Under Vietnam Law, foreign companies can either set up (i) Foreign Invested Company; (ii) Branch Office or (iii) Representative Office in order to expand its market to Vietnam.
1.Foreign Invested Company In Vietnam
Foreign Invested Company (FIC) can be divided into two following forms: (i) Wholly Foreign Owned Company wherein Foreign Investors shall own 100% capital of the Company and (ii) Joint Venture Company wherein Foreign Investor shall jointly setup company with at least one local partner.
Generally, foreign investor is freely to determine suitable form of FIC to run their business in Vietnam.
However, in several specific sectors such as tourism, transportation, advertisement etc in which foreign ownership is restricted, only Joint Venture Company is allowed.
Nevertheless, the matter of Wholly Foreign Owned Company and Joint Venture Company does not impact on tax regime or investment incentive applicable to FIC. With respect to corporate management structure of FIC, it can be structured as Limited Liability Company (LLC) or Joint Stock Company (JSC).
LLC including LLC with 01 member and LLC with two members upward shall allow the members to restrict rights on transfer of capital.
With LLC, the members may also adopt Call Option and Put Option in order to optimize their business goals. Meanwhile, with JSC, after three years from establishment of company, shareholders are free to transfer their common shares on market.
Thus, LLC is generally adopted by Foreign Investors who intend to run a business for a long term in Vietnam
2. Branch Office
Under Vietnam Law, foreign company can also establish the Branch Office to carry out business activities in Vietnam.
However, this form is not very popular in practice except for branch office of foreign law firms, foreign bank and insurance company.
With respect to the foreign trade companies and foreign tourist companies, despite of that Vietnam Commercial Law and Vietnam Tourism Law clearly stipulates conditions and procedures for setting up branch office of foreign trade companies and foreign tourist companies, foreign investors are recommended to setup FIC as an alternative option in practice due to that under Vietnam-WTO Commitment, Vietnam does not commit to permit foreign investor to setup branch office in trade and tourism.
3. Representative Office
Representative Office is an option for Foreign Investor who wishes to conduct market research, trade promotion etc in Vietnam.
Depending on business sector of the parent companies abroad, conditions and procedure for setting up representative office in Vietnam may be different.
Up to now, Vietnam Law only stipulate conditions and procedures for setting up Representative Office for foreign companies operating in the field of trade, trade related services, sale and purchase of goods; education; tourism; banking, law; securities and airline only.
Generally, a Representative Office shall be permitted to conduct following activities:
– Operate as contact office of the Company in Vietnam;
– Promote cooperation projects of the Company in Vietnam;
– Research market to push up chances to purchase commodities, supply and consume commercial services of the Company in Vietnam;
– Supervise implementation of the Company’s contracts signed with Vietnamese partners or related to Vietnam market;
The Representative Office shall not be allowed to conduct business activities for profit making purpose in Vietnam.
4. OUTLINE ON LICENSING PROCEDURE IN VIETNAM
4.1. Licensing Procedure for setting up FIC
Under the Investment Law 2014 which shall be effective from 1st July 2015, in order to setup a FIC, Foreign Investor must undergo following steps:
Step 1: Obtainment of Investment Certificate Procedure for obtainment of Investment Certificate shall very much depend on scope of business activities of the FIC in Vietnam.
Particular as follows:
Nuclear power plants;
Projects that change purposes of land in national parks, wildlife sanctuaries, landscape sanctuaries, experimental forests of 50 hectares or larger; headwaters protective forests of 50 hectares or larger; protection forests meant for protection against wind, sand, waves, land reclamation, environmental protection of 500 hectares or larger, production forests of 1,000 hectares or above;
Projects that change purposes of land meant for rice cultivation with two or more crops of 500 hectares or larger;
Projects that require relocation of 20,000 people or more in highlands; 50,000 people or more in other areas; and Projects that require special policies decided by the National Assembly must obtain the approval of National Assembly on investment policies before granting the Investment Certificate.
Within 05 working days from obtainment of approval on Investment Policies from the National Assembly, the Investment Registry Office shall be required to grant the Investment Certificate.
Projects that require relocation of 10,000 people or more in highlands; 20,000 people or more in other areas; Construction and operation of airports; air transport; Construction and operation of national seaports; Petroleum exploration, extraction, and refinery; Betting and casino services; Cigarette production; Development of infrastructure of industrial parks, export-processing zones, and specialized sectors in economic zone; and Construction and operation of golf courses must obtain the approval of Prime Minister on investment policies before granting the Investment Certificate. Within 05 working days from obtainment of approval on Investment Policies from the Prime Minister, the Investment Registry Office shall be required to grant the Investment Certificate.
- Projects that use land allocated or leased out by the State without auction or bidding or transfer; projects that require changes of land purposes and Projects that use technologies on the List of technologies restricted from transfer prescribed by regulations of law on technology transfers must obtain approval on investment policies from the Provincial People Committee before granting the Investment Certificate. Within 05 working days from obtainment of approval on Investment Policies from the Provincial People Committee, the Investment Registry Office shall be required to grant the Investment Certificate.
- Other remained Investment Project shall be granted Investment Certificate within 15 days from receipt of application dossier by the Investment Registry Office.
Step 2: Obtainment of Business Registration Certificate
After obtainment of Investment Certificate, the Foreign Investor is required to obtain the Business Registration Certificate in order to setup FIC.
According to the Vietnam Law on Enterprise, within 03 working days from receipt of application dossier the Licensing Authority shall grant the Business Registration Certificate.
Until now, Vietnam Law is now still silent on time gap limit between Obtainment of Investment Certificate and Obtainment of Business Registration Certificate.
4.2. Setting up Branch Office
Since the procedure for setting up Branch Office of Foreign Companies is not popular in practice, we do not include outline on procedure for setting up Branch Office here.
4.3. Setting up Representative Office
For foreign companies operating in field trade, trade related services, sale and purchase of goods, it shall take about 15 working days from submission of application dossier to the licensing authority for granting the License for establishment of Representative Office.
The License for establishment of Representative Office shall be valid within 5 years. The validity term of such License can be renewable. However, the validity term of License for establishment of Representative Office must not exceed validity term of Business License of the Parent Company.
