Vietnam - Establishing an Office Vietnam - Establishing an Office
Foreign companies have several options to establish a commercial presence in Vietnam. The National Assembly of Vietnam recently passed the new Law on Enterprises and the new Law on Investment in November 2014, both effective as of July 1, 2015. Firms should seek advice from a competent law firm to evaluate the legal and tax implications of the various options, and to review the most up-to-date regulatory information. Recently, the Government of Vietnam launched the National Business Registration Portal to simplify the procedures as well as to improve the transparency and efficiency of business registration.
Representative Office License
A representative office (RO) is generally easy to establish, but is the most restrictive form of official presence in Vietnam. The license is issued by the Department of Industry and Trade (DoIT) in the city or province where the representative office is to be established. The new Decree 07/2016/ND-CP dated January 25, 2016, guiding the Commercial Law on ROs and branches of foreign business entities in Vietnam took effect on March 10, 2016 and replaced Decree No. 72/2006/ND-CP on the same matter.A representative office may rent office space/residential accommodations, employ local staff along with a limited number of expatriate staff, and conduct a limited range of business operations. Per Decree 07, the scope of activities of an RO is narrower than the one stipulated in Decree 72. An RO can conduct the following activities: (i) being a liaison office, (ii) conducting market research, and (iii) promoting the opportunities for investment and business co-operation of the foreign business entity. The activity of “monitoring and activating performance of contracts of the foreign business entity signed with Vietnamese parties or related to Vietnamese markets” allowed under Decree 72 is now removed from the scope of operation of an RO. However, the existing ROs established under Decree 72 can operate in accordance with their granted licenses until the expiry of such licenses.
As the representative office is regarded as a commercial liaison office and not an operating entity, it is strictly prohibited from engaging in any revenue-generating activities, such as trading, rendering professional services, revenue collection, invoicing or subleasing of its office space.
Application Procedures
The procedure to establish a representative office is relatively straightforward. An application with stipulated supporting documentation must be submitted to the relevant DoIT. The application and profile must be prepared in English and Vietnamese, and the license is usually valid for five years and may be extended.Branch License
The term “branch” office under the laws of Vietnam refers to an entirely foreign-owned business that operates in certain designated service sectors. These sectors, which are restricted and closely monitored by the Vietnamese government, include banking and finance, law, insurance, marketing and advertising, education, tourism, logistics, construction, and other types of services. Many foreign branch offices first entered Vietnam as representative offices and later applied for a branch license. Branch status authorizes a foreign business to operate officially in Vietnam, including invoicing/billing on-shore in local currency and the execution of local contracts.The establishment and operation of the ROs and branches of foreign business entities as stipulated in Decree 07 need to be in line with Vietnam’s commitments in the international treaties of which Vietnam is a member. In case the foreign business entities come from the countries/territories that are not members of the international treaties of which Vietnam is a member, or the scope of operation of the ROs/branches are not in line with Vietnam’s commitments in such international treaties, the licensing authorities must seek evaluation opinions from the specialized ministries before granting the license for establishment of the RO/branch of such foreign business entities. The decree also provides requirements for applying for the opening of a foreign branch in Vietnam, a foreign business must operate for at least five years from the date of establishment or registration.
Examining applications take up to three days and valid applications will be further processed by the licensing agency. The licensing agency will send the applicant a written notification of whether the license or establishment of the representative office is granted or not within seven working days of the receipt of the valid application. with reasons for rejections.
Foreign Investment Licenses (FIL)
Foreign direct investment (FDI) in Vietnam is regulated by the Department of Planning and Investment (DPI) at the local level and the Ministry of Planning and Investment (MPI) at the central level, through related implementing regulations, decrees, and circulars. Current FIL rules delegate more authority over investment licensing to provinces, municipalities, and investment zones than was the case in the past. However, larger investments (usually above $100 million), and those requiring complex licensing approval often require extensive consultations between the provincial DPI and MPI – a process that can take many months. The Prime Minister's office retains authority over larger projects and projects deemed sensitive. MPI remains the principal government agency acting as an advisor for the Prime Minister with regard to approving licenses.Primary forms of direct investment include:
- To establish economic organizations in the form of 100 percent capital of domestic investors or 100 percent capital of foreign investors.
- To establish joint venture economic organizations between domestic and foreign investors.
- Under (1) and (2) investors shall be permitted to make an investment to enable the establishment of the following economic organizations:
- Enterprises organized and operating in accordance with the Law on Enterprises; credit institutions, insurance enterprises, investment funds and other financial organizations in accordance with various laws;
- Medical service, educational, scientific, cultural, sports and other services;
- Establishments which conduct investment activities for profit-making purposes;
- Other economic organizations in accordance with law.
- To invest in the contractual forms of Business Cooperation Contract (BCC); Build- Operate-Transfer (BOT); Build-Transfer-Operate (BTO); and BT (Build-Transfer).
- To invest in business development. Investors shall be permitted to invest in business development through expanding scale, increasing output capacity and business capability, renovating technology, improving product quality, and reducing environmental pollution.
- To purchase shares or to contribute capital in order to participate in management of investment activities. Investors shall be permitted to contribute capital to and to purchase shareholding in companies and branches operating in Vietnam. The ratio of capital contribution and purchase of shareholding by foreign investors in a number of sectors is regulated by the government.
- To invest in the carrying out of a merger or acquisition of an enterprise. Investors shall be permitted to merge with and to acquire companies and branches. The conditions for the acquisition of companies and branches are largely regulated by the 2014 Investment Law and the Law on Competition, among others.