Refer to the detailed documents and procedures for converting a Vietnamese company into a foreign-invested company and the advantages and disadvantages after conversion in this article of fdiinvietnam.com. There are full sample documents for businesses to refer to.
Attracting foreign investment is always a matter of concern for many companies, large and small. When a company receives foreign investment capital, it means that the company has changed from 100% Vietnamese capital to a foreign-invested enterprise (also known as an FDI company or FDI enterprise). At that time, Vietnamese enterprises must carry out procedures at the business registration agency so that foreign investors can contribute capital and buy shares in the enterprise.
Conditions for foreign investors to contribute capital to Vietnamese enterprises
Foreign investors are specifically defined in the Investment Law as individuals with foreign nationality or organizations established under foreign laws that conduct business investment activities in Vietnam. In order to contribute capital to a Vietnamese company, these investors must operate in industries that have accessed the market as prescribed in Article 9 of the Investment Law.
When foreign investors contribute capital to Vietnamese enterprises or companies, two situations may occur:
- Case 1: Vietnamese company only transfers part of capital to foreign investors;
- Case 2: Vietnamese company transfers 100% of capital to foreign investor.
Procedures for converting a Vietnamese company into a foreign invested company (FDI)
The process of converting a 100% Vietnamese-owned company into a foreign-invested company or a 100% foreign-invested company is carried out in the following 2 steps:
Step 1: Register to contribute capital, buy shares, and capital contributions of Vietnamese companies
Registration documents for capital contribution, share purchase, and capital contribution for foreign investors include:
- Investor’s authorization letter;
- Document of registration of capital contribution/share purchase/capital contribution purchase by foreign investors;
- Agreement in principle on the purchase of capital contributions/shares;
- Notarized translation copy of passport of foreign individual investor;
- Translated, notarized/consularized copy of business license of foreign investor which is an organization;
- Power of attorney for the person submitting the application at the business registration office.
DOWNLOAD FORM: Application for capital contribution, share purchase, capital contribution for foreigners.
The legal representative of the enterprise or the person authorized by the enterprise shall submit the application for capital contribution, purchase of shares, and capital contributions to the Investment Department – Department of Planning and Investment of the province/city where the enterprise has its headquarters.
Within 15 – 20 working days from the date of receiving valid documents, the Investment Department will issue a Notice of eligibility for capital contribution and share purchase of Vietnamese enterprises .
Step 2: Procedures for converting a 100% Vietnamese-owned company into a foreign-invested company
The dossier for converting a Vietnamese company into a foreign-invested company includes:
- Company charter (if any);
- Business registration application (if any);
- List of foreign members/shareholders (if any);
- Minutes of meeting on changes to business registration contents (if any);
- Decision to change business registration content;
- Contract for transfer of all or part of capital contribution/shares;
- Notice of change of business registration content;
- Notice of meeting the conditions for capital contribution and share purchase;
- Copy/consular legalization of passport/business license of foreign investor;
- Copy of Vietnamese ID card/Citizen ID card/passport (in case of joint capital contribution with Vietnamese);
- Authorization letter for the person performing the registration procedure (if any).
DOWNLOAD FORM: Profile of converting Vietnamese company into foreign invested company.
The authorized person of the enterprise submits the application at the Business Registration Office – Department of Planning and Investment of the province/city where the enterprise has its head office or can submit it online on the National Business Registration Information Portal.
Within 5 working days from the date of receiving valid documents, the Business Registration Office will issue a new business registration certificate to the enterprise. At this time, the enterprise officially becomes a foreign-invested enterprise or a 100% foreign-owned enterprise.
Note:
After converting into a foreign-invested company or a 100% foreign-owned company, a Vietnamese company may not be allowed to operate in one or some of the industries that the company previously registered. The reason is that there are industries that require foreign-invested enterprises to meet the conditions on minimum capital ratio or are not yet allowed to operate according to the WTO commitment schedule. Therefore, when completing the procedure in Step 2, the enterprise needs to check and adjust the business lines to comply with the regulations.
Things to do after converting a Vietnamese enterprise into an FDI enterprise
1. Update business information if changing company type.
In case the acceptance of additional capital contributions from foreign investors changes the type of enterprise (for example, converting from a 1-member LLC to a 2-member LLC, or converting an LLC to a joint stock company), the company must do the following:
- Re-engrave legal seal;
- Re-make company sign;
- Update company information on digital signatures and electronic invoices;
- Update information on electronic tax account and social insurance account;
- Update information on business-owned documents (sub-licenses, land use right certificates, etc.);
- Notify customers and partners about the company name change.
2. Declare personal income tax after transfer
- Within 10 days after being granted a new business license by the business registration authority, shareholders/members transferring capital/shares must submit a personal income tax return arising from the capital transfer to the tax authority where the company is headquartered.
- For LLCs, only personal income tax declarations are required without having to pay taxes. For joint stock companies, 0.1% tax will be incurred on the transfer value.
Personal income tax declaration documents include:
- Personal income tax declaration (Form No. 04/CNV-TNCN);
- Contract for transfer of all or part of capital contribution/shares;
- Certificate of capital contribution;
- In addition, when there is a change in information about members, shareholders, or legal representatives of the company, the enterprise must notify the bank and business partners.
DOWNLOAD FORM: Personal income tax declaration form.
Advantages and disadvantages of converting a Vietnamese company into a foreign-invested company
Basically, the procedure for converting a Vietnamese company into a foreign-invested company does not have many differences when a Vietnamese enterprise transfers part or 100% of its capital to a foreign investor. However, changing the capital structure and having more foreign investors participate in the operation and management of the enterprise will bring the following advantages and disadvantages to the enterprise. Specifically:
Advantage:
- Enterprises with 100% foreign capital will be able to learn advanced international management methods, can apply modern technology, advanced science, so it can bring higher economic efficiency to the enterprise. In addition, the investment capital as well as human resources are also absolutely invested.
- Enterprises with both Vietnamese and foreign capital will be the cultural exchange of business management between countries, thus creating a more diverse corporate identity. Creating conditions for promoting Vietnamese goods and services internationally while also maximizing international integration into the Vietnamese market.
Limit:
- 100% foreign-owned enterprises sometimes have difficulty reaching traditional domestic customers due to differences in business culture. Therefore, these enterprises need to integrate to become more friendly to consumers in Vietnam. In addition, there are still restrictions on business lines for these enterprises, so there are some areas that 100% foreign-owned companies cannot operate in.
- When a business has both Vietnamese and foreign managers, it can cause disagreements in management cultures between countries, affecting the business’s performance.
Frequently asked questions when converting a Vietnamese company into a foreign-invested company
1. Are all business lines of a Vietnamese company allowed to operate when converted into a foreign-invested company?
No , there are industries that require minimum capital ratio conditions or are not allowed under the WTO commitments. Therefore, when converting from a 100% Vietnamese-owned company to a foreign-invested company, it is also necessary to check and adjust the business lines.
2. What are the cases when converting a Vietnamese company into a foreign-invested company?
Two cases can occur:
- Firstly, Vietnamese companies only transfer part of their capital to foreign investors;
- Second, Vietnamese companies transfer 100% of capital to foreign investors.
3. Are all foreign investors allowed to contribute capital to Vietnamese companies?
No. Only investors from countries and territories participating in the WTO, of which Vietnam is a member, and committed to opening the market, have the right to contribute capital to Vietnamese companies.
4. Where to submit the application to convert a Vietnamese company into a foreign-invested company?
Enterprises submit to the Investment Department and Business Registration Department – Department of Planning and Investment where the enterprise has its head office.
5. What is the process of converting a Vietnamese company into a foreign invested company?
The procedure for converting a Vietnamese company into a foreign-invested company includes the following 2 steps:
- Step 1: Complete procedures to register capital contribution, purchase shares, and capital contributions of Vietnamese companies. Enterprises submit their applications directly to the Investment Department – Provincial Department of Planning and Investment;
- Step 2: Complete the procedures to convert a 100% Vietnamese-owned company into a foreign-invested company. The enterprise submits the application to the Business Registration Office – Department of Planning and Investment of the province.
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