Enquiry on opening a software company in Vietnam

0
164
Representative office in Vietnam

Question: We are software company and based and registered in Singapore trading for nearly 3 years. Our company are a software development house servicing international brands.  We are currently engaged with an existing Local Vietnam Outsourcing company whom we have worked closely for the past 3 years.

We are embarking on a new business strategy and looking at opening an software company in Vietnam either as a FIC or a JV and considering both Hanoi/Saigon in terms of locations.

Can you maybe provide me with some case studies on the difference between a FIC /JV and any government initiative for subsidies/tax breaks etc.  Also provide me a breakdown costs your company charges for assisting us to establish an office, timeline and other requirement needed from us eg. Minimum Capitals and any other documentations

Answer: We refer with thanks to your email advice on possibilities of setting up a foreign invested company (hereinafter referred to as “FIC”) for software development in Vietnam.

Therefore, we are grateful to set our legal services proposal for your review and consideration as follows:

1. SETTING UP WHOLLY FOREIGN INVESTED COMPANY

The establishment of a FIC including Wholly Foreign Owned Company or Joint Venture Company 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.

The roadmap for the incorporation of the FIC for trading activities can be described in following steps as follows:

– Preparing the application dossier: We shall collect necessary information and documents from you. A list of required documents is detailed described in the Annex A of this Proposal. Upon receipt of necessary information and documents from you, we shall translate documents from English into Vietnamese and prepare the application dossier under the standard forms. The initial drafted application dossier shall be sent to you for your comments. Then, after updating the application dossier based on your comments, we shall obtain the preliminary comments from the competent authority and send the finalized application dossiers for you to sign and seal. We anticipate that this phase shall be completed within 07 working days.

– Submission of application dossier: Within 02 working days from receipt of duly signed and sealed application dossier, we shall submit the application dossier to the competent authority. It shall take about 45 days from submission of application dossier to thecompetent authority for the provincial licensing authority to grant the Investment Certificate. In some case the process can be longer as it takes time to consult relevant Ministries such as Ministry of Industry and Trade, Ministry of Planning and Investment, and the Ministry of Finance.

– Post licensing: Within 13 working days we shall complete the post licensing procedures such as publishing the FIC in News Paper, obtaining seal and tax code registration.

2. INTRODUCTION TO SOFTWARE INDUSTRIES IN VIETNAM

It is our understanding that you are now considering possibilities of setting up a foreign invested company for developing software in Vietnam.

Vietnam Goverment is now creating best supports for foreign investor making investment in software industries. Accordingly, FIC manufacturing software can enjoy Corporate Income Tax (“CIT”) Exemption in 4 years, Deduction of CIT up to 50% in 9 years after completing period of tax exemption and favored CIT Rate of 10% in 15 years. This Tax Incentive is applicable for both of Wholly Foreign Owned Company and Joint Venture Company.

With the respect to capital required for FIC operating in the Software Industries, Vietnam Law does not stipulate any minimum capital rate. However, according to our experience, you should consider an amount of 100,000USD (One hundred thousand US Dollar).

The foreign investor can complete capital contribution within 36 months from the establishment of FIC in case FIC is structured under the form of Limited Liability Company. Despite of that, competent authority may suggest Foreign Investor to complete its capital contribution within 12 months from the establishment of FIC.

We also would like to note that, JVC shall be much more favored than Wholly Foreign Owned Company. However, this difference is minor in this case as Vietnam Government encourages Foreign Investor to make investment into Software Manufacturing