to be registered is large;
– Parent Company must have positive business operation result in at least 02 recent years. This must be evidenced by audited Financial Statements for 02 recent years.
– Parent Company must be experienced in the field at least 03 years.
– Head office address of the FIC in Vietnam must be compliant with master plan of Vietnam.
3. Maintenance and warranty services
Under Vietnam Law, foreign investor can setup FIC to provide Maintenance and warranty services. However, according to our practical experience in the similar previous cases, generally, competent authorities in Vietnam only permit FIC to provide Maintenance and warranty services to Customers consuming its goods.
We understand that in this case, the FIC also intend to provide Maintenance and warranty services for Customers directly purchasing goods from Parent Company. The Competent Authority can consider this matter.
