Q: Our company is based on Singapore and we would like to expand our business in oversea by starting a small Japanese restaurant inside of supermarket in HMC.
So I’m requesting a estimation for your service and explanation on how the whole process would take place.
And since we would like to be able to start right away, I would also like to know how long would it take.
A: We would like us to advise on establishment of 100% Foreign Invested Company (hereinafter referred to as “FIC’) which is owned by foreign company (herein after referred to as “Client”) in Ho Chi Minh City. We further understand that upon establishment, the FIC shall engage with F&B Business. We are therefore grateful to present you hereinafter our Legal Services Proposal for your review and consideration.
1. BRIEF INTRODUCTION ON SETTING UP FOREIGN INVESTED COMPANY IN VIETNAM
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. With respect to Investment Project, total investment capital of which is from 300,000,000,000 VND upward, Investor is required to prepare Feasibility Study for the Investment Project.
Generally, 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.
By the way, 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 become effect 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.
2. SPECIFIC COMMENTS
Under Vietnam-WTO Commitments, F&B is classified to CPC 642. Accordingly, from 1st January 2015, Vietnam undertakes to open its market for foreign investors to setup foreign invested company for running F&B Business in Vietnam without strict accompanying requirements .
According to our practical experience, in the year of 2015, licensing authorities in Ho Chi Minh City and Hanoi licensed several foreign investors to run F&B Business in Vietnam.
Then, from 1st January 2015, when the accompanying requirements imposed on F&B are officially removed, they proceed the licensing procedure to acquire the F&B Business from their nominee local partner.
It seems that Vietnam Licensing Authority keep an opened mind to Foreign Investor running F&B Business in Vietnam.
However, in the South of Vietnam, the Licensing Authority keeps a cautious view on allowing foreign invested company opening a large number of restaurants in Vietnam. Luckily, this opinion is not considered as official in Vietnam, even in Ho Chi Minh City as there is no legal basis for restriction of opening national wide network of restaurant in Vietnam.
In this case, in order to secure the high success possibility, we highly recommend Client to carefully account following factors:
– Location of the restaurant: In Vietnam, location of a foreign invested company is very important. Location of the restaurant in Vietnam must strictly comply with master plan of the City. Locations in Trade Complex Buildings are highly recommended. In case Client wishes to select locations out of Trade Complex Building, car parking place for customers, architecture and fire fighting system of the restaurant should be carefully accounted. The Licensing Authority may refuse to grant the License if Client fails to provide sufficient explanation on such matters.
– Serving alcohol in Restaurant is considered as one of the most sensitive matters of the application for opening Restaurant in Vietnam, especially, those relating to foreign invested company. Generally, in order to serve Customer with Alcohol in restaurant, the Restaurant shall be required to obtain a Sub-License for retailed sale of Alcohol. The Sub-License shall be granted if the Restaurant satisfies strict conditions for storage of Alcohol, Food hygiene and safety, fire fighting and prevention, master plan of city on alcohol retailed sale network …etc4 .
However, we also further note that on 27th December 2014, the Ministry of Industry and Trade adopted the Circular No. 60/2014/TT-BCT further guiding on manufacturing and distribution of alcohol goods, serving alcohol for Customer in restaurant is removed from requirement for obtainment of Sub-License.
This Circular shall be effective from 1st March 2015. However, the Circular does not clearly state that serving alcohol in restaurant is exempted from requirement of obtainment of Sub-License for retailed sale of Alcohol. This may cause confusion to the Licensing Authority.
Thus, for avoidance of any difficulty during the licensing process, in the application dossier for setting up FIC in this case, we should not mention about proposal of serving alcohol for Customers in the restaurant. Then, we can add this business activity when the Government has new guidance on this matter.
– Investment Capital of FIC: Under Vietnam Law, F&B business does not require for minimum rate of investment capital. However, upon applying for investment certificate, Client shall need to provide an estimate of capital required for operating the Foreign Invested Company in a medium or long term. We understand that in this case, Client plans to setup a small Restaurant. According to our practical experience in this field, we are of opinion that you should consider an investment amount of 500,000USD upward.
By the way, we also would like to note that, in case we obtain the Investment Certificate by 1st July 2015, Client shall be required to contribute 100% charter capital of the FIC within 03 months after completion of obtainment of Certificate of Business Registration.
However, if we can obtain the Investment Certificate before 1st July 2015, we can apply for an extended schedule of capital contribution, such as contribution of charter capital within 12 months from the date of setting up company.
– Experience of Client: Experience of Client in the F&B is also one of important factor that determining the success possibility of the case. Foreign Investor having no experience in the field is generally not favoured by the Licensing Authority.
– Other factors to be accounted: Under Vietnam Law, after completion of licensing process for opening the Company, in order to officially operate the Restaurant, Client shall need to obtain (i) Certificate of satisfaction on food safety and hygiene; (ii) Certificate of satisfaction on conditions for fire fighting and prevention and (iii) Commitment on environment protection.
3. Licensing Process
The roadmap for the incorporation of the FIC can be described in following steps
a. Preparing the application dossier: We shall collect necessary information and documents from you. 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 send the finalized application dossiers for you to sign and seal. We anticipate that this phase shall be completed within 10 working days.
b. Licensing Procedure: 02 working days from receipt of documents duly signed and sealed from Client, we shall submit the application dossier for starting the licensing procedure. It shall take about 45 working days from submission of application dossier to the competent authority for the provincial licensing authority to grant the Investment Certificate.
c. Post licensing: Within 15 working days we shall complete the post licensing procedures such as publishing the FIC in News Paper, obtaining seal and tax code registration.
d. For avoidance of any doubt, in practice, the administrative procedure can be longer due to that the competent authority must consult relevant ministries before granting License. In such case, SB Law shall try its best to accelerate the progress in order to obtain the approval at the soonest.
4. SCOPE OF WORK
We propose our scope of work in this case as follows:
Preparation of the application documents:
Notifying application documents required in accordance with Vietnamese law;
Drafting application documents required for submission purpose;
Liaising with SB Law to discuss the draft application documents;
Amending the application documents based on Client’s comments;
Obtaining preliminary comments from the licensing authority on the draft application documents;
Finalizing the application documents following comments from the licensing authority; and
Translating the final version of the application documents into Vietnamese for execution.
Licensing procedures:
Submitting the application dossier to the licensing authority on Client’s behalf;
Monitoring and following up with the relevant authorities on the approval process;
Keeping your company updated on the developments and additional requirements, if any; and
Assisting Client in obtaining the investment certificate for the Investment Project.
Post-licensing procedures:
Upon the issuance of the Investment Certificate, the FIC shall be required to carry out immediate administrative procedures.
Our services include:
Obtaining the seal of the FIC;
Obtaining the FIC’s tax code;
Placing an announcement on the establishment of the FIC in the newspaper;
5. PROFESSIONAL FEE
Professional Fee for performing the SB Law services as mentioned in item 3 above will be 8,000USD (Eight thousand US Dollar). The above service fee is exclusive of 10% VAT, bank charge and cost for translation of documents from English into Vietnamese (10USD/150 words).
