Question: We are Taiwan company and is now seeking legal advices for establishment of wholly foreign invested company for (i) designing labels and (ii) selling labels in Vietnam, please provide legal advice?
Answen:This is reference to the conservation between us, from which, we understand that your company (hereinafter referred to as “Client”) is now seeking legal advices for establishment of wholly foreign invested company (hereinafter referred to as “FIC”) for (i) designing labels and (ii) selling labels in Vietnam.
We therefore are grateful to present you our Legal Services Proposal for your review and consideration.
1. BRIEF INTRODUCTION ON ESTABLISHMENT OF FIC
1.1. 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:
a. 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.
b. Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
c. Head office of the FIC should be in line with master plan of the City.
We also would like to note that we also would like to note that in the year of 2014, Vietnam National Assembly adopted a new law on Investment and Enterprise which shall becomeeffect from 1st July 2015. Accordingly, the licensing procedure for setting up FIC shall have to undergo two following steps:
– Step 1: Obtainment of Investment Certificate. The Law requires that within 15 working days from submission of the application dossier the competent authority shall have to issue the Investment Certificate for Foreign Investor. However, having preliminarily discussed with the Licensing Authority, we do not much expect that the licensing authority can comply with this requirement in practice, especially, those relating to conditional investment sectors
– Step 2: After obtainment of Investment Certificate, Client shall be required to obtain the Certificate of Business Registration. The Law requires that within 05 working days from submission of application dossier, the competent authority shall have to issue the Certificate of Business Registration for forming the Foreign Invested Company.
1.2. Setting up FIC for designing and selling labels
For designing labels, Vietnam-WTO Commitments does not mention about label designing. Thus, Vietnam Authority does not have obligations to open market to foreign investor.
According to our practical experience in similar previous case, in this industry, generally, foreign investor trends to classify this service into software services. It was acceptable up to now. However, for prudence, we shall do our best to persuade the competent authority for approving label designing as a registered business line of the FIC.
With the respect to selling labels, this can be classified to trading activities. 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
– The form of investment is consistent with the schedule/s undertaken in 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; 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 withVietnam’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 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 industry. However, according to our practical experience in previous case, an amount of 100,000USD 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.
