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Gửi lúc 09:53' 05/08/2012
Introduction to foreign investment in Vietnam
I. Forms of foreign investment in Vietnam
A foreign investor can directly engage in the Vietnamese market in several ways. At the same time, investors must consider and choose the most appropriate form of investment, including whether to establish a new company, invest in an existing company with an active management role, or pursue an alternative form of investment presence, such as a branch, representative office or BCC. The choice of investment form will depend primarily on the investment aim. It may also be dictated by particular rules applying to particular sectors. For example, for investments in the services sector, the commitments made by Viet Nam when it joined the Word Trade Organization will be a key determinant in selecting the form of investment.
Under Vietnamese laws, investment certificates are issued in one of two ways: (i) registration for issuance of investment certificate with respect to invested capital less than VND300 billion (approximately US$15,400,000) and not included in the list of sectors of investment subject to conditions. Accordingly, the investor must carry out the procedures for investment registration at a provincial State administrative body for investment in order to be issued an investment certificate. (ii) evaluation for issuance of investment certificate with respect to invested capital from VnD300 billion upward and/or projects within a sector that falls on the list of sectors of investment subject to conditions. Accordingly the investor must carry out the evaluation procedures in order to be issued with an Investment certificate regardless of whether they are included in the list of sectors of Investment subject to conditions.
Foreign investors investing in Vietnam for the first time must obtain an Investment certificate (which is also the business registration certificate) by proceeding with the procedures for investment registration or evaluation of investment. Once a foreign invested enterprise is established, only its new investment projects (if any) need to be registered.
a. Establishing a new enterprise
A foreign-invested enterprise, whether wholly foreign-owned or in the form of a joint venture with Vietnamese partners, must be approved by the relevant authorities. In order to be approved a foreign invested enterprise must have an 'investment project', being a set of proposals for the expenditure of medium and long-term capital in order to carry out investment activities in a specific geographical area and for a specified duration. Approval of the investment project, and establishment of the foreign invested enterprise, take the form of an 'Investment Certificate', the equivalent of a certificate of incorporation or business registration certificate.
In addition to the Investment Certificate, a Vietnamese-established entity also must have a 'Charter', the equivalent of by-laws, constitution or articles of association of a company in other jurisdictions. Joint ventures between foreign and Vietnamese investors also require a 'Joint Venture Contract', governing certain key elements of their relationship. This contract sits alongside the Charter as part of the enterprise's constituent documents. Having determined that a Vietnamese-established enterprise is the most appropriate form of investment, investors will also need to consider and choose from the various forms of enterprise such as Joint Stock Company, Limited Liability Company, single member limited liability Company, private enterprise, partnership.
b. Investing in an existing enterprise
Investors may also choose to directly invest in Viet Nam by acquiring a stake in an existing Vietnamese enterprise. Often, extensive internal and external authority approvals will be required. The precise procedural requirements for effecting such an acquisition will differ depending on (i) whether the target entity already has foreign investors and an Investment Certificate for an approved project, (ii) whether the investor is acquiring existing equity by way of transfer, or newly issued equity (iii) the form of the target entity (whether a single or multiple-member limited liability company, or a shareholding company); and (iv) the sector in which the entity operates.
c. Branches and representative offices
Under the Law on commerce, foreign business entities are entitled to establish branches and representative offices in Vietnam. The Ministry of Industrial and Trade manages the licensing of branches and representative offices of foreign businesses. Businesses are liable under Vietnamese law for all the operations of their branches and representative offices in Vietnam
Branches
Unlike the representative office, branches of foreign businesses are allowed to conduct activities including the purchase and sale of goods and other commercial activities consistent with their licenses for establishment in accordance with the law of Vietnam and any international treaty of which Vietnam is a member. In addition, these branches have the following rights and obligations in accordance with Vietnamese Law:
- To rent offices and to lease or purchase equipment and facilities necessary for branch operations;
- To recruit Vietnamese and foreign employees to work for the branch;
- To enter into contracts in Vietnam in accordance with the activities stated in the license for establishment of such branch and in accordance with the commercial Law.
An investor should consider the following points when deciding whether to set up a branch or a new entity:
- In order to establish a branch in Vietnam, the foreign company has to have been operating for at least five years;
- It takes almost the same time to establish a branch as it takes for a new enterprise but a branch license will only be valid for five years;
- If the enterprise is more active in operation and organization, establishing a new entity is more appropriate;
- With an enterprise, it is relatively easy to enlarge the business as well as the operation of the company by for example opening representative offices, branches or sub-companies.
Representative offices
The representative offices of foreign business entities are not allowed t
- Directly conduct profit making activities in Vietnam except for carrying out commercial promotion activities within the scope permitted by license and laws,
- Enter into commercial contracts of the foreign entity or to amend or supplement such contracts already signed except where the chief of the representative office has a valid power of attorney from the foreign business entity.
representative offices are not recommended , as the restriction s on it s operation provided by Vietnamese law .
d. Business Cooperation Contract (BCC)
The new investment law also recognizes foreign investment in the form of a business co-operation contract. An investor is permitted to sign a BCC in order to cooperate in production and share profits or to share products and other forms of business cooperation. An investor is permitted to sign a build-operate-transfer, build-transfer-operate and build-transfer contract with a competent State body in order to implement projects for new construction, expansion, modernization and operation of infrastructure projects in the sectors of traffic, electricity production and business, water supply or drainage, waste treatment and other sectors as stipulated by the Prime Minister.
2. Indirect foreign investment
The primary form of indirect foreign investment into Viet Nam is via the country's stock exchanges. Indirect investment in this form requires comparatively less regulatory approval than direct investment, concentrating on administrative requirements such as the establishment and registration of trading codes and accounts, and periodic disclosures.
Under Vietnamese laws, “foreign investor” is defined as either: (i) organizations established and operating pursuant to foreign law and their branches both overseas and in Vietnam; or organizations established and operating in Vietnam with a capital contribution ratio of foreign parties above forty-nine (49) percent, (ii) Investment funds and securities investment companies with a capital contribution ratio of foreign parties above forty nine (49) percent, (iii) foreign individuals without Vietnamese nationality, residing overseas or in Vietnam.
II. List of Sectors in which investment is conditional in Vietnam
Sectors in which investment is subject to conditions are those listed in Decree 108 and international treaties of which the Socialist republic of Vietnam is a member. Those sectors are listed in Vietnams WTO commitments. In particular, sectors in which investment is subject to conditions include:
- Sectors that impact national defense and security, social order and safety;
- Banking and finance;
- Sectors that impact on public health;
- Culture, information, the press and publishing;
- Entertainment;
- Real estate;
- Surveying, prospecting, exploration and mining of natural resources; the ecological environment; and
- Development of education and training,
In addition to the sectors mentioned above, sectors in which investment is subject to conditions include those in accordance with the schedule for implementation of international requirements as stipulated in international treaties of which Vietnam is a member. Where an enterprise with foreign-owned capital is in a sector in which investment was unconditional, but during the course of investment activity the list of sectors in which investment is conditional was amended to include the relevant sector, the investor shall be permitted to continue investment activity in that sector.
For further information, please to contact Mr. Pham Thanh Tuan managing partner of VIETIN LAWYER, e-mail tuan.pham@vietinlaw.com.vn Tel (+ 84) 4 66809023 Mobile (+84) 904966448
There are two principal forms of foreign investment in Vietnam: (i) direct investment and indirect investment. Direct investment means investment whereby the investor invests its capital and participates in the management of the investment activity. In contrast, indirect investment means investment by way of the purchase of shares, share certificates, bonds, other valuable papers or by way of intermediary financial institutions such as a securities investment fund, where the investor does not participate directly in the management of the investment activities
1. Direct foreign investment formsA foreign investor can directly engage in the Vietnamese market in several ways. At the same time, investors must consider and choose the most appropriate form of investment, including whether to establish a new company, invest in an existing company with an active management role, or pursue an alternative form of investment presence, such as a branch, representative office or BCC. The choice of investment form will depend primarily on the investment aim. It may also be dictated by particular rules applying to particular sectors. For example, for investments in the services sector, the commitments made by Viet Nam when it joined the Word Trade Organization will be a key determinant in selecting the form of investment.
Under Vietnamese laws, investment certificates are issued in one of two ways: (i) registration for issuance of investment certificate with respect to invested capital less than VND300 billion (approximately US$15,400,000) and not included in the list of sectors of investment subject to conditions. Accordingly, the investor must carry out the procedures for investment registration at a provincial State administrative body for investment in order to be issued an investment certificate. (ii) evaluation for issuance of investment certificate with respect to invested capital from VnD300 billion upward and/or projects within a sector that falls on the list of sectors of investment subject to conditions. Accordingly the investor must carry out the evaluation procedures in order to be issued with an Investment certificate regardless of whether they are included in the list of sectors of Investment subject to conditions.
Foreign investors investing in Vietnam for the first time must obtain an Investment certificate (which is also the business registration certificate) by proceeding with the procedures for investment registration or evaluation of investment. Once a foreign invested enterprise is established, only its new investment projects (if any) need to be registered.
a. Establishing a new enterprise
A foreign-invested enterprise, whether wholly foreign-owned or in the form of a joint venture with Vietnamese partners, must be approved by the relevant authorities. In order to be approved a foreign invested enterprise must have an 'investment project', being a set of proposals for the expenditure of medium and long-term capital in order to carry out investment activities in a specific geographical area and for a specified duration. Approval of the investment project, and establishment of the foreign invested enterprise, take the form of an 'Investment Certificate', the equivalent of a certificate of incorporation or business registration certificate.
In addition to the Investment Certificate, a Vietnamese-established entity also must have a 'Charter', the equivalent of by-laws, constitution or articles of association of a company in other jurisdictions. Joint ventures between foreign and Vietnamese investors also require a 'Joint Venture Contract', governing certain key elements of their relationship. This contract sits alongside the Charter as part of the enterprise's constituent documents. Having determined that a Vietnamese-established enterprise is the most appropriate form of investment, investors will also need to consider and choose from the various forms of enterprise such as Joint Stock Company, Limited Liability Company, single member limited liability Company, private enterprise, partnership.
b. Investing in an existing enterprise
Investors may also choose to directly invest in Viet Nam by acquiring a stake in an existing Vietnamese enterprise. Often, extensive internal and external authority approvals will be required. The precise procedural requirements for effecting such an acquisition will differ depending on (i) whether the target entity already has foreign investors and an Investment Certificate for an approved project, (ii) whether the investor is acquiring existing equity by way of transfer, or newly issued equity (iii) the form of the target entity (whether a single or multiple-member limited liability company, or a shareholding company); and (iv) the sector in which the entity operates.
c. Branches and representative offices
Under the Law on commerce, foreign business entities are entitled to establish branches and representative offices in Vietnam. The Ministry of Industrial and Trade manages the licensing of branches and representative offices of foreign businesses. Businesses are liable under Vietnamese law for all the operations of their branches and representative offices in Vietnam
Branches
Unlike the representative office, branches of foreign businesses are allowed to conduct activities including the purchase and sale of goods and other commercial activities consistent with their licenses for establishment in accordance with the law of Vietnam and any international treaty of which Vietnam is a member. In addition, these branches have the following rights and obligations in accordance with Vietnamese Law:
- To rent offices and to lease or purchase equipment and facilities necessary for branch operations;
- To recruit Vietnamese and foreign employees to work for the branch;
- To enter into contracts in Vietnam in accordance with the activities stated in the license for establishment of such branch and in accordance with the commercial Law.
An investor should consider the following points when deciding whether to set up a branch or a new entity:
- In order to establish a branch in Vietnam, the foreign company has to have been operating for at least five years;
- It takes almost the same time to establish a branch as it takes for a new enterprise but a branch license will only be valid for five years;
- If the enterprise is more active in operation and organization, establishing a new entity is more appropriate;
- With an enterprise, it is relatively easy to enlarge the business as well as the operation of the company by for example opening representative offices, branches or sub-companies.
Representative offices
The representative offices of foreign business entities are not allowed t
- Directly conduct profit making activities in Vietnam except for carrying out commercial promotion activities within the scope permitted by license and laws,
- Enter into commercial contracts of the foreign entity or to amend or supplement such contracts already signed except where the chief of the representative office has a valid power of attorney from the foreign business entity.
representative offices are not recommended , as the restriction s on it s operation provided by Vietnamese law .
d. Business Cooperation Contract (BCC)
The new investment law also recognizes foreign investment in the form of a business co-operation contract. An investor is permitted to sign a BCC in order to cooperate in production and share profits or to share products and other forms of business cooperation. An investor is permitted to sign a build-operate-transfer, build-transfer-operate and build-transfer contract with a competent State body in order to implement projects for new construction, expansion, modernization and operation of infrastructure projects in the sectors of traffic, electricity production and business, water supply or drainage, waste treatment and other sectors as stipulated by the Prime Minister.
2. Indirect foreign investment
The primary form of indirect foreign investment into Viet Nam is via the country's stock exchanges. Indirect investment in this form requires comparatively less regulatory approval than direct investment, concentrating on administrative requirements such as the establishment and registration of trading codes and accounts, and periodic disclosures.
Under Vietnamese laws, “foreign investor” is defined as either: (i) organizations established and operating pursuant to foreign law and their branches both overseas and in Vietnam; or organizations established and operating in Vietnam with a capital contribution ratio of foreign parties above forty-nine (49) percent, (ii) Investment funds and securities investment companies with a capital contribution ratio of foreign parties above forty nine (49) percent, (iii) foreign individuals without Vietnamese nationality, residing overseas or in Vietnam.
II. List of Sectors in which investment is conditional in Vietnam
Sectors in which investment is subject to conditions are those listed in Decree 108 and international treaties of which the Socialist republic of Vietnam is a member. Those sectors are listed in Vietnams WTO commitments. In particular, sectors in which investment is subject to conditions include:
- Sectors that impact national defense and security, social order and safety;
- Banking and finance;
- Sectors that impact on public health;
- Culture, information, the press and publishing;
- Entertainment;
- Real estate;
- Surveying, prospecting, exploration and mining of natural resources; the ecological environment; and
- Development of education and training,
In addition to the sectors mentioned above, sectors in which investment is subject to conditions include those in accordance with the schedule for implementation of international requirements as stipulated in international treaties of which Vietnam is a member. Where an enterprise with foreign-owned capital is in a sector in which investment was unconditional, but during the course of investment activity the list of sectors in which investment is conditional was amended to include the relevant sector, the investor shall be permitted to continue investment activity in that sector.
For further information, please to contact Mr. Pham Thanh Tuan managing partner of VIETIN LAWYER, e-mail tuan.pham@vietinlaw.com.vn Tel (+ 84) 4 66809023 Mobile (+84) 904966448
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