What you need to know before making a foreign investment in Vietnam

Monday - 06/05/2019 09:52
The terms of foreign investment in Vietnam have recently been simplified, whatever the form of investment. Receive advice from lawyers for investing in Vietnam
What you need to know before making a foreign investment in Vietnam
Forms of foreign investment in Vietnam

Foreign investment represents international capital movements made to create, develop or maintain an overseas subsidiary and / or exercise control (or significant influence) over the management of a foreign company. The Law on Foreign Investment in Vietnam identifies three possible forms of investment:

    Business cooperation through a Business cooperation contract ;
    Setting up a joint venture ;
    Constitution of a 100% foreign capital company.

It is also possible to invest in Vietnam by opening a subsidiary or a representative office. They have no legal status, but allow investors to integrate and understand the market before making substantial foreign investment in Vietnam.

Why undertake foreign investment in Vietnam?

    Cost reduction: In Vietnam, labour is cheap and increasingly skilled. 60% of the population is of working age.

    Advantageous tax situation: Vietnamese tax policy is competitive with other countries in the area. Foreign investors often prefer Vietnam to other countries in Southeast Asia for tax reasons.

    Exploitation of raw materials at lower cost: Vietnam is full of raw materials, some of which are costly or impossible to transport. Relocating in Vietnam therefore appears to be a solution to save time and money.

    Conquering the Asian market: Vietnam, located in the heart of Southeast Asia, a region that is the driving force of world economic development, is a favorite destination for investors in that it facilitates their integration into the Asian market, sometimes difficult to penetrate only via exports.

Documents required to make a foreign investment in Vietnam

The declaration of all foreign direct investment is mandatory, whether the investor is a physical or legal entity.

The law on foreign investment in Vietnam oversees foreign investment, which requires obtaining various documents:

    Investment Certificate: To obtain it, investors should build a case for consideration by the competent authorities.

    Each business creation represents a specific investment that will be subject to requirements and specific regulations established by the Vietnamese government. Significant transactions will be subject to stricter conditions than smaller projects and will be subject to an investment evaluation procedure.

    Permission from the Vietnamese government: Investors wishing to establish a branch or a representative office in Vietnam must also submit their application to the Vietnamese administration, but the conditions are alleviated and the investment license is not required: only the agreement of the Government Vietnamese is required. When examining the case, particular attention will be paid to the interest of the parent company’s activity for the country.

    Visa: To enter the territory, a stranger in principle needs a visa issued by an embassy or consulate of Vietnam. Nationals of some countries, however, are exempted for short stays. Different types of visas exist depending on the profession and the subject of the applicant’s request.

    Residency permit: a residence permit will be issued in correspondence with visa. It is obtained from a police station. An applicant for a residence permit must present evidence that he/she works/invests in Vietnam.

    Working Licence: In Vietnam, foreign workers must hold a work permit issued by the Vietnamese Labour Authorities, with the exception of certain cases such as head of a representative office or subsidiary established in Vietnam, foreign lawyers who have a certificate of practice of the legal profession in Vietnam, foreigners being members/owner of LLC, members of the Board of management of SC, foreigners who are internally transferred within a company and within the scope of the List of Commitments of Services of Vietnam with WTO. The employer is in charge to submit the file to the Department of Labour, War Invalid and Social Affairs in both cases: request for issuance of work permit and certification of work permit exception.

Rights and obligations related to foreign investment in Vietnam

Foreign investors are subject to Vietnamese law, which confers rights and obligations:

    - Labour law: They can recruit manpower according to the needs of their activities, but must give priority to the recruitment of Vietnamese citizens, under Vietnamese labour law.

    - Insurance: Taking out property insurance and liability insurance is mandatory for foreign invested enterprises and foreign parties to a business cooperation contract.

    - Business Management: Investors are autonomous in managing their affairs in accordance with the objectives stipulated in the investment license.

    - Banking and Finance: The foreign-invested enterprises may open accounts in Vietnamese dong and foreign currency with a Vietnamese bank or may, in some cases, open a bank account abroad.

    - Accounting law: Foreign contractors must comply with legislation relating to the Vietnamese accounting system.

    - Fiscal law: Foreign investors must pay taxes due under Vietnamese law (corporate tax, VAT, income tax, customs tariff).

    - Environmental Law: Particular attention should be paid to the law on environmental protection.

    - Access to courts and arbitration centers: Foreign investors can bring a case before the courts Vietnamese and Vietnamese arbitration organizations.

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