Procedure for Establishing an FDI Company in Vietnam: Detailed Guide

Establishing an FDI company in Vietnam is a complex process with many steps and strict legal regulations. The following article provides an overview of both direct and indirect investment forms, along with necessary legal procedures and considerations.

Common Forms of FDI Investment

An FDI company in Vietnam can choose between two main forms: direct investment and indirect investment. With direct investment, foreign investors can establish a completely new company. Meanwhile, indirect investment allows investors to participate in an existing Vietnamese company through capital contribution or share purchase. Each form has its own procedures and legal benefits, catering to the diverse needs of international investors choosing Vietnam as a destination.

1. Investment Operational Vehicle

An operational vehicle investment is an FDI form where the parent company purchases and sets up business vehicles in the investment-receiving country. This is part of the procedure for establishing an FDI company in Vietnam, contributing to increasing investment volume and often involves building new production and assembly facilities from scratch.

2. Mergers and Acquisitions

Mergers and acquisitions involve the acquisition of an operating FDI-funded business. Although this form may not increase the total investment volume in the recipient country, it can enhance business efficiency, expand markets, and strengthen competitive positions. This is a popular strategy in the global mergers and acquisitions process.

3. Horizontal FDI

Horizontal FDI occurs when a company uses its resources to invest in another company of the same industry abroad. This form helps the parent company expand its scale and enhance profits by producing and trading similar products, refining the procedure for establishing an FDI company in Vietnam.

4. Vertical FDI

This investment form involves a business investing in a supporting business for its main operations in another country. A typical example is investing in raw material suppliers for products. This is one of the improved steps in the vertical FDI process.

5. Conglomerate FDI

Conglomerate FDI involves investing in multiple companies across completely different industries, creating an FDI cluster that is not directly related to the investor. This helps diversify the investment portfolio and enhance profits following the horizontal FDI strategy.

Classification of FDI by Capital Flow Nature

1. Equity Capital: Foreign investors can buy shares or bonds of enterprises to participate in management.
2. Reinvested Capital: Profits from business activities are used for additional investment.
3. Intra-company Loans: Branches can lend to each other for investment.

Classification of FDI by Investor Motivation

1. Resource-seeking Capital: Aimed at exploiting abundant and cheap resources in the recipient country.
2. Efficiency-seeking Capital: Taking advantage of the low production costs of the capital-receiving country.
3. Market-seeking Capital: Expanding and maintaining the market through economic agreements.

Procedure for Establishing an FDI Company in Vietnam

The establishment of an FDI company involves multiple steps and requirements. For direct investment, the process begins with declaring project information on the national information system for document tracking. Next, the application for Investment Registration Certificate must be completed within 15 working days after submitting a complete dossier. Once the certificate is obtained, the investor must continue to apply for an Enterprise Registration Certificate and carry out other related procedures such as seal engraving and opening an investment capital account. For indirect investment, initially, a 100% Vietnamese-owned enterprise must be established before the foreign investor participates through capital contribution or share purchase.

Online Declaration of Investment Project Information

The procedure for establishing an FDI company in Vietnam starts with online declaration of investment project information on the National Information System on Foreign Investment. Afterward, the investor must submit physical documents to receive an account for tracking the processing of documents.

Applying for Investment Registration Certificate

In the FDI procedure, applying for an investment certificate is a necessary step. Required documents include:

1. Written request to implement the investment project.
2. Investment project proposal.
3. Copy of the ID card/passport for individual foreign investors.
4. Confirmation of account balance corresponding to the estimated investment capital.
5. Financial statements for the last 2 years of the foreign organizational investor.

The processing time is 15 working days if the dossier is complete and valid.

Applying for Enterprise Registration Certificate

After possessing the Investment Registration Certificate, the investor continues to submit an application at the Business Registration Office of the Department of Planning and Investment to apply for the Enterprise Registration Certificate. Required dossier includes:

1. Enterprise registration application form.
2. Company charter.
3. List of shareholders or contributing members.

Publishing Enterprise Registration Content

The enterprise must publish registration information on the national portal. The publication includes business sector information and a list of founding shareholders.

Engraving Corporate Seal and Announcing Seal Usage

An important step in establishing an FDI enterprise is engraving the corporate seal. After that, the enterprise needs to publish the seal sample publicly on the national portal.

Opening a Direct Investment Capital Account

Investors are obliged to open an FDI capital account within 90 days from being granted the Enterprise Registration Certificate to complete the capital contribution.

Completing Post-establishment Procedures

The necessary procedures include preparing a dossier to open a bank account, paying business license tax, issuing invoices, and tax declarations.

Investment Forms

Foreign investment can be conducted in two forms:

• Direct Investment: Setting up an enterprise with capital investment from foreign investors.
• Indirect Investment: Participating through share purchase or capital contribution to a Vietnamese company.

Note: Certified documents from abroad need consular legalization and translation into Vietnamese.

Legal Considerations and Policies When Forming an FDI Company

Legal Considerations and Policies When Forming an FDI Company

Investors need to pay attention to house, land lease contracts that must have formal documentation to register the company headquarters. Tax incentives are also crucial and depend on the industry, investment area. Furthermore, financial management and compliance with accounting, tax, and labor regulations are essential factors FDI companies must implement to ensure efficient and legal operations. Understanding legal policies not only helps optimize investment activities but also avoids unnecessary risks during business processes.

The procedure for establishing an FDI company in Vietnam requires seriousness and deep understanding of legal regulations. Foreign investors should carefully consider from choosing the form of investment to completing the dossier, as well as the headquarters location and business sector.

Choose an Investment Form

1. Direct Investment:

• Requires an investment certificate before applying for an enterprise registration certificate.
• This procedure may be more complex and time-consuming than capital contribution.

1. Capital Contribution, Share Purchase:

• Investors only need to change the enterprise registration certificate after capital contribution.
• This form is usually simpler and most time-saving.

Dossier and Procedure

• Necessary documents include:
• Notarized copy of passport or business license.
• Financial capacity proving documents, such as financial statements.
• Legal house land lease contract for headquarters and project.
• Processing time from 30 days to 6 months, depending on the specific situation.

Location and Headquarters

• Location Requirement: Headquarters must have a legal house, land lease contract.
• Unassured location may lead to license refusal.

Business Sector and Investment Capital

• Permit Sector: The sector must not fall into the prohibition list according to the Investment Law 2020.
• Investment Capital: Must adhere to specific regulations for each sector.

Post-establishment Compliance

• Must engrave and register the official seal according to regulations.
• Open a capital account and fully contribute charter capital within 90 days.
• Fully declare taxes and manage labor.

Legal Policy

1. Granting Investment Certificate:

• This procedure is the first step before enterprise registration.

1. Registering Enterprise Establishment:

• After obtaining an investment certificate, enterprise registration takes place at the Business Registration Office.

1. Regulations on Capital Contribution Ratio:

• The capital contribution ratio of foreign investors must comply with legal regulations.

1. Prohibited Sectors:

• Note that business sectors such as narcotics, prostitution, rare animal specimens are prohibited.

The procedure for establishing an FDI company in Vietnam is not only about procedures but also requires understanding of “FDI policies“, “business registration”, and “investment certificate” to avoid legal risks.

Establishing an FDI company in Vietnam opens many opportunities from accessing dynamic markets to enjoying special tax incentives. With clear legal procedures and diverse investment forms, investors can easily choose a strategy that suits their requirements and objectives.

To truly succeed in establishing an FDI company, contact QuangAnhcons via Hotline: 09 1975 8191 for professional advice and comprehensive solutions.

QuangAnhcons provides comprehensive consulting and support services in the field of establishing FDI companies in Vietnam. We are committed to providing the most effective and optimized solution for investors, ensuring all legal procedures proceed smoothly and quickly.