In recent years, foreign investment capital in the Vietnamese market has increased dramatically. The form of establishing a 100% foreign-owned company in Vietnam has been chosen by many foreign investors. So what is a 100% foreign-owned company? What is the process of setting up a 100% foreign-owned company? Learn more about this topic with LTS LAW in the following article.
What is a 100% foreign-owned company?
A 100% foreign-owned company is always established by foreign investors. They will manage and be responsible for the company’s business operations. It can be a limited liability company or joint stock company and has legal status under Vietnamese law. A 100% foreign-invested company has all shareholders or company members that are foreign individuals or companies. When establishing a 100% foreign-owned company, foreign investors must apply for an investment registration certificate and an enterprise registration certificate (akin to a certificate of incorporation in some jurisdictions).
Note that 100% foreign-owned companies in Vietnam are different from joint venture companies. A joint venture company always has domestic and foreign investors, while a 100% foreign-invested company only has foreign investors.
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Characteristics of 100% foreign-invested companies
The 100% foreign-owned company will differ from locally-owned and joint venture companies. The following are the basic features of this company model:
- Foreign organizations and individuals fully contribute the charter capital of a 100% foreign-owned company in Vietnam.
- A 100% foreign-owned company will have legal status and operate in accordance with Vietnamese law.
- A 100% foreign-owned company in Vietnam will be established in the form of a limited liability company or a joint stock company. Foreign investors are responsible for debts, and other property obligations of the company to the extent of the amount of capital contributed to the company.
Advantages of a 100% foreign-owned company in Vietnam
- Foreign-invested companies are the legal vehicle that enables foreign investors to do business in Vietnam. They are considered Vietnamese legal entities and protected under the laws of Vietnam.
- In 100% foreign-invested companies, foreign investors can make their own decisions on managing the company’s business activities.
- Foreign-invested companies are entirely autonomous in terms of technology, techniques, equipment, business development, and business processes without depending on Vietnamese partners.
- This company type is suitable for foreign companies who want to expand their business in Vietnam by establishing their subsidiary.
Business lines that foreign investors are not allowed to invest in Vietnam
Foreign investors are only allowed to invest in business lines that Vietnam has opened to foreign investors in accordance with international treaties to which Vietnam is a member or in accordance with Vietnamese law.
The following is a list of business lines that foreign investors are not allowed to carry out in Vietnam:
- Goods and services are under the State monopoly in the field of commerce.
- Press activities and news gathering in any form.
- Services related to investigation and security.
- Judicial and administrative services, including judicial expertise, property auction, notary, bailiff, and asset management services.
- Labor export services.
- Investment in the construction of cemetery infrastructure to transfer land use rights associated with infrastructure.
- Services involving the collection of the waste directly from households.
- Opinion poll service (public opinion).
- Other explosives or blasting services.
- Production, sales, and distribution of weapons, explosives, or supporting equipment.
- Services for importing or breaking used ocean liners.
- Public postal services.
- Goods transshipment business.
- Temporary import for re-export business.
- Activities of purchasing and handling public property of the armed forces.
- Producing military materials and equipment.
- Business activities are related to industrial property representation and intellectual property assessment services.
- Operation and maintenance services for navigational signals, water zones, public navigational channels, and navigational routes. Develop and issue documents related to maritime safety.
- Maritime information service.
- Inspection and certification services for vehicles.
- Service of inspection and exploitation of natural forests.
- Active research activities using genetic resources of livestock breeds before the Ministry of Agriculture and Rural Development approves.
Procedures for setting up a 100% foreign-owned company in Vietnam
Apply for an investment registration certificate
The provincial Departments of Planning and Investment or the Management Boards of Industrial Parks/Export Processing Zones (hereinafter referred to as the investment registration agencies) are the competent State agencies that can issue an investment registration certificate to foreign investors, depending on where the foreign-invested company is registered.
In some cases, foreign investors must apply for investment policy approval for investment projects falling under the investment policy approval competence of the Prime Minister or the provincial People’s Committee before applying for an investment registration certificate.
For investment projects subject to investment policy decisions, the investment registration agencies will issue an investment registration certificate within five (5) days of submitting a valid application dossier.
For those not subject to investment policy decisions, foreign investors must apply for an investment registration certificate according to the following order:
- Foreign investors must self-declare online information about the proposed investment project at the National Foreign Investment Information System (https://fdi.gov.vn). Upon the online declaration, the investors must file the application documents in hard copy at the investment registration agency.
- After the investment registration agency receives the application dossier, the investors will be granted an account on the National Foreign Investment Information System to access and monitor the processing of the application.
- If the application dossier is in order, the investment registration agency will issue an investment registration certificate within fifteen (15) days of the submission.
Apply for an enterprise registration certificate (ERC)
After being granted an investment registration certificate, foreign investors must carry out procedures for obtaining an enterprise registration certificate (ERC).
Foreign investors must file a set of application documents for an enterprise registration certificate to the Business Registration Office under the Department of Planning and Investment in the province where the new company will be established.
According to the laws, an enterprise registration certificate will be made available within three (3) working days of submitting a valid application dossier. The newly registered company has its legal status and can carry out the registered business activities from the date of the enterprise registration certificate.
Apply for other sub-licenses (if any)
For those business activities requiring a sub-license, such as vocational training, banking, retail services, etc., a foreign-invested company must apply for that sub-license before carrying out such activities.
You can contact LTS LAW via the hotline for further advice and support.
Public announcement of company registration contents
Company registration contents of a newly registered foreign-owned company must be published on the National Business Registration Portal (https://dangkykinhdoanh.gov.vn) within 30 days from the date of the business registration certificate. This will be done by the Business Registration Office under the Department of Planning and Investment, where the application is filed.
Engraving company seals
After obtaining an enterprise registration certificate, a 100% foreign-invested company must have a licensed vendor make a company seal in accordance with the laws.
According to Article 43 of the 2020 Enterprise Law, companies have the right to decide on their seals’ type, quantity, form, and content and are solely responsible for their seals. However, a company seal must contain mandatory details, including the company name, address, and tax code.
Dossiers and procedures for applying for an investment registration certificate
An application dossier for an investment registration certificate for a 100% foreign-invested company in Vietnam includes the following documents:
- A proposal for investment project implementation, including investors, investment objectives, project scale, investment capital, location, labor demand, and proposal for investment incentives.
- A copy of a house/office lease contract to prove the company’s head office address.
- A copy of the passports of foreign investors.
- Proof of investors’ bank account balance, such as bank account statements or certificates of bank balance. The balance must be equal to or more than the proposed investment capital of each investor.
- Foreign corporate investors must provide a copy of their certificate of establishment, certificate of business registration, certificate of incorporation, or other documents of equal value.
- Foreign corporate investors must provide proof of finance, such as bank statements or a copy of their audited financial statements for the last two years.
Dossiers and procedures for applying for an enterprise registration certificate
An application dossier for registration of a 100% foreign-invested company includes the following:
- Application form for an enterprise registration certificate.
- Charter of the 100% foreign-invested company.
- List of members for two or more-member limited liability companies or list of shareholders for joint stock companies.
- A copy of ID cards or passports if investors are individuals. If they are corporate investors, they must provide a copy of the certificate of establishment, a certificate of business registration, or certificate of incorporation, or other documents of equal value, accompanied by a copy of a passport of the foreign company’s
- A copy of an investment registration certificate that has been granted in the previous step.
Post-licensing procedures after establishing a 100% foreign-invested company
LTS LAW, with many years of experience in accompanying foreign investors, will share with you the post-licensing procedures that foreign investors need to perform after establishing a company.
- Buy a digital signature token for online transactions, including online tax payment: A digital signature token is a device that has encrypted all primary identification information of a company. The token is used to replace handwritten signatures in electronic transactions.
- Opening company bank accounts, including capital and current accounts.
- Submit license tax returns and pay license taxes: Newly registered companies must file tax returns within 30 days of company registration and before January 30 every year after the company registration. License taxes will be waived for the first year of establishment.
- Making company signs: Companies with 100% foreign capital in Vietnam must hang company signs at their headquarters. The company sign must contain information about the company name, address, and tax code. The company may be fined from VND 1 million to VND 3 million if it fails to comply with this requirement.
- Initial tax registration: Newly registered 100% foreign-invested companies in Vietnam must submit two sets of initial tax registration documents to the tax agency where their head offices
- Registration of e-invoice issuance: 100% foreign-owned companies in Vietnam must use the e-invoice service of a licensed vendor. The vendor will help them create e-invoices for their companies. After the e-invoices are completed, the companies shall submit written notice of the e-invoice issuance to the tax agency.
Consulting service to establish a company with 100% foreign investment in Vietnam
Establishing a company with 100% foreign capital in Vietnam is not easy. Foreign investors must be equipped with many documents. Language differences will also be problematic. For the process of establishing a company in Vietnam to take place quickly, foreign investors should use the company formation consulting service from a local professional law firm. Foreign investors must choose a reputable and experienced law firm to avoid many problems later.
LTS LAW with an understanding of the legal system in Vietnam, a team of experienced lawyers, and foreign investment consultants. This is the local agency that investors are often looking for. LTS LAW will provide legal solutions to help 100% foreign-owned companies lay a solid foundation in the Vietnamese market.
Coming to LTS LAW, you will receive professional advice and service as follows:
- We provide high-quality consulting services at competitive prices for foreign clients’ needs.
- Enthusiastic, fast, and timely advice for foreign investors.
- Support to apply for investment registration certificates.
- Support to apply for enterprise registration certificates.
- Support for checking company name availability.
- Support for preparing charter/memorandum of understanding.
- Support for initial tax registration.
- Support for bank account opening for foreign-invested
LTS LAW has provided information about establishing a 100% foreign-owned company in Vietnam in the above article. Please get in touch with the hotline for further free advice if you have any questions.
Immediately contact LTS LAW for the most detailed advice:
LTS LAW FIRM
Address: Room 602, 6th Floor, 520 CMT8, Ward 11, District 3, HCMC, Vietnam
Hotline: (+84) 902 798 066