HOW TO BUSINESS IN VIET NAM

ngay_dang 15/01/2020 loaitin Foreign Company

Vietnam economy is stable and dynamic. Vietnam's economy has a system of open and transparent investment policies, a young labor force and a highly competitive workforce with the completion of the legal system and policies. This means that investment and business opportunities in Vietnam are open and welcoming foreign investors around the world.

This article on business in Vietnam provides an overview of the legal provisions relating to the types of common business used by domestic and foreign investors, tax law, land law, the law on real estate trading,  the law on housing for foreign investors wishing to do business in Vietnam.

 

I. THE INVESTMENT FORM IS APPLIED TO FOREIGN INVESTORS

 

Vietnam has great potential to attract foreign investment in the coming years. First, foreign investors wishing to engage in investment activities in Vietnam. Foreign investors should consider this occupation to be in the prohibited investment category, conditional business investment. Foreign investors can start their own business in different ways: by setting up an economic organization; capital contribution, purchase of shares or capital contribution in an existing business; Invest on the basis of commercial contracts or implement an investment project.

 

1. Invest through the creation of a business

 

Before creating an economic organization, foreign investors must have an investment project and having to apply for a certificate of investment. After that, foreign investors will apply procedures for establishing business organizations. According to the 2014 Business Law, foreign investors are free to choose any of the following forms to create a company in Vietnam.

 

a. Limited liability companies

Limited liability companies established by foreign investors may take the following forms:

• 100% foreign-controlled enterprises; or

• a foreign-invested joint venture

Limited liability companies must not issue shares to raise capital.  Members are liable for debts and other liabilities of the enterprise up to the value of capital they contribute to the enterprise.

 

b. Joint-stock companies:

 Charter capital is split into multiple units of equal value called shares. Joint-stock companies are entitled to issue various types of shares to raise capital. Shareholders are only liable for the enterprise’s debts and other liabilities up to the value of capital contributed to the enterprise.

The Investment Law does not prohibit foreign investors from setting up private enterprises, but there is no specific procedure for foreign investors to set up such businesses. Foreign investors can not establish this type of business in Vietnam yet.

 

c. A partnership:

 At least 02 partners are co-owner of the company who run the business together in a common name (hereinafter referred to as general partner). Apart from general partners, the company may have contributing partners; General partners are individuals who are responsible for the company’s obligations with all of their property; Contributing partners are only liable for the company’s debts up to the value of capital contributed to the company. A partnership has its own legal status from the issuance date of the Certificate of Business registration. Partnerships must not issue any kind of shares.

 

2. Investment by contributing capital, buying shares or capital contributions

 

The capital contribution, the purchase of shares, the capital contribution to economic organizations is one of the four types of investment set out in the 2014 Investment Law. It is the indirect investment of forms of investment. When implementing this form of investment, investors should pay attention to the following forms of capital and share purchase:

 

a. Foreign investors may contribute capital to business organizations in the following manners:

-  Buy shares of joint-stock companies through IPOs or additional issuance;

- Contribute capitals to limited liability companies and partnerships;

- Contribute capital to other business organizations not mentioned in Point a and Point b of this Clause.

 

b. Foreign investors shall buy shares or capital contributions of business organization in the following manners:

- Buy shares of joint-stock companies from the companies or their shareholders;

- Buy capital contributions to limited liability companies by their members and become members of limited liability companies;

- Buy capital contributions to partnerships by partners and become partners;

- Buy capital contributions to business organizations other.

 

Note: Foreign investors contribute capital, buy shares, contributed capital must meet the conditions relating to the ratio of ownership of capital, the form of investment, the scope of activity and other conditions consistent with international treaties to which Vietnam is a party.

 

 An investor shall follow the register the capital contribution, purchase of shares, or capital contributions for foreigner investor in the following cases:

- The investor contributes capital, buy shares or capital contributions of business organizations engaged in business lines subject to conditions applied to foreign investors.

- 51% of charter capital of the business organization or more is held by foreign investors and/or business organizations after the capital is contributed, or shares/capital contributions are purchased.

Note: Investors are not required to follow the procedures for recording the capital contribution, purchase of shares, or capital contributions. They must only implement procedures to change shareholders and members in accordance with the law.

 

                                                                    Vietnam economy is stable and dynamic

 

3. Investment under business cooperation contracts (BCC):

 

BCC is a cooperation agreement between a foreign investor and at least one Vietnamese partner to conduct specific business activities. Foreign investors must follow the procedures for granting investment certificates.

Parties outside the BCC may establish an executive bureau to represent themselves in the implementation of the BCC (headquarters, seals, workers, representatives of foreign parties).

This form of investment does not constitute the creation of a new legal entity. Investors in BCC often share income and / or products from BCC and have unlimited liability for BCC's liabilities.

 

4. Investment under PPP contracts (PPP)

 

Investors and project management companies shall sign PPP contracts with competent authorities to execute an investment project to build new infrastructural works, to improve, upgrade, expand, manage, and operate infrastructural works, or to provide public services.

 

II. INVESTMENT INCENTIVES FOR FOREIGN INVESTORS

 

Depending on the investment sector, the location of the investment project and other criteria, foreign investors may be entitled to the following investment incentives:

  • Application of a lower rate of corporate income tax for a certain period of time or throughout the project execution.
  • Exemption, reduction of corporate income tax;
  • Exemption or reduction of import tax on goods imported as fixed assets; raw materials, supplies, and parts used for the project;
  • Exemption, reduction of land rents, land levy

 

III. TAX LAW FOR FOREIGN INVESTORS

 

Most investment activities and foreign investors operating in Vietnam are subject to the following taxes: corporate income tax; tax on foreign entrepreneurs; Personal income tax; Import and export taxes; Value added tax.

However, the Vietnamese government also provides for tax incentives, exemptions, and reductions for qualified foreign investors, within a period determined by law. This will reduce the cost of researching and developing new products or developing their business activities.

Foreign investors are allowed to transfer their after-tax profits to their home country without having to pay tax on their transfer abroad. Foreign investors are not allowed to transfer profits if their companies invest in accumulated losses.

 

IV. LAND LAW FOR FOR FOREIGN INVESTORS

 

The Vietnamese State grants land-use rights to overseas Vietnamese and foreign-invested enterprises in two main forms: allocated land to implement investment projects for the construction of houses for sale or for a combination of sale and lease, and the State may lease land and collect an annual land rental or full one-off rental for the entire lease period.

 

V. LAW ON REAL ESTATE TRADING AND LAW ON HOUSING

 

The 2014 Housing Law and the 2014 Real Estate Law allow the foreign entities eligible for the homeownership in Vietnam if they:

- Invest in project-based housing construction in Vietnam as prescribed in this Law and corresponding regulations of law;

- Buy, rent and purchase, receive or inherit commercial housing including apartments and separate houses in the project for housing construction, except for areas under management relating to national defense and security as prescribed in regulations of the Government.

In addition, foreign investors are permitted to engage in commercial and real estate services in Vietnam as specified in Vietnamese law.

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