KNOWLEDGE BASE

MARKET ENTRY INFORMATION

DOING BUSINESS IN VIETNAM

Vietnam Business Services Overview About Vietnam Vietnam Market Entry Taxation

VIETNAM MARKET ENTRY

How do I form a company or representative office?

We will examine your proposed business activities in Vietnam and advise you of the options available to you under Vietnamese investment regulations and WTO market access commitments made by Vietnam. Other than financial institutions, a foreign company cannot set up a branch office in Vietnam, but must operate via a local business entity, be it a company or a representative office.

How do I form the entity that I need?

We can assist you with the establishment of a representative office or a Vietnamese company, wholly or part foreign owned. The documentation may differ depending on local requirements. After an investment licence and a business registration certificate is issued for the representative office or Vietnamese company, we can assist you to register with the local tax bureaus and confirm the taxation basis or tax preferences.

The Investment Situation in Vietnam

Foreign investment into Vietnam is governed by the Common Investment Law (CIL), introduced in July 2006.

  • CIL covers both foreigners and overseas Vietnamese investment.
  • It guarantees that assets and capital of investors shall not be nationalized or confiscated by administrative measures.

Remittance of Capital and Assets Aboard

  • After all financial obligations have been met, a foreign investor can remit profit and any money lawfully earned aboard.
  • Foreign employees of investment enterprises can transfer salaries abroad.

Purchase of Foreign Currencies

  • A foreign investor can purchase foreign currency from authorized credit institutions in order to conduct business.

Uniform Prices and Fees

  • Foreigners shall pay the same prices and fees as Vietnamese. They shall not have to buy from any specified supplier.

Import, Export, Marketing and Advertising of Goods and Materials

  • A foreign investor has the right to import and export goods and materials.
  • A foreign investor can freely advertise and market his products or services.

Assignment ( Sale) or Adjustment of Capital Investment

  • A foreign investor can assign or adjust capital in an investment project.

Mortgage of Land Use Rights and Assets Attached to the Land

  • Foreigners cannot own land in Vietnam (although in certain cases this may change). However they can obtain land usage rights. These rights enable them to use the land they pay for in order to carry out their project. Land use rights are very similar to holding a registered lease over land.
  • Foreigners can mortgage land use rights or assets (but only with Vietnamese credit institutions) in order to raise money for capital to implement the investment.

Other Rights of Foreign Investors

  • To all intents and purposes, with respect to business and investment activities, foreigners shall have the same rights as Vietnamese citizens.

Dispute Resolution

  • Any dispute resolution shall first be attempted to be settled by negotiation and conciliation.
  • Any dispute involving foreigners can be settled by:
  1. A Vietnamese court
  2. A Vietnamese arbitration body
  3. A foreign arbitration body
  4. An international arbitration body
  5. An arbitration body agreed upon by the parties
  • Any dispute between a foreign investor and a Vietnamese State body shall be resolved by a Vietnamese arbitration body or court, unless pre-agreed in the investment contract.

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Forms of Investment in Vietnam

Direct Investment

  • Can be by 100% Vietnamese or 100% foreign ownership or mixed ratio.
  • Can be by joint venture between a Vietnamese or foreign investment entity.
  • Can be by a Business Cooperation Contract (BCC), Build Operate Transfer (BOT), Build Transfer Operate (BTO), or Build Transfer contract.
  • Can be to invest in business development such as expanding scales, increasing output and increasing business capacity.
  • Can be to purchase shares
  • Can be by merger and acquisition of an existing enterprise.

Indirect Investment

  • Can be to purchase shares, bonds and other commercial papers
  • Can be by way of securities investment funds
  • Can be by way of other intermediary financial institutions

Special Incentive Areas

  • Activities attracting special investment incentives include:
  • Manufacture of new materials, raw energy, high tech products, mechanical manufacturing etc.
  • Breeding, rearing, growing, processing of agricultural forestry etc
  • Use of high technology and advanced techniques
  • Labour intensive industries
  • Construction and development of infrastructure
  • Professional development of education, training, health, sports, and Vietnamese culture .
  • Development of traditional crafts

Geographical Areas Attracting Investment Incentives

  • Areas with difficult socio-economic conditions
  • Industrial zones, export processing zones, high tech and economic zones
  • Areas of Conditional Investment
  • Those impacting on national defence, security, social order and safety
  • Banking and finance
  • Those impacting on public health
  • Culture, information, the press and publishing
  • Entertainment services
  • Real estate business
  • Survey, prospecting, exploration and mining
  • Development of education and training

Areas Prohibited for Investment

  • Project detrimental to national defence, security and public interest
  • Projects detrimental to historical and cultural traditions
  • Projects that harm people‚Äôs health or which harm the environment
  • Projects for the treatment of toxic wastes brought into Vietnam
  • Projects for the manufacture of toxic chemicals or chemical agents prohibited by international treaties.

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Investment Application Process

The process of applying for approval of an investment entity can be complicated. Preparing the application, leasing space in one of the free trade zones, and laying other groundwork can take several months. Once the application and the charter of the investment entity are filed with the appropriate Vietnamese authorities, the authorities will respond to the application with an approval, denial or a request for additional information.

What are the employer and employee issues?

A foreign assignee in Vietnam is required to apply for a business visa and a residence permit that can be up to five years under Article 44 of the CIL. We can assist your assignees to obtain these documents. Since the top rates of Vietnamese income taxes are rather high, planning an assignee's remuneration package is very important. All local staff can be hired direct. We can arrange for the recruitment of local staff and payroll administration.

Can OCRA Worldwide help me set up a joint venture?

Yes. Historically, the establishment of a Joint Venture has been the most common form of foreign investment in Vietnam, but now they are much less common, especially as the new Unified Enterprise Law that governs corporate structures now allows for mixed foreign and Vietnamese shareholdings. We are able to assist our clients in finding their local joint venture partners through our network of contacts.

What other Vietnam business services does OCRA Worldwide offer?

We offer bespoke services relating to the identification of suitable tax advisers, lawyers, local partners, premises, factories, management, staff and expatriate housing. We can also provide professional corporate administration. We have the capacity to deliver a turn-key back office function for an operation in Vietnam. This service encompasses communication services, accounting and handling a broad range of commercial work including documentary credit services and managing an import or export operation.

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Disclaimer: Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other
professional advice. OCRA Worldwide does not accept any responsibility, legal or otherwise, for any errors or omission.