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SURVEY

Investment Environment / Frequently Asked Questions

FAQs (19/3/2012)


 

Question 1: Please help to distinguish the application of law on foreign direct and. indirect investments in Vietnam with respect to foreign investors? 

 

Question 2: 2005 Investment Law and 2005 Enterprise Law are the framework of law and policies on the investment and business conditions of general applicability on the domestic enterprises and foreign invested businesses; please talk about the provisions only applicable to foreign - invested projects in Vietnam?

 

Question 3: Please specify the regulations applicable only to foreign-invested projects in Vietnam regarding the fields in which investment is conditional?

 

Question 4: Please tell us about the regulations on authorities to approve to issue Investment Certificates only applicable to foreign-invested projects in Vietnam?
 

 

Question 5: Please tell about the provisions on the establishment of economic organizations only for application to foreign investors?

 

Question 6: Please name the regulations on investment procedures, items included in the investment project dossiers and sites for carrying out investment and business registration procedures only for application to foreign investors?

 

Question 7: Are foreign-invested enterprises in the form of Limited Liabilities Companies set up under the former Law on Foreign Investment considered as Limited Liabilities Companies under the current Enterprise Law?

 

 

Question 8: Please tell the difference between foreign-invested enterprises in the form of Limited Liabilities Companies under the former Law on foreign Investment and foreign-invested enterprises in the four of Limited Liabilities Companies under the current Enterprise Law? Things that should be noted?

 

Question 9: Fields in which investment is prohibited are sectors/lines in which business are prohibited, are not they?

 

Question 10: Legal grounds to determine fields in which investment prohibited and sectors/line's in which business is prohibited?

 

Question 11: Please clarify the conditions, for business for sectors/lines ill which business is conditional and those for fields in which investment is conditional? Are localities allowed to invest to develop garment and textile workshops for re-sale to enterprises? Is Lao Bao Commercial Zone an exception?

Question 12: Is foreign investors' investment to acquire hotels and restaurants to do business considered a business in real estate?

 

Question 13: Which documents should be looked into to learn about sectors/lines, fields in which investment is conditional under Vietnam's commitment following WTO's accession with respect to the foreign-invested sector?

 

Question 14: According to which documents can foreign investors set up distribution enterprises? Please provide guideline son the conditions for investing in this field?

 

Question 15: Where there are different restrictions in multi and bi-lateral commitment’s on foreign investors in the same sector, then which one shall apply when an investor makes investments?

 

Question 16: Where the investment conditions stipulated under domestic legal documents are more open than those under international commitments, can investors enjoy the domestic provisions?

 

Question 17: Is construction of training facilities of School (already set up) a development of education and training cause? Is it subject to the procedures of inspection for issuance of an Investment Certificate?
 

Question 18: Previously, foreign investment cooperation in the field of education, training and scientific research complied with Decree 06/2000/ND-CP dated 06/03/2000. This Decree implemented Foreign Investment Law in Vietnam, Now as the Foreign Investment Law is invalid is this Decree 06 still valid?
 

Question 19: For fields and sectors in which business licenses are required, must investors obtain business licenses before or after the issuance of the Investment Certificate?

 

Question 20: Please specific the sectors/lines in which investment laws and relevant laws stipulate that practice permits must be available?

 

Question 21: Please specific those who have to submit the practice permits?

 

Question 22:

1. Please specify the practice permit issuing agencies?

Is it possible to submit the practice permits issued by foreign agencies where practice permits are required upon registration for establishments of enterprises to implement an investment project? If the Vietnamese agency issues a permit. Then can a foreigner coming to Vietnam to for the first time apply for this permit? Which agency will issue?

2. Does the hospital director, head of the primary and high school or a university need practice permits? Does the investor need practice permits?

 

Question 23: Please clarify the relevant regulations on the conditions on legal capital contribution for foreign invested businesses set up under the former Law on Foreign Investment and Investment Law and the Enterprise Law at the time being?

 

 Question 24: Please specify   some specific stipulations relating to the conditions on the legal capital under current law?

 

Question 25: Flow to inane foreign invested businesses? Investors being individuals map name enterprises set up in Vietnam by private mares?

 

Question 26: Can a foreign investor (corporate or individual) establish a number of enterprises, for the same purpose or for different purposes in different localities? 
 

Question 27: Can foreign individuals set up private enterprises? How the unlimited responsibilities of the investor/or such type of enterprise is controlled? Is it possible to keep control over the investor upon registration to vet up a private enterprise or not?

 

Question 28: What does foreign invested business mean? Compare with domestic enterprises?

 

Question 29: For joint venture enterprises already granted with Investment Licenses wishing to mrake joint venture with domestic enterprises to set up a new legal person, which procedures shall be carried out, the one stipulated for domestic investment or the one for foreign investors?

 

Question 30: Does the representative at law of the enterprise have to be a permanent resident in Vietnam? If yes, does it mean where the representative of the enterprise is a foreigner, then such foreigner must carry out the procedures to he issued with a permanent residencepermit in Vietnam? Is this possible because the conditions for issuances of permanent residence permit are very difficult to satisfy?

 

 Question 31: According to which regulations do foreign investors buy share in Vietnamese enterprises?

 

 Question 32: Procedures and formalities for foreign investors to buy shares in Vietnamese enterprises?

 

Question 33: Are foreign investors subject to any limitations on the ratio for capital contribution and share purchase for Vietnamese enterprise. doing business in fields/lines in real estate?

Question 34: Which ratios do foreign investors making capital contribution or purchasing shares in Vietnamese enterprises hare to comply with when the Vietnamese enterprises conduct business in various fields/lines, with different caps on foreign investors?

 

Question 35:
How to deal with foreign investors purchasing shares in Vietnamese enterprises in excess of the permitted ratio?

 

 

Question 1:


Please help to distinguish the application of law on foreign direct and. indirect investments in Vietnam with respect to foreign investors?

Answer:

1. First, it is necessary to identify "foreign investors". "direct investments" and "indirect investments" in Vietnam in accordance with 2005 Investment Law as follows:
According to Article 3.5, "foreign investors" means foreign
organizations/individuals investing capital to carry out investment
activities in Vietnam including enterprises established under the
Enterprise Law: foreign-invested enterprises established under the Law
on Foreign Investment in Vietnam before the Investment Lain takes
effect; foreign organizations individuals; overseas Vietnamese people; foreigners permanently residing in Vietnam and other organizations in accordance with Vietnamese law;
Under clause 2 of this Article, `direct investments’ means investments in which investors invest capital and participate in management of such investment activities;
Clause 3 of this Article stipulates that "indirect investments"
means investments via purchase of shares, share certificates, bonds. and
other valuable papers, securities investment funds and via other
intermediary financial institutions that investors do not directly involve management of investment activities.

As such, `direct investments’ and "indirect investments" are classified according to 2 major features of form of investing capital and management as follows:

 

    'direct investments' "Indirect investments"
 1. Form of capital 

 - Contribution investing                                  

 - Loan  

 

 - purchase of shares. share certificates, bonds, and ether valuable papers

 - via securities investment funds
 - via other intermediary financial institutions
 

 2. Form of  management 
 
 Directly involved in management of investment activities.

 

 Not directly involved in  management of  investment activities. 
 

 2. Governing laws:


2.1. With respect to "direct investments", where the "foreign investors" are enterprises:


The procedures for the dossiers for establishment of enterprises (in the form of limited liability companies/or joint stock cornpanies or partnerships) in accordance with the Enterprise Law, Decree No.88/2006/ND-CP of the Government on business registration; Decree NV-08/2006/ND-CP of the Government implementing and providing guidelines few implementation of some Articles of the Investment Law and relevant documents.

Procedures for the investment project dossier shall comply with the Investment Law, Decree No. 108/2006/ND-CP of the Government implementing and providing guidelines for implementation of some Articles of the Investment Law, specialized laws and relevant documents.

 

2.2. With respect to "indirect investments": 

(i) Where foreign investors purchase a part of capital contribution/shares of members/shareholders in a Vietnamese
enterprise; accordingly, leading to no change in the legal person or in capital (assets) of the enterprise, but a change in the asset ownership structure the enterprise and as such, not subject to re-establishment of the enterprise; the enterprise shall register with the business registration agency in accordance with Enterprise Law and Chapter V Decree No. 8S,,2006/ND-CP with respect to relevant procedures.

(ii) Where foreign investors buy the whole of capital contribution/shares of members/shareholders in a Vietnamese enterprise; there. is a change in the owner, not in the legal person or in the capital (assets) of the enterprise :

As such, it is not requited to the re-establish the enterprise, but to change the owner, the enterprise must register with the business registration agency regarding relevant procedures in accordance with Enterprise Law and Decree No. 88'2006,N1D-C.P; Foreign investors shall report of t e dossier receiving agency stipulated in Article 40 of Decree 108/2006,'ND-CP for re-registration like in the case of foreign invested businesses.

(iii) Where foreign investors buy shares of foreign invested businesses in Vietnam, the enterprise shall carry out the procedures for adjustment of the Investment Certificate (change of the contents of business registration) in accordance with Article. 51, 52 Decree 108/2006/ND-CP at the dossier receiving agency of the project stipulated in Article 40 of this Decree.

 Top

Question 2:


2005 Investment Law and 2005 Enterprise Law are the framework of law and policies on the investment and business conditions of general applicability on the domestic enterprises and foreign invested businesses; please talk about the provisions only applicable to foreign - invested projects in Vietnam?

Answer:

2005 Investment Law reaffirms the principle of equality, secures the right to be initiative and the right to discretion of investors in investment activities and step by step uniforms the business and investment conditions of general applicability on domestic enterprises and foreign invested businesses. In addition, in order to match with the road neap committed under international treaties to which Vietnam is a member and in line with the features of the foreign investors, investment laws provide some contents for application only on foreign-invested projects in Vietwiam on a different basis of domestic investment projects. particularly in the 6 fields as follows:

1. Fields in which investment is conditional

2. Authorities to approve to issue Investment Certificates

4. Investment procedures

5. Item in the investment

6. Places where procedures for business registration are carried out

 

 Top

Question 3:


Please specify the regulations applicable only to foreign-invested projects in Vietnam regarding the fields in which investment is conditional?

Answer:

The laws on investments stipulate some regulations only applicable in fields in which investment is conditional to foreign - invested projects in Vietnam on a different manner as compared to domestic investment projects. In particular, in addition to the general regulations on the fields in which investment is conditional in Article 29
of the investment Law, Foreign-invested projects investing in fields stipulated in Annex C issued in accordance with Decree 108/2006/ND-CP must satisfy the conditions and international treaties to which Vietnam is a member.

 

Question 4:


Please tell us about the regulations on authorities to approve to issue Investment Certificates only applicable to foreign-invested projects in Vietnam?


Answer:

2005 laws on investment give general provisions on decentralization of the issuance of Investment Certificates to provincial People's Committees and Management Boards of Investment Zones, Export-processing zones, high-tech zones and economic zones: Article 37 Decree 1 08i2006/ND-CP give general provisions oil projects investing in some important fields, projects of pig scale where the Prime Minster shall approve the investment policies; in addition, Article 37.3 also provides for foreign-invested projects investing in 4 fields namely: (i) maritime shipping, (ii) development of networks and provision of postal, courier, telecom and internet services; development of broadcasting transmission networks. (iii) printing and publication of newspapers, and publication (iv) establishment of independent scientific research institutes for which investment approval shall be made by the Prime Minister.

 

Question 5:

Please tell about the provisions on the establishment of economic organizations only for application to foreign investors?

Answer:

Foreign investors can establish an enterprise in the form stipulated in the Enterprise Law, there are only specific regulations applicable to the establishment of enterprises in the form of joint stock companies and private enterprises as follows:


a) For joint stock companies, the owner of foreign invested businesses must be founding shareholders, where there are a number of enterprise owners, at least one enterprise owner must be a founding shareholder (Article 11 Decree 101 /2006/ND-CP ).


h) The establishment of private enterprises by foreign investors shall comply with separate regulations issued by the Prime Minister (Article 87 Decree 108/2006/ND- CP).

 

Question 6:


Please name the regulations on investment procedures, items included in the investment project dossiers and sites for carrying out investment and business registration procedures only for application to foreign investors?

Answer:

1. Regarding investment procedures:

Domestic investment projects of less than VND15 billion and not falling under fields in which investment is conditional shall not have to carry out investment registration (Article 42 and 43 Decree 10812006/ND-CP)

Foreign invested projects of less than VND300 billion (including below VNDl5 billion) and not lolling under fields in which investment is conditional all have to carry out investment registration (Article 44 Decree 108/2006/ND-CP).

2. Regarding items included in the investment project dossiers:


In addition to those of general applicability in Section 11 Chapter V Decree I08/ 2006/ND-CP regarding items included in the investment project dossiers, foreign investors shall also have to comply with the following regulations:


- for the first time of investment in Vietnam: there must be an investment project;


- submit also the dossiers stipulated in Section IV of Chapter V Decree 108/2006/ND-CP.


3. Regarding site to carry out Investment and business registration procedures:


Investors shall carry out investment procedures with respect to domestic investment projects and foreign invested projects at provincial Departments for Planning and Investment or the IZ/EPZ/HTZ/EZ Management Board in accordance with Article 40 of Decree108/2006/ND-CP.In accordance with the law on enterprises (Article 20 of Enterprise Law) and investments (Article 50 of Investment law), the foreign-invested enterprise shall be established according to the Investment Certificate which is at the same time the business registration certificate issued by the investment management agency issuing investment certificates and managing the place where the investment project is carried out. accordingly, the places to carry Out procedures shall be as follows:

a) Domestic investment projects :


- to carry out procedures regarding business registration at the business registration agency

- to carry out investment procedures at the provincial Departments for Planning and Investment or the  IZ/EPZ/HTZ/EZ  Management Board.


b) Foreign invested projects: to carry out investment and business registration procedures at provincial Departments for Planning and Investment or the IZ/EPZ/HTZ/EZ  Management Board.

 

Question 7:

Are foreign-invested enterprises in the form of Limited Liabilities Companies set up under the former Law on Foreign Investment considered as Limited Liabilities Companies under the current Enterprise Law?

 Answer:

According to the former Law on Foreign Investment, joint venture enterprises and wholly-foreign owned enterprises lurnied up in the form
of limited liability companies (Article 6. Article 15 of the Law on Foreign Investment); In Article 6 Decree l 0l /2006/ND-CP dated 21!9/2006 on re-registration. Conversion and registration for renewal of Investment Certificates by foreign invested businesses under the Enterprise Law and the Investment Law, the joint venture enterprises and wholly- foreign owned enterprises tonged up under the former Taw on Foreign Investment may re-register or convert us follows:

 

Form of Enterprise under the Investment License

 

Form of Enterprisefollowing re-registration or Conversion

 

1. Arrcording to re-registration: procedures:

Wholly-foreign invested enterprises having one owner 

 

One-member Limited Liabilities Companies

 

- Joint-venture Enterprises with at least 2 members


- Wholly-foreign invested enterprises with at least 2 owners

Limited Liabilities Companies with at least 2 owners 
2. According to the conversion: procedures

- Wholly-foreign invested enterprises with 1 owner

 

- Limited Liabilities Companies  with at least 2 members  

 

- Joint-venture Enterprises 


- Wholly-foreign invested enterprises with at least 2 owners

- One-member Limited Liabilities Companies

As such, in principle, foreign invested businesses set up in the form of limited Liabilities Companies under the former Law on Foreign Investment shall be considered as limited liability companies under the current Enterprise Law.

 

Question 8:

Please tell the difference between foreign-invested enterprises in the form of Limited Liabilities Companies under the former Law on foreign Investment and foreign-invested enterprises in the four of Limited Liabilities Companies under the current Enterprise Law? Things that should be noted?
 

Answer:

Limited Liability Companies established under the former Law on Foreign Investment and those under Enterprise L anti- can be compared as follows:

1. identical tenures:

a) Allocation of rights and responsibilities pro rata capital contribution:

- Theo Law on Foreign Investment (Article 6, Article 15): joint venture parties or investors making capital contributions shall share profits and risks pro rata capital contribution (except otherwise agreed in the Joint Venture Agreement or the Charter of the enterprise).
 

- Under the Enterprise Law (Article 38, 63): members or owners of the company must be responsible for the debts and other asset obligations of the enterprise within the capital contribution committed to make to the enterprise or the amount of charter capital of the company.

h) No right to issue shares.

2. Difference: in the organization and management of the enterprise:

a) Under the former Law on Foreign Investment

- The Board of Management is the steering body of the enterprise (Article 11 Law on Foreign Investment):

- Form of approving decisions of BOM in the form of votes at 11GM BOM meetings;

- Principles for passing BOM decisions (Article 14 of the Law on Foreign Investment)

+ with respect to important issues (appointment, dismissal of General Director, first (general Director: amendment to supplement to the enterprise's charter) according to the unanimous principles:

+ with respect to other issues, the principle of majority vote of members present at the meeting shall apply.

h) Under the Enterprise Law

- The Member Board is the Highest deciding body of Limited Liabilities Companies with at least two members (Article 47 of the Enterprise Law):

- Form to pass Member Board s decisions

+ voting at BOM meetings

+ collecting written votes:

+ other forms stipulated in the company's Charter.

- Principles for passing Member Board's decisions (Article 52 Enterprise Law)

+ voting at meetings of the Board of Members with respect to the following issues: (i) amending and supplementing the Charter. (ii) deciding the development orientations, (iii) electing, dismissing and removing from office the Chairman of the Board of Members, appointment, dismissal and removal of the Director/General Director, (iv) approving annual financial reports and (v) re-organization or dissolution of the company, a decision is ratified case by case and in the principle that it is agreed by at least 651%%0 of total capital contribution of the members present at the meeting as stipulated in the Charter, and for the sale of assets and amendments to the Charter. and re-organization of the company, the required percentage is at least 75%;

+ for cases of gathering of written approvals: approval of at least 75% of the charter capital as stipulated in the Charter.

It is worth to note that since 11/0 1 /2007. the provisions on (i) the quorum for a meeting, (ii) the form to pass a decision and (iii) issues under the authority to decide or (iv) the necessary percentage of votes needed to pass a decision of the Member Board. General Shareholders' Meeting shall be agreed by the parties and stipulated in the Charter of the company in accordance with Vietnam's W TO commitments.


Question 9:


Fields in which investment is prohibited are sectors/lines in which business are prohibited, are not they?

Answer:

Ender the Enterprise Law, business is to continuously perform One, several or all steps of the investment process (clause 2 Article 4), as such, investment activities are within the definition of business activities; accordingly, sectors/'lines in which business is prohibited are concurrently subject to the Investment Law.

Enterprise Law (Article 7) stipulates that enterprises of all economic sectors are entitled to conduct business in sectors; lines not prohibited by law in accordance the specialized laws. including those on investment and Article 4 of Investment Law which stipulate that investors, can invest in fields and sectors/lines not prohibited by law.
 

Question 10:

Legal grounds to determine fields in which investment prohibited and sectors/line's in which business is prohibited?

Answer:

Under the current laws, the legal grounds to determine the fields in which investment is prohibited and sectors/lines in which business is prohibited are as follows:
 

1. Clause 3 Article 7 of the Enterprise Law prohibits business activities that may harm the national defense, security, social order and safety, historic tradition, culture, merits, and good customs of Vietnam and the people's health, destroying natural resources and the environment. The Government stipulates in details the list of sectors/lines in which business is prohibited.

At the moment, specific sectors/lines in which business is prohibited are defined to put forward the grounds to issue business registration certificates in accordance with:
 

(i) Annex I of Decree No. 59/2006/ND-CP dated 12/6/2006 of the Government stipulating in details the Commercial Law regarding goods/services prohibited from business, subject to business restriction find subject to conditional business,
 

(ii) the list of sectors/lines iii which business is prohibited under Article 4 of Decree 139/2007/ND-CP dated 05/9/2007 providing in details the implementation of some Articles of the Enterprise Law.

 2. Article 30 of investment Law prohibits investment projects in 4 fields in which business activities are prohibited under Article 7 of the enterprise Law as stipulated in clause a above, projects of disposal of toxic wastes brought from overseas to Vietnam: of production of toxic chemical or using toxic elements prohibited under international treaties.

At the moment, Investment Certificates art: issued on the grounds that sectors/lines in which investment is prohibited are identified under the List of 12 sectors/lines of 4 fields in which investment is prohibited .ender Annex D of Decree No. 1 08/2006/ND-CP dated 22/9/2006 of the Government stipulating and providing guidelines in details the Implementation of some Articles of Investment Law.

 

Question 11:


Please clarify the conditions, for business for sectors/lines ill which business is conditional and those for fields in which investment is conditional?
Are localities allowed to invest to develop garment and textile workshops for re-sale to enterprises? Is Lao Bao Commercial Zone an exception?

 

Answer:
 

1. Under the Enterprise Law. for sectors/lines stipulated in the laws investments and relevant laws to be conditional for business, the enterprise shall only conduct business in such sectors/lines if being eligible as stipulated (Clause 2, Article 7).

Conditions for business shall be issued by competent agencies and are in the form of business licenses/or certificates of eligibility for operations /or practice permits/or certificates of professional liability insurance or request for certification of the legal capital/or approval from competent State agencies /or other requests;

At the moment, conditions for business are stipulated in a number, of ways: conditions to be met before business registration /or conditions for business under Business licenses /or conditions to be observed during business activities (e.g. at the place of business, or requests regarding equipment. workshops. or requests regarding zones of raw materials, or requests regarding professional qualifications and expertise of the laborers,...).

2. Construction of textile and garment workshops for re-sale to enterprises: for domestic enterprises, there will be no cap on the ratio, incases where foreign investors are purchasers, the maximum ratio for sale is 49% if already listed; However, sale at a cheap price should be avoided, and is considered a breach of the "red box", as such, sale should be organized in the form of an auction. Lao Bao Commercial Zone is not an exception and also needs to comply with the common principles.

Question 12:

Is foreign investors' investment to acquire hotels and restaurants to do business considered a business in real estate?

 Answer:

According to clause 1, Article 4, Law on trading in real estate, the business in real estate shall include business in real estate services and business in real estate services. tlronslutor's note: repetition,
 

Clause 2. Article 4, Law on trading in real estate stipulates that business in real estate means the investment of capital to create, purchase, act as assignee of. and obtain hire purchase of real estate for sale, assignment, lease, sub-lease or hire purchase for profits.
 

Clause 3, Article 4, Law on trading in real estate stipulates that business in. real estate services include activities supporting the business in real estate and real estate market, including services of real estate brokerage, real estate evaluation, real estate transaction floor, real estate consultancy, real estate auction, real estate advertisement, real estate management.
 

On the basis of the above provisions, the investment by foreign irnvestors to acquire hotels and restaurants to conduct business in hotels and restaurants not for the purpose of sale or conduct of other transactions stipulated in Article 4 of the Law on trading in rail estate shall not 1r11 within the scope of business in real estate.


Question 13:

Which documents should be looked into to learn about sectors/lines, fields in which investment is conditional under Vietnam's commitment following WTO's accession with respect to the foreign-invested sector?

Answer:

Sectors/lines, fields in which investment is conditional are stipulated in legal documents /or "specialized" decrees 'or international committees. It is stipulated under current 'specialized'" decrees that over 200 papers/documents that the enterprise needs to obtain before it can commend business/production activities; At the moment, the determination of sectors/lines in which business is conditional for the purpose of issuance of business registration certificates shall he in accordance with specialized legislations on conditions for business and Annex 11 issued under Decree No. 59/2006/ND-CP dated 12/6/2006 of the Government stipulating in details the implementation of the Commercial Law regarding goods and services prohibited from business, restricted in terms of business and subject to conditional business.
Under WTO commitments, the issuance of investment certificates to foreign invested businesses shall be based on:


- The Schedule of Specific Commitments in Services of WT0 Working Party's Report;

- Decree No. 23/2007/ND-CP dated 12/2/2007 of the Government stipulating in details the Commercial Law regarding activities of goods purchase/sale and activities directly relating to goods purchase/sale by foreign invested businesses in Vietnam:

- Circular No. (J9/200 711T-BTM date 17/7/2007 of the Commercial Ministry implementing Decree 2, 2007/ND-CP above: Decision 1 0/200?/QD-RT1.I date 21/5/2007 of the Commercial Ministry making announcement on the roadmap regarding activities of goods purchase/sale and the other relating activities.
 

Question 14:

According to which documents can foreign investors set up distribution enterprises? Please provide guideline son the conditions for investing in this field?


Answer:

Foreign investors from countries and territories participating in international treaties to which Vietnam is a member wishing to set up enterprises in the field distribution in Vietnam must base on the committed roadmap in accordance with 2005 Investment Law. Decree l U8/2006/ND-CI', documents referred to in Q12 above and relevant
documents.

The establishment by foreign investors of distribution enterprises should pay special attention to some contents that Vietnam has committed to market opening (11/12 sectors including 110 sub-sectors of services, including distribution), as follows:

1. Some strict restrictions in market opening commitments:
Firstly, no distribution market opening for 7 categories: (11 cigarettes, cigars, (2) books, newspapers. magazines, video tapes, (3) metals and precious gemstones, (4) pharmaceutical products and addition causing substances, (5) explosives, (G) rice, (7) sugar;

Secondly, sensitive products such as steel, fertilizer, cement... the market will only be opened after 3 years:
Thirdly, restriction on the opening of retail sale points by foreign invested enterprises (for the second retail sale point and after that, permission from Vietnam Must be obtained for each specific case).


2. For whole sale, retail sale and agency services:


a. Establishment of enterprises in the Distribution sector:
- At the time of WTO admission: a foreign service supplier is permitted to set up a joint venture and contribute no more than 49'i0 of the legal capital of the joint venture. As from 1/1 /2008: percentage of 51 %

- As from 1/1/2009: no percentage stipulated For Whole sale, retail sale and agency services:
Since accession to the WTO: FDI enterprises doing business in distribution services are permitted to conduct whole sale, retail sale and agency activities for all categories imported legally or produced locally, except for the following 11 categories: (I) cements. (2) Outer tyres (except for aircraft types), (3) tractors. (4) Motorcycle engines, (5) cars, (6) motorcycles, (7) steel, (8) audio and video aid, (9) alcohol, (10) alcoholic drinks, (11 ) fertilizers;

As from 1/1/2009: are allowed to carry out distribution in the following 4 categories. (1) Tractors, (2) motorcycle engines, (. automobiles, (4) motorcycles 3 years after WTO accession: FDI enterprise's mentioned above 1 are allowed to distribute all categories.

Question 15:

Where there are different restrictions in multi and bi-lateral commitment’s on foreign investors in the same sector, then which one shall apply when an investor makes investments?

Answer:

Vietnam’s commitments under the Bilateral Agreement on Investment Incentives and Protection. BTA, Agreement on Investment Freedom, Incentives and Protection between Vietnam and Japanese: Vietnam's WTO commitments and other multi-lateral commitments currently valid.

In order to secure compliance with such bilateral and multi-lateral commitments of Vietnam, where there is different provision on the same issue according to these commitments, the investor coming from a nation or territory which have signed a bilateral or multilateral agreements With Vietnam shall be entitled to the most favorable investment conditions.

 

Question 16: 

Where the investment conditions stipulated under domestic legal documents are more open than those under international commitments, can investors enjoy the domestic provisions?

Answer:

Under Decree 108/2006/ND-CP dated 221912006. Clause 2 Article3 stipulates that: "Where Vietnamese laws are issued after Vietnam's membership to International "Treaties provide for more favorable treatments as compared to such International Treaties investors shall have the right to select whether to apply international Treaties or Vietnamese law.

Accordingly, if Vietnamese law offer better than international commitments, the investors shall have the right to select to apply domestic law.
 

Question 17:

Is construction of training facilities of School (already set up) a development of education and training cause? Is it subject to the procedures of inspection for issuance of an Investment Certificate?

Answer:

Article 29, Investment Law on fields in which investment IS conditional, point h) stipulates projects in education and training Cause development. According to Investment Law, investment projects fields in which investment is conditional must be subject to inspection.
 

- Where an investment project is for business purpose tinder the Investment Law, then under the Investment Law (Article 29) and Annex A of Decree 108/2006 ND-CP dated 22/09/2006, an inves1ment project in school infrastructure is given investment incentives and an eligible 1j1vestment project needs to be inspected to be granted with an investment Certificate.
 

- Where an investment project is not for business purpose, then Decree 53/2006/ND-CP dated 25/50/2006 on policy to encourage the development of facilities to provide non-State services and current regulations on education popularization shall apply.



 Question 18:

Previously, foreign investment cooperation in the field of education, training and scientific research complied with Decree 06/2000/ND-CP dated 06/03/2000. This Decree implemented Foreign Investment Law in Vietnam, Now as the Foreign Investment Law is invalid is this Decree 06 still valid?

Answer:

Foreign investment cooperation in the education field is currently subject to Vietnam's WTO commitments. Accordingly, in education. Vietnam only commits to open the education market in such lines as technique, natural science and Technology, business management and business science, economics, accounting, international law and language training.
 

Accordingly, foreign investors are permitted 10 provide services in higher education and adult education in the above mentioned fields. For elementary education services (including primary school, junior high school and high school), Vietnam has not yet made any commitment on market opening for foreign investors.


Question 19:

For fields and sectors in which business licenses are required, must investors obtain business licenses before or after the issuance of the Investment Certificate?

Answer:

Business licenses are approvals from the competent Statc agencies to the enterprises or economic organizations before their commencement of business activities in specific fields; provisions or, business licenses, the procedures and formalities to issue business licenses (including provisions on whether having to obtain the Business licenses before or alter the issuance of the invests lent certificate) are in accordance with specialized legislations:

The regulations on the items required in the dossier for business registration in Articles 1 6, 17. 18 and Article 1 9 of the Enterprise Low and Articles 1 4, 1 5. 16 of Decree No. 88/2006/ND-CP for each type of enterprises do not require the Business licenses;

Accordingly, following the issuance of a business registration certificate or an Investment Certificate cum business registration certificate, the enterprise/economic organization shall carry out the procedures to set up the enterprise to conduct business/ investment, activities in accordance with specialized legislations, including the procedures to apply for Business licenses if in accordance with specialized legislations Business licenses are required (please look up in Annex II issued under Decree No. 59/2006/NTD-CP).

Question 20:

Please specific the sectors/lines in which investment laws and relevant laws stipulate that practice permits must be available?

Answer:
 

1. Clause 2 Article 7 of the Enterprise Law stipulates that the enterprise is only permitted to commence business if eligible for the sectors/lines which are conditional under investment laws and relevant laws, including the conditions regarding practice permits.

2. Article 6 Decree 1 39/2007/NTD - CP dated 05/09/2007 providing guidelines on practice permits (stipulated in clause 4 Article 16. clause 5 Article 17. clause 5 Article 18 and clause 5 Article 19 of the Enterprise Law), is the written document issued by competent State agencies or occupational associations authorized by the State to issue to individuals certifying such individual's eligibility in terms of qualification and occupational experience in certain sectors; lines in accordance with the
law.

Clause 4, Article 5 Decree 88/2006/ND-CP stipulates that each individual is only permitted to use the practice permit to do business registration in an enterprise in business sectors/lines in which practice permits are required.


Question 21:

Please specific those who have to submit the practice permits?

Answer:

 According to the regulations on the items included in the dossier relating to practice permits (clause 4 Article 16. Clause 5 Article 18 and clause 5 Article 19 of the Enterprise Law Articles 14, 15 Decree 88/2006/ND-CP), Article 6 Decree 139/2007/ND-CP dated 05/9/2007 providing guidelines on the subjects who have to submit the legitimate copies of the practice permits, the following regulations shall be observed:

1. For an enterprise doing business in sectors; lines in which the laws requires the Director of the enterprise or the head of the business unit to have a practice permit, then the Director of the enterprise or the head of the business unit must obtain practice permits;

2. For the enterprise doing business in sectors/lines that the law requires the Director of the enterprise and others to have practice permits then the Director of the enterprise and at least one of the professional officer in accordance with specialized legislations must obtain practice permits;

3. For the enterprise doing business in sectors/lines that the law does not require the Director or the head of the business unit to have practice permits then at least one professional officer in accordance with specialized legislations must have a practice permit;

4. If same stipulations of the specialized legislations Oil sectors/lines of business which require practice permits according to the following 3 types:

(i) The one that requires the director (or the head of the enterprise) to have practice permits, e.g. the following certificates:

- Practice permits to conduct business in relics, antiques, and national precious items

- Practice permits for services of industrial property representative in case of no authorization)

- Certificate of production, processing and packaging insecticides Practice permits for sauna and pasteurization

- Practice permits for trading in insecticides

- Practice permits in private health consultation and treatment

- Practice permits in private traditional medicine

- Legal practice permits for lawyer's offices and law firms (for (one-member Limited Liabilities Companies)


(ii) The sectors/lines requiring both the director and others (management officers) to have practice permits, e.g. the following certificates:

- Auditor certificates

- Legal practice permits for legal partnerships

(iii) The sectors/lines only requiring others to have practice permits (not the director or the head of the enterprise), e.g. the following certificates:

- Practice permits for veterinary health care

- Practice permits for supervision of project construction

- Practice permits of engineers

- Practice permits of architects

- Practice permits for lawyers for law firms (Limited Liability ties Companies with 2 or more members)

- Practice permits in pharmacy

- Practice permits in brokerage of real estate

- Certificate of real estate evaluation
 

Question 22:

1. Please specify the practice permit issuing agencies?

Is it possible to submit the practice permits issued by foreign agencies where practice permits are required upon registration for establishments of enterprises to implement an investment project? If the Vietnamese agency issues a permit. Then can a foreigner coming to Vietnam to for the first time apply for this permit? Which agency will issue?

2. Does the hospital director, head of the primary and high school or a university need practice permits? Does the investor need practice permits?

Answer:

1. Specialized legislations stipulating in details the competent agencies for issuance of practice permits the conditions for such issuance and the use of practice permits;

Practice permits issued overseas are not valid in Vietnam, unless otherwise stipulated in specialized legislations or international treaties to which Vietnam is a member.

2. The director of a hospital or head of the primary or high school or a university must have practice permits in accordance with the conditions for practice permits with respect to the enterprise as mentioned in Question 21 above and stipulated ill details in relevant specialized legislations.

Question 23:

Please clarify the relevant regulations on the conditions on legal capital contribution for foreign invested businesses set up under the former Law on Foreign Investment and Investment Law and the Enterprise Law at the time being?

Answer:

1. The former Law on Foreign Investment in Vietnam stipulates that `legal capital' of foreign invested businesses is the capital needed to set up the enterprise prescribed in the charter of the enterprise (clause 19 Article 2). Accordingly, any enterprise set up under the Law on Foreign Investment must register the legal capital which is stipulated in the Investment Licence.

Under the Enterprise Law (Article 170) and Investment Law (Article 88). an enterprise already set up under the former Law on Foreign Investment may and may not re-register in accordance with Decree 101/2006/ND-CP. the regulations on legal capital stipulated in the Investment License shall be considered the regulations on the charter capital of t_1ie enterprise stipulated in Article 4 of the Enterprise Law.

2. Unlike the regulations on legal capital of the foreign invested businesses under the law on Foreign Investment. Enterprise Law stipulates that "legal capital" means the minimum capital required in accordance with the law to set up the enterprise (clause 7 Article 4) and is the condition in some sectors, lines subject to conditions for business tinder the investment laws and relevant laws specify (clause 2 Article 7); accordingly, the dossier for business registration under clause 3 Article 16, clause 4 of Articles 17, 18 and 19 is stipulated as follows:  "written certification for the legal capital by the competent agency/authority for the enterprise conducting business in sectors/lines in which the legal capital is required in accordance with the law'.
 

 Question 24: 

Please specify   some specific stipulations relating to the conditions on the legal capital under current law?

Answer:

At the moment, the conditions on the legal capital are in accordance with Article 7 Decree 139/2007/ND-CP dated 05/9/2007 and specialized legislations. The grounds to determine the business fields/lines subject to conditional business on the legal capital shall be in accordance with Decree 59/2006/ND-CP dated 1 2 June 2006 stipulating in details the Commercial Law regarding goods/services subject to business prohibition, business restriction and conditionalbusiness and the regulations under specialized laws.

By now, business and investment in some following fields/linesshall be subject to legal capital requirements:
 

(i) According to the law on securities, the following companies bust have sufficient legal capital in accordance with the regulations of the Government (Article 62 Securities Law):

- Securities companies, including securities brokerage, proprietar,,'C7 1 dealing; underwriting; securities investment consultancy, provision of financial and other financial services;

- Securities investment fund management companies, including management of securities investment funds, portfolio management.

(ii) According to the law on business in insurance services (Decree 42, 43/2001 /ND-CP dated 1/8/2001) the legal capital stipulated for:

- Non-life insurance enterprises is 7 billion VND or 5 million USD;

- Life insurance enterprises is 140 billion VND or 10 million USD:

- Insurance brokerage enterprises is 4 billion VND or 300.000 USD.
 

(iii) Banks and non-bank credit institutions. including financialcompanies and finance leasing companies (Decree 16/20()1/ND-CP dated dated 02/-5/2001),

(iv) Business in real estate (Article 8 Law on business in real estate)

(v) Aviation services, including:

- Business in aviation ports;

- provision of aviation services at aviation ports;

- business in aviation transport

(vi) Enterprises doing business as tour operators and tourist guides under 2005 Tourism Law.

(vii) Business in international multi-mean transportation.

(viii) labor services. including:

Enterprises providing labor export services (Decree 8l/200 /ND-CP):

- Services of recruitment (Decree 19/2005/ND-CP)

- Job training services (establishment of vocational centers, establishment of foreign-invested intermediate level schools and colleges).

(ix) film production activities.

(x) Establishment of publishing house.

(xi) Goods transaction centers; brokerage members and business members of goods transaction centers.


Question 25:

Flow to inane foreign invested businesses? Investors being individuals map name enterprises set up in Vietnam by private mares?

Answer:

The naming of enterprises shall be in accordance with Enterprise Law and Decree No. 88/2006/ND-CP dated 29,i8/2U06 on business registration, in a way not to violate the prohibitions in naming enterprises in Article 32 of the Enterprise Law. Foreign-invested enterprises may use the registered names in foreign languages as a part or the whole of the name of the enterprise in accordance with point b, Clause I Article 10 Decree No. 88/20061/ND-CP.
 

Question 26:

Can a foreign investor (corporate or individual) establish a number of enterprises, for the same purpose or for different purposes in different localities?

 Answer

According to current law, investors are entitled to have discretion in investment and business in accordance with Articles 7, Article 8 of the Enterprise Law. Articles 4 and Article 13 of the investment Law:
Accordingly, investors of all economic sectors may set up enterprises, including the establishment of foreign invested businesses to implement an investment project in the sectors/lines not prohibited by law and not subject to limitations on the number of investment projects as well as the number of enterprises.

At the time, there have been various potential foreign investors investing in various projects in a number of different fields in different localities.
 

Question 27:

Can foreign individuals set up private enterprises? How the unlimited responsibilities of the investor./or such type of enterprise is controlled? Is it possible to keep control over the investor upon registration to vet up a private enterprise or not?

Answer:

Under current laws, investors are entitled to do business in sectors/lines not prohibited by law (Article 7 Enterprise Law): and register to do business in one or more sectors/lines and set up enterprises in accordance with the law (Article 13 Investment Law).

That foreign investors set up private enterprises shall comply with Article $7 Decree 105/2006/ND-CP that is in accordance with separate regulations of the Prime Minister on the basis of the provisions of the Investment Law and the implementing Decree.
 

Question 28:

What does foreign invested business mean? Compare with domestic enterprises?

Answer:

Clause 6 Article 3 of the investment Law defines foreign invested businesses as enterprises set up by foreign investors to care' out investment activities in Vietnam or Vietnamese enterprises which foreign investors buy shares, merge or acquire;

Under current law, economic organizations 100% owned byforeign investors or economic organizations as joint ventures between domestic investors and foreign investors setting tip foreign invested businesses (translator's note: bad Vietnamese) in the forms of limited liability companies, joint stock companies, partnerships in accordance with Enterprise Law. In addition to the regulations of the law of general application, in accordance with international committees to which Vietnam is a member and in order to facilitate the activities of managing investments and law on enterprises and investments with respect to foreign investment in fields in which investment is conditional. Oil establishment of Joint stock companies, private enterprises on investment procedures, on items of the investment project dossiers and the places to carry out the business registration procedures. (Please refer to the comparison of the domestic enterprises and foreign invested businesses in Q2 above).
 

Question 29:

For joint venture enterprises already granted with Investment Licenses wishing to mrake joint venture with domestic enterprises to set up a new legal person, which procedures shall be carried out, the one stipulated for domestic investment or the one for foreign investors?

Answer:

Joint venture enterprises already set up ' under the Investment Certificates cum business registration certificate (or under Investment Licenses issued before 1/7/2006) when setting tip joint venture with domestic enterprises to create new legal persons shall carry out procedures at the investment project dossier receiving agency (in accordance with Article 40 Decree 108/2006/ND-CP) for foreign-invested projects.

 

Question 30:

Does the representative at law of the enterprise have to be a permanent resident in Vietnam? If yes, does it mean where the representative of the enterprise is a foreigner, then such foreigner must carry out the procedures to he issued with a permanent residencepermit in Vietnam? Is this possible because the conditions for issuances of permanent residence permit are very difficult to satisfy?

Answer:

In accordance with Article 22 of the Enterprise Law, representative at law of limited liability companies, joint stock companies must be stipulated in the Charter of the enterprise.

 Articles 46, 611 and 95 of the Enterprise Law stipulate that the chairman of the Member Board ;the Board of Management or the President of the company (for one member limited liability companies) or the Director or the General Director shall be the representative at law of the enterprise and are stipulated in the Charter of the enterprise; and also that the representative at law of the enterprise must be a permanent resident in Vietnam; in case of absence from Vietnam for over 30 dated there must be a written letter of attorney for others iii accordance with the Charter of the enterprise to execute and perform the rights andobligations of the representative at law of the enterprise .

The requirement that representative of the enterprise who is a foreigner (including overseas Vietnamese) must be a permanent resident in Vietnam means that such person must have a permanent residence permit in Vietnam; while current laws on residence of foreigners in Vietnam regarding the conditions for issuance of permanent residence permits do not have separate regulations on foreigners (including overseas Vietnamese) coming to Vietnam to implement an investment proiect for which competent agencies of Vietnam have issuedinvestment certificates.


At the moment, where foreigners working for foreign invested businesses still obey the procedures for issuance of B2 temporary residence permits for foreigners working for investment projects for which competent State agencies has issued investment certificates in accordance with the purpose, time and address of registration in accordance with Decree 21/2001/ND-CP dated 28./5/2001 stipulating in details the implementation of Ordinances on immigration and residence of foreigners in Vietnam and guidelines in Joint Circular 04/2002/ITLT/BCA-BNG dated 29/01/2002; and in case of absence from Vietnam for over 30 dated, investors must effect powers of attorney for others to exercise and perform their rights and obligations in accordance with the, current laws on the enterprise.


Question 31:

According to which regulations do foreign investors buy share in Vietnamese enterprises?

Answer:

In accordance with Article 56 Decree 108/2006/ND-CP. foreign investors and acquire enterprises currently under operation in Vietnam in 3 cases as follows:

(i) foreign investors buy a part of capital contribution shares of members/shareholders in Vietnamese enterprises

(ii) foreign investors buy the whole of capital contribution/shares of of members shareholders in Vietnamese enterprises;

(iii) Foreign investors buy shares from foreign invested business in Vietnam.

The activities of capital by foreign investors must take into account the following regulations:

Firstly, the purchase of share in equitized enterprises shall comply with Decree 187/2004/ND-CP dated 16/11/2004 of the Government on conversion of State owned enterprises into joint stock companies:

Secondly, the making of capital contributions and purchase or shares must strictly comply with the provisions of international treaties to which Vietnam is a member, WT O accession commitments on ratios of capital contributions, forms of investment and the roadmap for market opening

Thirdly, in addition to the provisions of the law on enterprises and investments, the making of capital contribution and purchase of shares must comply with the provisions of specialized legislations c.g. the laws on land, the law on IP, etc..
 

Question 32:

Procedures and formalities for foreign investors to buy shares in Vietnamese enterprises?

Answer:

The procedures and formalities for foreign investors to buy shares ill Vietnamese enterprises shall be subject to separate regulations for each case stipulated in Question 31 above as follows:

Where (i) : foreign investors buy a part of capital contribution shares of members/shareholders in Vietnamese enterprises; leading to no change in the legal person, but change in the structure of asset ownership in the enterprise ; the enterprise shall register with the business registration agency in accordance with the procedures stipulated in Article 31 Decree No. 88/2006/ND-CP

Where (ii) : foreign investors buy the whole of capital contribution shares of members/shareholders in Vietnamese enterprises; leading to change in the owner ; the Vietnamese enterprises shall register with the business registration agency in accordance with Enterprise Law and Decree No. 88/2006/ND-CP with respect to relevant  procedures; Foreign investments shall report to the project dossier receiving agency stipulated in Article 40 of Decree 108/2006/ND-CP to be re-registered as in the case of foreign invested businesses.

Where (iii) : foreign investors buy shares of foreign invested businesses in Vietnam, the enterprise shall carry out the procedures for adjustment to the Investment Certificate (change of the contents on business registration) in accordance with Article 51, 52 Decree 108/2006/ND-CP at the project dossier receiving agency stipulated in Article 40 of this Decree.

Question 33:

Are foreign investors subject to any limitations on the ratio for capital contribution and share purchase for Vietnamese enterprise. doing business in fields/lines in real estate?

 Answer:

The sector of business in real estate falls within the list of business sectors subject to conditions for foreign investors under annex C issued under Decree 108/2006/ND-CP. The specific conditions for doing, business in real estate of foreign investors are stipulated in Article 10, Law on trading in real estate. Accordingly, foreign investors are not subject to restriction on the ratio for capital contribution and share purchase with respect to Vietnamese enterprises conducting business in fields/lines of real estate business.


Question 34:


Which ratios do foreign investors making capital contribution or purchasing shares in Vietnamese enterprises hare to comply with when the Vietnamese enterprises conduct business in various fields/lines, with different caps on foreign investors?

 

Answer:

Clause 2, Article 10, Decree 108/2006/ND-CP Stipulates that investors making investments in the form of capital contribution and purchase of shares in enterprises in Vietnam must comply with the international treaties to which Vietnam is a member regarding the ratio of capital contributions, the form of investment and the roadmap for opening the market.

When Vietnamese enterprises conduct business in various fields/lines, various sectors with different caps on foreign investors:
 

- Foreign investors will breach the. law if in the fields of business registration of the enterprises include those in which foreign investors are prohibited from making capital contribution or purchasing shares the foreign investors do make capital contribution or purchase.

Foreign investors will breach the regulations applicable to fields lines setting a lower ratio of foreign ownership if making capital contribution or purchase shares in a ratio of the sectors and fields/lines at a foreign ownership ratio.

As such. for Vietnamese enterprises conducting business in various sectors and fields/lines with different ownership ratios users the foreign investors: are not allowed to make capital contributions or purchase shares in enterprises conducting business in sectors, fields/lines that do not allow foreign investors to make capital contributions or purchase shares.
 

- For enterprises conducting business in sectors, fields/lines that do not prevent foreign investors from making capital contributions or purchasing shares, then the foreign investors are only entitled to make capital contributions or purchase shares subject to the cap applicable to the filelds/lines with the lowest foreign ownership ratio.


Question 35:

How to deal with foreign investors purchasing shares in Vietnamese enterprises in excess of the permitted ratio?
 

Answer:

Upon transaction to purchase shares in Vietnamese enterprises,foreign investors must comply with the regulations on conditions applicable to foreign investors stipulated in Annex C issued under Decree l08/2006/ND-C'P, including the compliance with regulations na limited ratio for capital contribution and share purchase in Vietnamese enterprises according to international commitments of Vietnam.

Where foreign investors buy shares in Vietnamese enterprises iii excess of the permitted ratio, thee surplus part of the transaction shall be valid due to breach of the law, as such subject to the provisions or invalid civil transactions under Article 128. Civil Code and refused f-,r registration by the business registration agency-.


 

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