Foreign investor (from Singapore) are seeking legal advices for establishment of 100% Foreign Invested Company with business principal activities of
(i) Construction Services;
(ii) Import for resale of the construction equipment and machinery and
(iii) Leasing of the construction equipment and machinery (without the operators) in Hanoi, Vietnam (hereinafter referred to as “FIC”).
SBLAW’s lawyers therefore are grateful to present you our Legal opinions for your review and consideration.
1.SETTING UP WHOLLY 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.
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.
2. FOREIGN INVESTMENT IN CONSTRUCTION SERVICES, IMPORT FOR RESALE OF CONSTRUCTION EQUIPMENT AND MATERIAL, AND LEASING OF THE CONSTRUCTION EQUIPMENT AND MACHINERY (WITHOUT THE OPERATORS)
2.1. Construction Services
Vietnam Law does not restrict foreign investor to involve with construction services in Vietnam.
Thus, it is possible for Client to setup wholly foreign invested company to provide construction services in Hanoi, Vietnam. We also would like to note that, you shall be required to employ management personnel licensed to conduct construction services under Vietnam Law.
2.2. Import for resale of Construction Equipment and Material
With the respect to the importation and trading activities of FIC, 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 international
– The goods and services in which business is conducted are consistent with 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 treaties of which the Socialist Republic of Vietnam is a member and is consistent with the law of Vietnam; Vietnam’s undertaking to open the market and are consistent with the law of Vietnam; and is consistent with the law of Vietnam;
– The scope of operation is consistent with Vietnam’s undertaking to open the market
– 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 import and trading activities in Vietnam.
Singapore has been a member of WTO. Thus, Client is entitled to setup a FIC for importing and trading construction equipment and machinery 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 industries.
However, according to our practical experience in previous case, an amount of 350,000USD 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 Statement for last year.
– 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.
– Goods to be imported and traded by FIC must not include round timber and sawn timber produced from domestic natural forests, asbestos; clinker, cement and second hand equipments.
2.3. Leasing of construction equipment and machinery (without operators)
Under Vietnam WTO’s Commitments, Vietnam’s Government did not commit to open the market to foreign investors to lease machine, including, construction equipment and machinery (without operators). This leasing service shall be only permitted case by case.
According to our practical experience, from September 2013, Vietnam Government stopped considering approval for FIC to provide leasing services in Vietnam. Therefore, your chance of obtaining License for leasing service is not very high.
In order to increase your possibility to obtain the approval for provision of leasing services, Client must prove that its case is a special exemption. Support Letters from Vietnam Professional Associations and Singapore Embassy in Hanoi can help Client to persuade Vietnam Government on this (In the year of 2009, S&B Law successfully assisted a Japanese Investor to obtain License for Leasing Service.
It was very first case in Vietnam that a Foreign Investor obtained License for Leasing Services).
