Vietnam is considered a fertile land in Southeast Asia for foreign investors who want to invest in. In addition to the competitive advantages of the stable political and economic situation, the abundant young labor force with the digital golden structure …, Vietnam’s investment environment has appeared many new factors that increase the attractiveness of foreign capital flows. It is the effort to prevent Covid-19 pandemic that has reached the recording world, showing its ability to cope with the global crisis, completely better than many different economies; Economic maintains positive growth.
Accordingly, a foreigner can invest in Vietnam in several ways, including establishing a new enterprise, acquiring or investing in an existing enterprise, setting up a branch or representative office, or using contractual arrangements. In determining the structure of its investment in Vietnam, a foreign investor will need to consider such factors as:
- The scope and nature of the proposed investment and business activities, and the related licensing requirements;
- Whether there are any foreign ownership restriction in the relevant investment sector;
- Whether it is necessary or desirable to involve a local partner; and
- The tax implications of the available structures.
Establishing a new enterprise:
Foreign investors who want a direct presence in Vietnam and who do not want to inherit an existing business can set up a new enterprise in the country, whether as a wholly owned subsidiary or as a joint venture with foreign or Vietnamese partners.
To do this, the investor must register an ‘investment project’, then needs to go through procedures to establish an enterprise to implement the investment project.
Approval of the investment project is in the form of an Investment Registration Certificate (IRC), which will set out key details of the project, including its objective, duration and investment capital (equity and debt). Certain types of projects may require an in principle approval by the National Assembly, the Prime Minister or the relevant local People’s Committee before the IRC is issued (eg projects for investment in airports, seaports, petroleum, casinos and golf courses).
Once the IRC is issued, the investor must then apply for an Enterprise Registration Certificate (ERC) to establish the new enterprise that will implement the investment project.
Acquisition of, and investment in an existing enterprise
Investors may also choose to invest in Vietnam by acquiring all or part of an existing enterprise. If this route is taken, external regulatory approvals will often be required, though the precise procedural requirements for effecting such an acquisition will depend on:
- the sector in which the target entity operates;
- the form of the target entity (whether a single- or multiple-member limited liability company, or a shareholding company, and whether it is a private, public, or listed company); and
- the foreign ownership ratio in the target company after the acquisition.
Branches and representative offices
As an alternative to establishing, or acquiring or investing in, an enterprise, Vietnam’s Law on Commerce allows certain foreign business entities to establish two other forms of presence in Vietnam: a branch or a representative office. Both must be licensed by the relevant authorities.
A branch may be established by a foreign business entity only in certain WTO-committed sectors, including banking, insurance, securities and legal services,..
A representative office, on the other hand, may be established by any foreign business entity wanting to seek, and expedite, opportunities for the commercial activities of that foreign business entity in Vietnam: through market research, marketing, liaising with authorities regarding investment in Vietnam, and overseeing the implementation of the foreign entity’s contracts in Vietnam.
A representative office:
- is not an independent legal entity and the foreign entity does not own equity in the representative office; and
- must not directly conduct profit-making activities.
Public private partnerships
Investment in the form of PPP contract is an investment made on the basis that investors and project enterprises sign with competent state agencies to implement, manage and operate structural projects. infrastructure and public service delivery.
Accordingly, there are 7 types of contracts in the form of public private partnerships, including Build – Operate – Transfer (BOT), Build – Transfer – Operate (BTO), Build – Transfer (BT), Build – Own – Operate (BOO), Build – Transfer – Lease (BTL), Build – Lease – Transfer (BLT) and Operate – Manage (O&M) Contracts.
Business cooperation contracts
A business cooperation contract (BCC) is a written contract between investors, agreeing to cooperate to undertake certain business activities and to share the profits or products arising from such activities. No separate legal entity or company is established and there is no limitation on liability for participants. An IRC must be obtained for BCCs involving foreign investors.
BCCs are relatively uncommon in practice, and have been used mainly in the petroleum and telecommunication sectors.
In addition to complying with investment regulations under Vietnamese law, foreign investors are also required to comply with their own national regulations when making offshore investments.
To know more about investment in Vietnam, please feel free to contact us at:
Ms. Gracie – Juridical Executive of MRS Steel