Starting a business in Vietnam – Incorporating a company is essential for doing business in Vietnam. The registration records indicate that LLC’s are the most common type of companies to be incorporated. Foreign investors starting a business in Vietnam for the first time, must go through two main steps to register a limited liability company.
1. Applying for an investment registration certificate.
2. Applying for a business registration certificate.
Starting a business in Vietnam – Investment registration certificate.
What is an Investment registration certificate?
- An investment registration certificate, commonly abbreviated as IRC is an electronic or printed document issued by a Vietnamese government only to foreign investors who wish to invest in Vietnam via the foreign direct investment (FDI) route where they are either in a majority partnership or hold more than 51% in entity. An IRC essentially records information of the project such as details of the investor, investment objectives ie. the permitted business lines for investment, period of proposed investment, land requirement, labor requirement etc.
In simple terms, an investment registration certificate is a permit issued by the Vietnamese government to encourage foreign direct investment and commerce in Vietnam.
What is the process to get an investment registration certificate in Vietnam?
In Vietnam, the Law on Investment governs the process for obtaining an Investment registration certificate. This law has been simplified in 2014. The goal is to allow foreign investors to easily and quickly setup a company in Vietnam.
Foreign investors who wish to register a foreign owned company in Vietnam need to meet some specifics conditions. These have been listed in Article 22 of Investment Law 2014 and guided in detail in Article 44 of Decree No. 118/2015 / ND-CP dated 12/11/2015, detailing and guiding the implementation of some articles of the investment Law. In specific sectors as conditional investment sectors, a foreign investor also needs to consult with the laws governing investment in that particular sector. For example to invest in the real estate development sector an investor must be able to pledge a minimum capital investment of USD 1 million. In such cases, the Department of Planning and investment (DPI) awards an investment an investment registration certificate to invest in the real estate sector only after the investor has met this and other conditions.
In Vietnam, for foreign direct investment there are no pre-conditions for almost 90% of the business lines. A foreign investor is to have 100% equity in these businesses without the need for fulfilling any special conditions.
Where do I apply for an investment registration certificate if I am starting my business in Vietnam
The Dept of Planning and Investment (DPI) is the nodal agency responsible for issuing an investment registration certificate in Vietnam.
It is useful to know that in Vietnam, certain projects/ investment sectors are subject to an investment policy/ review process. This is carried out by other agencies in addition to that carried out by the DPI. These investment polices/ review process is typically reserved for large scale projects. These are projects which may have a significant socio-economic impact on the local population, local businesses or natural resources of a province. For example projects of large capital investments or project requiring extensive land use or projects involving relocation and re-settlement or projects related to sensitive areas affecting national defense and security are typically passed on for review and approval from a higher government office before an investment registration certificate can be awarded.
A typical example of this kind of project would be construction of the Ho chi minh city sky train/ metro.
How long does it take to get an investment registration certificate in Vietnam?
The typical processing time is 30 working days. In cases where projects require further review by other government offices, the time period can be longer.
What documents does an investor need to submit in order to to apply for an investment registration certificate in Vietnam?
The following set of documents are required if the foreign investor starting a business in Vietnam is an individual.
- Investors passport copy.
- Bank statement showing financial capability/ proof of funds.
- A legal address to register their company.
- A brief description of the project and the intended lines of business.
The following set of documents are required if the foreign investor starting a business in Vietnam is an overseas entity/ corporation.
- Business license or equivalent of the parent company.
- Audited financial statements for the last 2 years of the parent company.
- Articles of association/ Company charter of parent company.
- Passport copy of legal representative.
All documents originating outside Vietnam need to be notarised & consular legalized. Basically, this is a 3 step process involving attestation by a notary lawyer, the foreign affairs ministry and the Vietnam embassy in the investors country. For more information on this, please click the link here.
What are the other documents that need to be drafted?
- Written proposal of investment project (according to Form I.2 of Circular 16/2015 / TT-BKHDT Regulating the form to implement investment procedures and reporting investment activities in Vietnam) Including contents : Name of project, location of project implementation, project objectives (business lines), investment scale (designed capacity, products and services provided, area of land, water surface, ground level use ants, construction architecture scale), propose land use demand (Location of the land plot, structure of current land use status, expected land use demand, explanation of land allocation conditions, land lease, transfer of land use rights, and projected land allocation schedule, overall plan for compensation and clearance.
- Investment capital: Total investment capital explaining specific expenses such as compensation, resettlement support, land and water tax expenses; construction cost; cost of machinery, equipment, technology, brand; other costs of forming fixed assets; redundancy costs; method of capital contribution, mobilized capital (borrowed from credit institutions or borrowed from the parent company).
- Progress of project implementation: Specifying the timeline for each stage such as: Expected investment schedule, progress of compensation for ground clearance, construction time, operation time, production and business. joint.
- Labour requirement: Specifying the number of domestic workers, the number of foreign workers.
- Assessing the socio-economic impacts and efficiency of the project: Eg. Job creation, contributing to the ex-chequer of Vietnam, reducing fiscal deficit.
- Explanation on the use of technology: Technology name, technology exit, technological process diagram, main technical parameters, use of machinery, equipment and technology transmission lines; Explanation of the ability to meet the conditions for receiving and transferring technology on the list of technology restricted transfer.
- Proposal on investment incentives: Preferences on corporate income tax, import and export taxes, incentives for land rent exemption and reduction.
- Business cooperation contract (BCC) for investment projects in the form of BCC contract.
A professional consultancy like Mahan can draft these documents on your behalf. Our team will not only guide you through the entire process of starting a business in Vietnam but also support you with drafting all the documents. Additionally, we will also undertake to submit these to the government on your behalf, reply to any queries from the government and ensure that you are awarded an investment registration certificate in the stipulated time.
For more information please get in touch by visiting our contact us page and providing us with information on your project.
What is the next step after drafting all the documents?
The investor submits the dossier to the government. After receiving the application, the investment registration agency will review the dossier. If the application is valid after 25 working days, the investment registration agency will issue an investment registration certificate to the investor. If the application is not valid the application receiving agency will send a notice to the investor and ask them to submit additional documents or make some corrections and then re-submit the dossier. Each time the investor re-submits the dossier, the DPI resets the counter.
Once the DPI awards an investment registration certificate to the investor, the investors is obliged to apply for enterprise registration certificate.
How can I bypass the process of applying for an investment registration certificate in Vietnam?
In circumstances where a foreign investor contributes capital to or acquires shares in a previously wholly Vietnamese owned company which are not included in the list of sectors of investment subject to conditions and in cases an invested capital is below three hundred (300) billion Vietnamese dong, the local company is required to amend only its enterprise registration certificate in order to record the new investor at the business registration office of the DPI.
In Hanoi, where a foreign investor contributes capital or acquires shares in a local company, the current practice, based on a different interpretation of the same regulations, is as follows:
The local company is required to submit an application dossier to the Foreign Investment Office of the DPI for the issuance of a consolidated investment registration certificate recording in addition the details of the foreign investor;
The new investment registration certificate once issued will replace the current enterprise registration certificate of such a local company.