Consulting on establishment of Foreign Invested Company exercising trading activities in Vietnam

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Question: I currently want to establish a foreign-invested company exercising trading activities in Vietnam. Could you please advise me on the procedures to establish this company?

Answer:

SB Law Limited Liability Company understands that Client is seeking legal advices on establishment of a company operating in trading services in Vietnam. Therefore, we are grateful to present you our consultancy for your review and consideration:

  1. SBLAW’S PRELIMINARY OPINIONS
  1. SET UP A FOREIGN INVESTED COMPANY INVESTMENT REGISTRATION

According to Investment Law 2020, an investment in the form of the establishment of an economic organization will require a Foreign Investor to go through a two-step licensing process. Regarding trading services, applicable laws and regulations requires Foreign Investor and their Foreign Invested Company (FIC) to satisfy two-layer of conditions before officially providing trading services in all aspect. The first one is investment conditions and the second is business conditions (also known as business license or sublicense).

In summary, the following procedures need to be implemented:

  • Step 1: Obtaining an Investment Registration Certificate (IRC);
  • Step 2: Establishment of an enterprise by obtaining an Enterprise Registration Certificate (ERC);
  • Step 3: After obtaining the IRC and ERC, the FIC has to apply for the sub-license for the retailing activities and other necessary sub-licenses related to the specific operation (if any).
  1. PURCHASE AND SALE OF GOODS OF FOREIGN INVESTED ENTERPRISE IN VIETNAM

Purchase and sale of goods and activities directly related to the purchase and sale of goods is engaged in export right, import right, distribution right and other activities specified in the Vietnam Commercial Law.

When doing trading in Vietnam, the most common business lines the investor shall register are: import right and/or export right and/or distribution right. Distribution right includes wholesale, retail, dealer   purchases   of   goods   and   franchises   under   the   laws   of Vietnam. Distribution right is the right to make direct distribution activities.

If the FIC practices import right only (without distribution right), it is allowed to import valid goods into Vietnam and directly provide to Vietnamese’s merchant(s) having business registration or companies having exportation/distribution right of such kind of goods. The FIC is prohibited to participate in any retail network in Vietnam.

If the FIC practices import right only (without distribution right), it is allowed to import valid goods into Vietnam and directly provide to Vietnamese’s merchant(s) having business registration or companies having exportation/distribution right of such kind of goods. The FIC is prohibited to participate in any retail network in Vietnam.

If the FIC practices wholesale distribution right, it is allowed to import, export and wholesale distribute the goods and products without obtaining the Trading License (exclusive exercising the wholesale distribution of lubricant products, which will be granted Trading License with right to wholesale on a case by case basic).

If the FIC practices retail distribution right, it must obtain the Trading License and Retail Establishment License (if any) before officially conducting retail distribution right, which will be allowed to import, export and retail distribution of goods and products.

  1. SPECIFIC COMMENTS

According to Vietnam’s WTO Commitment on Services, now it is allowed to set-up a wholly foreign invested company provides trading services in Vietnam.

In order to optimize the success when setting up FIC, please kindly consider the following matters based-on our actual practice:

– Nationality of Foreign Investor must be among members of World Trade Organization.

– Registered trading products must be exclusive from List of prohibited products from import/export/distribution under Vietnam laws and regulations at the time being. We kindly suggest Client to provide us with detailed name of products for preliminary checking their availability for registration.

– Although Vietnam law does not imply a minimum of required charter capital/investment capital for a company provides trading services. However, licensing authority will check the financial plan of FIC for trading services purpose when applying Trading License (if any).

Having no overdue tax for those entities applying Trading License that have been set up in Vietnam at least one year.

– Business location and instruments necessary for the business must comply with requirements for environmental protection (if any).

II. SCOPE OF WORKS

 Details of our service range are as follows:

SCOPE OF SERVICES
Preparation of the dossier:

· Notifying to Client about application documents required in accordance with Vietnamese law.

· Drafting required application documents for submission.

· Finalizing application documents for execution.

Licensing procedure:

· Submitting the application dossier to the licensing authority on behalf of Client.

· Following with approval progress of the competent authority.

· Keeping Client updated on the developments and additional requirements, if any.

· Receiving and delivering results to Client.

Post-licensing procedure:

· Registration of company’s seal.

· Assisting on opening bank account.

Roadmap for carrying out above scope of work can be described in details as follows:

  1. Preparing the application dossier: We anticipate that this phase shall be completed within 07 working days from full receipt of information and document provided by Client. The prepared application dossier shall then be sent to Client for review and execution.
  2. Submission of application dossier: We shall submit application dossier within 02 working days from full receipt of duly signed and sealed application dossier.
  3. Licensing procedure:

– Applying for IRC: around 30 working days from submission of application dossier.

– Applying for ERC: around 05-07 working days from submission of application dossier.

4.  Post-licensing procedure: Within 03 working days approximately.