We refer with thanks to your email from which we were requested to advice on possibilities of setting up a subsidiary of Korean company (“Client’) in Vietnam.
It is our understanding that your company duly established in Korea and operating business in the field of auto accessories, is considering to enter into Vietnam market by setting up an office in Ho Chi Minh City.
According to Vietnamese Laws on Investment, Enterprise and Trading, there are three options for Client: (i) to establish a representative office (“R.O”) or (ii) to establish a 100% foreign invested company (“FIC”) or (iii) to establish a 100% local invested company (“Local Company”).
With regard to the three forms above, we would like to clarify you some following different criteria among such forms:
| CRITERIA | REPRESENTATIVE OFFICE | 100% FOREIGN INVESTED COMPANY * | LOCAL COMPANY |
| Prerequisite conditions | The foreign company must:
– Being recognized as a legal entity by countries or territories of business registration; – Having operated for no less than one (01) year from the date of establishment or valid business registration in the countries of origin. |
The foreign company must:
– Being recognized as a legal entity by countries or territories of business registration; – Having experience in the field of trading business or manufacturing the products that will be distributed in Vietnam. – Having the consistent financial capacity to operate the project in Vietnam (at least 500,000 USD). – The office of the newly set – up company should be located in a commercial building and the retail shop (if any) should be located in on trading center. |
The Vietnamese person must:
– Not be subject to the cases which are prohibited to set up company (such as: working in Vietnamese competent authorities as Officer, involved in any criminal cases, etc.). |
| Scope of operation | – Operate as liaise office of foreign company in Vietnam;
– Promote cooperation projects of foreign company in Vietnam; – Research market to push up chances to purchase commodities, supply and consume commercial services of foreign company in Vietnam; – Supervise implementation of foreign company’s contracts signed with Vietnamese partners or related to Vietnam market; – Conduct other works allowed by applicable law. R.O is not permitted to offer service(s) for profit-making purposes on behalf of the company in Vietnam market. |
– Being allowed to carry out activities as specified in the Investment Certificate (goods purchasing activities and other activities directly related to goods purchasing)
– The scope of goods is restricted in the HS code list approved by Ministry of Industry and Trade. – If the company operates in the fields which conditions are required in compliance with the law, such company can only operate if they meet enough conditions. * Business conditions are shown through Business License, qualification certificate for business conditions, professional certificate, professional insurance certificate, requirements on statutory capital or other requirements in accordance with the law. |
– Being allowed to carry out activities as specified in the Business Registration Certificate (goods purchasing activities and other activities directly related to goods purchasing).
– If the company operates in the fields which conditions are required in compliance with the law, such company can only operate if they meet enough conditions. * Business conditions are shown through Business License, qualification certificate for business conditions, professional certificate, professional insurance certificate, requirements on statutory capital or other requirements in accordance with the law |
| Time frame for licensing procedure | Total estimated time is about 40 (forty) days, in which:
– After 25 days from duly submission of dossier, the R.O Establishment License shall be granted; – Within 15 days from issuance of R.O Establishment License, S&BLaw shall support R.O to fulfill all post-licensing procedures (such as: registering the seal, publishing on newspapers for establishment of R.O information, opening bank account, tax declaration …) and sending an official notice to the Licensing Authority. |
Total estimated time is about 90 (ninety) working days, in which:
– After 80 working days from duly submission of dossier, the Investment Certificate shall be granted; – Within 10 days from issuance of Investment Certificate, S&B Law shall fulfill all post-licensing procedures (such as: registering the seal, publishing on newspapers for establishment, opening bank account, tax declaration) |
Total estimated time is about 10 (ten) days, in which:
– After 07 days from duly submission of dossier, the Business Registration Certificate shall be granted; – Within 03 days from issuance of Business Registration Certificate, S&B Law shall fulfill all post-licensing procedures (such as: registering the seal, publishing on newspapers for establishment, opening bank account, tax declaration) |
| Estimated fees for services | 1,400 USD | 6,000 USD | 500 USD |
| It is noted that the above fee is exclusive of 10% of VAT, translation fee (15 US Dollar/each page), consular authorization fee and actual communication fee of lawyers (if any) | |||
* Specific queries on establishment of 100% foreign invested company doing business scope in goods importing and trading activities:
For the importing activities of Import Company:
The newly set-up company shall have right to import products from overseas and sell to other traders who are already licensed for operating in wholesale business but the company shall not be allowed to directly sell products to end-customers (retails).
Thus, after being fulfilled customs clearance procedures, the products shall be directly transported to ordered wholesale clients or transported to warehouse of the Company for storage then deliver to clients by committed delivery schedule with such clients. The Company will not have right to open any outlet store for retail and also wholesale distribution.\
In this case our service fee will be 4,000 USD with time schedule for obtaining the Investment Certificate is 50 working days.
HS Codes of products is not provided in the List of restricted-trading products according to Vietnam Law and the latest update of Road-map for implementation of goods trading in Vietnam
For the trading activities:
Pursuant to prevailing regulations of laws of Vietnam, distribution activities shall comprise two scopes of operation: wholesale and retail.
With respect to wholesale activities, the newly set up company shall have right to import products from overseas or buy in the territory of Vietnam and sell to other traders who are already licensed for operating in retail business but Client shall not be allowed to directly sell products to end-customers. Notwithstanding, with respect to retail activities, the Client shall be permitted to import and then directly distribute products to end-customers.
With respect to retail distribution, the newly set up company could choice between implementing the retail activity either through or not a retail establishment. The modality and cycle of import and distribution of products without retail establishment will be based on commercial contracts with partners, products transported to ports of Vietnam, after being fulfilled customs clearance procedures shall be directly transported to ordered clients or transported to warehouses of the company for storage then deliver to clients by committed delivery schedule with such clients. The newly set up company will not have to open any outlet store for retail and also wholesale distribution.
In case your company decides to register a retail establishment for retail activities, then it is necessary to request the lessor who is licensed the real estate business to provide the Certificate of Construction Ownership of the warehouse or retail shop. Besides, to use the warehouse, the investor must obtain the acceptance from the District People’s Committee, approval from Fire Fighting and Exemption Police Department.
