Establishing a foreign-invested enterprise in Vietnam

In recent years, Vietnam has witnessed a massive and strong wave of investment from foreign investors seeking business opportunities. With the promulgation of the Investment Law 2020 and the Enterprise Law 2020, Vietnam has established a legal framework to regulate the investment participation and establishment of enterprises by foreign investors in Vietnam. Thereby improving the investment environment towards creating a fair competitive environment while protecting national security. Below, S4B Vietnam will advise on Vietnamese labor laws for businesses and Legal requirements for foreign businesses in Vietnam.

1. Options

Based on current Vietnam business licenses explained, foreign investors seeking investment opportunities in Vietnam can choose one of two options to establish a foreign-invested enterprise as follows:

  • Option 1: Request for the first Investment Registration Certificate (whether it is a 100% foreign-invested enterprise or a joint venture enterprise) and then carry out the procedures to request the issuance of an Enterprise Registration Certificate.
  • Option 2: Invest in the form of capital contribution, purchase of shares in a Vietnamese company, then participate in the management of the company according to the agreement of the parties.

Legal requirements for foreign businesses in Vietnam

2. Advantages and disadvantages: Vietnamese labor laws for businesses

Each of the above options has certain advantages and disadvantages related to the conditions, administrative procedures and governance issues when implementing investment projects in Vietnam.

Option 1:

  • Disadvantages: This option requires two procedures: Investment registration and enterprise establishment registration to be able to operate. However, the process of applying for an Investment Certificate and a Business Registration Certificate in this case is a bit more complicated than for domestic enterprises, and will require more time to complete the procedures (such as capital contribution certification, investment capital to implement the project, capital contribution ratio, etc.).
  • Advantages: If the procedure is carried out in this direction, the 100% foreign-owned enterprise will own the company, have full authority to decide on business policies as well as directly hold profits; while the joint venture enterprise will have development potential because it has support in science, technology, market share as well as capital from each other.

Option 2: The advantages and disadvantages will be the opposite of option 1. Therefore, investors need to consider their goals carefully before deciding on the form of investment.

Vietnamese labor laws for businesses

2. Cases requiring procedures for granting an Investment Registration Certificate

Pursuant to Article 37 of the 2020 Investment Law, cases requiring procedures for granting an Investment Registration Certificate include:

a) Investment projects of foreign investors

Foreign investors are individuals with foreign nationality, organizations established under foreign laws conducting investment and business activities in Vietnam.

b) Investment projects of economic organizations with foreign investment capital

For economic organizations established in Vietnam (not included in investment projects to establish new business organizations of foreign investors), the organization is still subject to the case of having to grant an IRC if:

There is a foreign investor holding more than 50% of the charter capital or the majority of the partners are foreign individuals for economic organizations that are partnerships;
There is an economic organization in case (1) holding more than 50% of the charter capital;
There are foreign investors and economic organizations in this case (1) holding more than 50% of the charter capital

Vietnam business licenses explained: Foreign investors investing in the form of capital contribution, buying shares, buying capital contributions of economic organizations do not have to carry out procedures for granting Investment Registration Certificates.

3. Investment capital conditions, investment project information, investment and business sectors

Vietnam became a WTO member in 2007, accordingly, between Vietnam and WTO member countries, there will be a commitment to adjust the conditions of foreign investors when investing in trade and services in Vietnam. Therefore, not all sectors of Vietnam will open up and each sector will have a different level of opening.

As Steps to open a branch in Vietnam, Investors need to clearly understand whether the investment sector is included in the commitment list or not and the level of opening before applying for an investment certificate. Investors can find this information in Vietnam’s WTO Commitments List.
After determining the investment sector, investors need to demonstrate financial capacity to implement the project by confirming the account balance (for individuals) or the most recent financial report (for organizations); project approval (for projects requiring investment policy decisions) and investment project information.

4. Hai Phong: Best cities for business in Vietnam

Recently, Hai Phong has been one of the 6 localities nationwide leading in attracting foreign investment. In the context of the global market still having many fluctuations, investors, especially large investors, are increasingly cautious in investing abroad. Amid fierce competition pressure both domestically and internationally, Hai Phong City is still a destination that many foreign investors are interested in choosing because of its own advantages in attracting FDI capital.

According to statistics from the People’s Committee of Hai Phong City, to date, Hai Phong has attracted 40 billion USD in FDI capital, making it one of the localities attracting the largest FDI capital in Vietnam. Of which, the European Union (EU) invested in more than 50 projects, with a total investment capital of nearly 1.5 billion USD (accounting for 3.7%) and Sweden invested in 3 projects, with a total investment capital of 40.37 million USD. Hai Phong has become a successful investment destination for large corporations from Europe such as Tesa, Polarium, ZL Automotive, Assa Abloy…It can be said that Hai Phong is considered one of the best cities for business in Vietnam in attracting FDI and always maintains its position in the top of the country.

Established in 2007, S4B Vietnam has been known by many people specializing in human resource outsourcing services. Currently, S4B Vietnam is also developing a Corporate Legal service to support businesses setting up a company in Vietnam. If your business needs support, please do not hesitate to contact us.

>>>Read more: Setting up a company in Vietnam for a 100% foreign-owned enterprise

S4B Vietnam

  • Address: Unit 701B – 701C, Tower A, Handi Resco 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam.
  • Tel: + 84 24 3974 4181
  • Email: service@s4b.com.vn

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