Foreign investors entering the Vietnamese market often encounter many difficulties related to various legal issues.

This article was consulted by Lawyer Nguyen Quang Trung

Vietnam is increasingly becoming an attractive destination for international investors, with an improved business environment, high economic growth rate and an abundant young workforce.

To help foreign investors better prepare when entering the Vietnamese market, we summarize some notes when establishing a company with 100% foreign capital below:

1. Determine the type of 100% foreign invested company expected to be established?

There are many forms of foreign investment in Vietnam. However, many foreign investors prefer to choose the form of establishing a company with 100% of their capital to actively control all business activities in Vietnam.

There are 2 main types of companies chosen by foreign investors including:

• Limited liability company (with from 1 to 50 members who are foreign individuals or foreign organizations);
• Joint stock company (with 3 or more shareholders who are foreign individuals or foreign organizations).

In fact, the limited liability company type is preferred and chosen by many investors. Foreign investors must carry out procedures to apply for an Investment Registration Certificate and an Enterprise Registration Certificate.

2. Determine business lines and investment capital amount

Although Vietnam is gradually opening up to create conditions for foreign investors to do business in Vietnam. However, there are some business lines in which foreign investors are restricted from doing business or are not allowed to do business in Vietnam. The process of opening up these industries is carried out in accordance with the commitments of the Vietnamese State under international treaties that Vietnam participates in.

For example, some industries that foreign investors are not allowed to do business in Vietnam are as follows:

• Inspection and certification services for means of transport
• Notary service
• Radio and television broadcasting services
• Lottery business
• Services for sending workers to work abroad
• Pipeline transportation services
• Importing tobacco products for commercial purposes

In addition, foreign investors should note that Vietnam regulates more than 200 conditional business lines. Accordingly, domestic and foreign investors must meet the conditions prescribed by law before conducting production and business activities in these industries.

Regarding investment capital amount, currently most business sectors do not have regulations on minimum investment capital amount requirements. However, the business registration agency will evaluate whether the registered investment capital amount is sufficient for business activities in Vietnam or not. In fact, the recommended capital amount is usually 10,000 USD or more.

3. Procedures for establishing a 100% foreign-owned company

In order for a 100% foreign-owned company to officially come into operation, it usually must go through 2 procedural steps as follows:

Apply for an Investment Registration Certificate (IRC)

• Investors apply for an IRC at the investment registration agency, which is the Department of Planning and Investment or the Industrial Park/Export Processing Zone Management Board.
• Investors must register information about the investment project at the information portal https://fdi.gov.vn and submit hard copy documents to the investment registration agency. If the application is valid and complete, the investor will be issued an IRC within 15 days.
• For large, specific investment projects, foreign investors need to apply for investment policy approval from the Prime Minister or the Provincial People’s Committee before applying for an IRC. This will take more time for investors.

Apply for an Enterprise Registration Certificate (ERC)

• After being granted an IRC, foreign investors must complete procedures to apply for an ERC to establish a company with 100% foreign capital.
• Investors submit applications to the Department of Planning and Investment of the province where the company plans to locate. Investors will be issued ERC within 3 working days after submitting all valid documents.
• From the time the ERC was granted, the 100% foreign-owned company was legally established, had legal status and could sign contracts and agreements to carry out production and business.

4. Important things to do after establishing a company

After being granted IRC and ERC, in order for the company to operate most smoothly, foreign investors should perform the following important tasks:

• Hiring a service to make a company seal: The company has the right to decide on the form and quantity of the seal, however, the seal must contain information about the company name, address and tax code.
• Open a direct/indirect investment capital account and an account in Vietnamese currency: Investors must open a direct/indirect investment capital account to pour capital into newly established companies and members/shareholders must contribute capital to the company within 90 days from the date of receiving the ERC. Accounts in Vietnamese currency are used for payment transactions for company activities in Vietnamese territory.
• Buy the company’s digital signature: The company buys digital signatures to perform electronic transactions with state agencies such as tax authorities, customs authorities, social insurance agencies, and can also use digital signature to sign contracts with business partners.
• Register to use electronic invoices: Companies in Vietnam must purchase electronic invoice services from licensed suppliers. After registering for electronic invoices, the company can issue sales invoices and service provision invoices to customers.
• Initial tax declaration with tax authorities.
• If the company has foreign workers, the foreign workers must have a work permit before starting to work in Vietnam.

5. Apply for sublicenses (if company has a conditional industry)

After being granted an ERC, a 100%  foreign-owned company has legal status and can carry out business activities.

The company can do business in any field that is not prohibited by law. However, with conditional business lines, the company must apply for relevant licenses/certifications/approvals… before doing business.

For example, some conditional business lines are as follows:

• Retail activities: must have a business license;
• Restaurant business: must have fire prevention inspection records and food hygiene and safety certification;
• Labor brokerage services: must have a license to establish a job brokerage center;
• Cosmetic production: must register product circulation;
• Establishing a foreign language training center: there must be a decision to establish a foreign language center;
• Establishment of kindergartens and high schools: there must be a decision to allow the establishment of a school.

In addition, for production and product processing activities, foreign investors need to have an environmental impact assessment report and locate factories in industrial parks, export processing zones, and high-tech zones with separate specific regulations.

Investors should consult legal consulting services to ensure investment and business activities in Vietnam comply with the law and are more convenient.