Professional Documents
Culture Documents
December 2010
TABLE OF CONTENTS
Introduction 3
1. Main Principles 3
1.1 Forms of direct investment 4
1.2 Forms of indirect investment 5
1.3 Investment Sectors 5
1.4 Licensing 5
1.5 Term of investment projects 6
1.6 Dispute resolution (Art. 12 LOI) 6
1.7 Accounting System 7
2. Possible legal forms 8
2.1 Representative Office 8
2.2 Branch Office 9
2.3 Limited Liability Company (LLC) 10
2.4 Partnerships 11
2.5 Public Limited (“Shareholding”) Company 11
3. Business Co-operation Contract (BCC) 12
4. Post-Licensing Procedures 12
4.1 Tax Registration 13
4.2 Financing 14
4.3 Annual Financial Reports 15
4.4 Labour 15
5. Foreign owned trading company 16
5.1 Import and Export 16
5.2 Distribution 17
Introduction
Vietnam is getting more and more into the focus of Western and Eastern investors.
Its GDP growth over the last decade was one of the highest worldwide. Even now,
during the downturn of the world economy, Vietnam is one of the few countries
expecting moderate growth rates for 2010 amounting up to 6.7%. Investment into
Vietnam has become even more attractive since Vietnam was granted accession to
the World Trade Organisation (WTO) on 11th of January 2007, after a waiting pe-
riod of 12 years. In order to become a member of the WTO, Vietnam had to pass a
law on investments (“LOI”), that would grant the same rights to foreign investors
as to domestic investors. According to the new LOI, domestic and foreign inves-
tors shall in general be treated equally.
However, doing business in Vietnam is still sometimes complicated. The following
chapters highlight some of the most important aspects to be considered in connec-
tion with structuring a business in Vietnam.
Particularly, this brochure will stress the major points to be considered under the
new LOI when investing either directly or indirectly into Vietnam. It will also out-
line the requirements for setting up a company according to the new Law on En-
terprises (LOE), in force since 1st of July 2006.
In the Appendices to this brochure you will find terms, definitions and application
forms as well as a detailed list of mandatory procedures for pre- and post-licensing
processes.
1. Main Principles
The main principles that govern foreign investment activities in Vietnam are, as
mentioned above, now stated in the LOI. The law provides a wider range of in-
According to Art. 4 Sec. 1 LOI, investors are permitted to invest in all sectors
and industries not prohibited by law. Under the new law, Vietnam’s economy
is still divided in three sectors: encouraged sectors, conditional sectors and
prohibited sectors.
Conditional sectors, under the old law only accessible to those foreign inves-
tors willing to cope with the respective conditions (restrictions on investment
forms, foreign participation etc.), are in general now accessible for both do-
mestic and foreign investors under the same conditions. However, according
to Art. 29 Sec. 3 LOI, equality in conditions shall follow the schedule for im-
plementation of international treaties, into which Vietnam has entered. Total
equality between domestic and foreign investors will therefore still take some
time.
1.4 Licensing
If the dispute arises between a foreign investor and a State administrative body
of Vietnam, relating to investment activities in Vietnam, the dispute has to be
resolved by a Vietnamese Court or a Vietnamese arbitration body, if not stipu-
lated otherwise in the contract of the parties, signed by a representative of a
competent State body of Vietnam and the foreign investor or stipulated in an
international treaty of which Vietnam is a member.
Recently in 2010, Vietnam has issued a new law on arbitration replacing the
old legislation “Ordinance on Arbitration”. Foreign arbitrators are permitted
to practice in Vietnam; representative office of international arbitration will
also take the chance to be in Vietnam sooner or later. The main implementa-
tion however, might be that from now on, the English language can be agreed
on in an Arbitration. While waiting the guidance for implementation, the new
arbitration law is therefore a step forward to putting Vietnam into the Global
market and making it a recognisable part of it.
Vietnam has created its own accounting regime. Foreign companies that es-
tablish a legal entity in Vietnam as well as foreign parties to a business co-
operation contract are obliged to adopt the Vietnamese Accounting System
(VAS). In theory, any other accounting regime could be used. However, there
has to be a specific need for such a “deviating” practice, which has to be ap-
proved by the Ministry of Finance. Approvals are rare.
Consequently, it seems advisable to adopt the VAS to ensure smooth co-
operation with the local authorities and in particular to minimise future mis-
understandings.
This is the simplest way to be present in Vietnam as an entity. The LOE pro-
vides a definition of the term representative office (rep. office) in Art 37 Sec.
1. Accordingly, a rep. office is a dependent unit of the enterprise, acting as the
authorised representative in the interest of the enterprise and protecting such
interests.
entity. But it should be taken into account that such authorisation can also
lead to a possible tax exposure of the rep. office with regard to corporate in-
come tax as a permanent establishment might be constituted by doing so.
Representative offices in specific sectors such as banking, finance, legal ser-
vices, culture, education or others must comply their specific laws thereof.
legal services, culture, education or others must comply their specific laws
thereof.
LLC is the most common form of investment in Vietnam. Under the LOE,
LLC is an enterprise, in which its members are liable for the debts and other
property obligations of the enterprise only with the capital they contributed to
the enterprise. A minimum capital is only required when conducting special
businesses (real estate, banking etc). The amount is stipulated in the respective
law. The number of its members is limited to a maximum of fifty. If members
are more than fifty, the LLC must be converted into a shareholding company
(joint-stock company).
An LLC is a legal entity. It obtains this status from the day of issuance of the
business registration certificate.
An LLC cannot issue shares. However, when a member has fully paid his
share of capital contribution, he will receive a capital contribution certificate.
It is also possible for an LLC to raise its charter capital through a contribu-
tion of additional capital from the members or admission of new members to
the company. Under the LOE, an LLC can be formed by multi-members
(multi-members limited liability company or MMLLC) or a single member
(single member limited liability company or SMLLC). “member” can be any
person or an organisation.
The SMLLC generally follows the rules of MMLLC. Concerning structure and
required documents there are, however, some differences.
The highest decision-making body is the Members’ Council for a MMLLC
and the Owner of a SMLLC. The Legal representative of the enterprise has
signing authority or authorises one or more person(s) to carry out his power.
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He is responsible to run the day – to - day business and report to the highest
making decision body of the enterprise.
Any form of an LLC has to hire a Chief Accountant. For the purpose of mak-
ing the set – up of a company easier, in the first year, any enterprise is permit-
ted to outsource the accounting services.
2.4 Partnerships
4. Post-Licensing Procedures
The issuance of the business registration certificate respectively the investment cer-
tificate is the first step to commence operations. However, even after the changes
in the Vietnamese investment law, there are still some post-licensing procedures, as
listed below, which can be time consuming and therefore should be kept in mind.
The following should be considered:
General post-licensing
• Within 90 days of the following calendar year, the annual VAT return has
to be submitted. The respective deficient payments have to be made
within 10 days. A surplus has to be set off with the VAT payable for the
following period.
• The company shall calculate, declare and withhold the Personal Income
Tax ("PIT") of salaries paid to its employees on a monthly basis.
• The company shall calculate, declare and pay import tax to the customs
and tax authorities.
• Chief accountant must be employed or arranged. For the first fiscal year,
the accounting services may be outsourced to an external service pro-
vider.
• In case the company ceases to exist, a final VAT report has to be filed.
• The annual provisional CIT return has to be submitted not later than 25
January of each year to the local tax authorities.
• In case of fluctuations in business results in the first six months of the fi-
nancial year, such changes have to be reported to the local tax authorities
in order to adjust the provisional CIT return.
• In case of quarterly CIT payments, the respective payment has to be
made not later than the 30th day of the respective next quarter.
• Within 90 days of the fiscal year, the CIT return must be submitted to
the local tax authorities.
4.2 Financing
• After establishment, the company has to open a specialised capital de-
posit account with a bank in Vietnam; any capital contribution by the
members of the company is required to be paid in on the company's
4.4 Labour
• Before recruitment, the company must submit an application to the local
Department of labour, Invalids and social affairs ("DOLISA") for work
permits for expatriates.
• No later than seven days prior to the date of commencement of work for
the company, the company must report to DOLISA the list of the expa-
triates exempt from work permit (if any). Prior to 5 January each year, an
annual report to DOLISA on employment of expatriates must be filled.
• Within seven days of the recruitment completion, it is required to send a
notice to DOLISA regarding the list of recruited employees
be reviewed from time to time in accordance with the schedule issued by Ministry
of Commerce and Industry.
A foreign-owned enterprise must obtain the license for import/export activities is-
sued by the provincial committee. Under Decree 23, a foreign-owned enterprise is
only permitted to resale (wholesale) the imports to the registered local companies
and not retail the imports directly to the end users.
5.2 Distribution
Since 1 January 2009, 100% foreign-owned company can engage in distribution ac-
tivities in Vietnam. Previously, only joint-ventures were allowed.
People’s committee at provincial level will issue the distribution (trading) license af-
ter obtaining the written opinion of Ministry of Commerce and Industry.
We hope that this information was helpful for you. For any further questions
or additional information, please do not hesitate to contact us.
Although Lorenz & Partners Co., Ltd. always pays greatest attention on updating the in-
formation provided in this brochure we cannot take responsibility for the topicality, com-
pleteness or quality of the information provided. None of the information contained in this
brochure is meant to replace a personal consultation. Liability claims regarding damage caused
by the use or disuse of any information provided, including any kind of information which is
incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly neg-
ligent.