Experience in establishing a foreign invested company (FDI)

From AZ experience, costs of establishing a foreign invested company (FDI enterprise) and things to note will be shared by fdiinvietnam.com in this article, hoping to help businesses save time and costs when implementing.

Things to know BEFORE establishing a foreign invested company

1. Choosing the form of establishment of a foreign-invested enterprise

Investors often choose to establish foreign-invested enterprises (FDI) in the following two popular forms:

• Direct investment: Foreign investors will contribute capital from the beginning and must carry out two procedures: applying for an investment certificate and applying for a business registration certificate;
• Investing in contributing capital, buying shares, buying capital contributions of a Vietnamese-owned enterprise. If a foreign investor chooses this form, there is no need to apply for an investment certificate.

Investors can refer to some basic differences between the two forms above in the following table:

Criteria	Direct investment form	Form of investment: capital contribution, share purchase, capital contribution
Address	Must have legal documents (notarized) proving the company headquarters and location of the investment project such as: House lease contract, office lease contract.	Just meet the general conditions for company headquarters address.
Charter capital	Must prove foreign investment capital through bank account statements.	No proof of capital required.
Competency and experience	Some occupations require experience and qualifications.	Regardless of experience or ability.
Result	Certificate of business registration; Certificate of investment registration.	Certificate of business registration; Notice of meeting the conditions for capital contribution, share purchase, and capital contribution.

 

According to fdiinvietnam.com’s experience in implementing procedures, establishing a foreign-invested enterprise (FDI enterprise) in the form of direct investment will take more time and cost for investors. If they want to simplify procedures and save time and cost, foreign investors should refer to the method of establishing in the form of contributing capital, buying shares, buying capital contributions of a Vietnamese-owned enterprise.

2. Regarding the subject of business establishment and nationality of foreign investors

Foreign individuals and organizations wishing to establish FDI enterprises in Vietnam must meet the following conditions:

For individual foreign investors:

• Be a person aged 18 years or older, not falling into the cases prohibited from establishing and managing enterprises in Vietnam according to the provisions of Article 17 of the Law on Enterprises 2020. 
• Have the nationality of a WTO member country or have signed a bilateral investment treaty with Vietnam. Currently, some nationalities will not be allowed to invest in Vietnam if their passport has the “cow tongue line”, such as Chinese nationals.

For foreign investors who are organizations:

• Foreign organizations legally established in countries that are members of the WTO or have signed bilateral treaties related to investment with Vietnam. 
• According to current regulations, some business lines will be restricted to foreign individual investors, only foreign organizations (legal entities) are allowed to register to operate.

3. About the business investment sector of the enterprise

• Unlike domestic companies, foreign invested companies will be more limited in their business fields. 
• For business lines and investment sectors not included in WTO commitments, when foreign investors want to operate, they must seek approval from the Ministry of Industry and Trade. Normally, the possibility of registration is very low, depending on the financial capacity, experience and explanation of the investor.

4. On capital contribution value and capital contribution ratio of foreign investors

• The value of capital contribution depends on the financial capacity of the investor. The value of capital contribution also affects the application for work permit and temporary residence card of foreign investors who are individuals.
• The capital contribution ratio of foreign investors in the company depends on the business sector in which the investor intends to operate. Some sectors (such as wholesale, retail or some commercial sectors…) will not be limited in terms of capital contribution ratio. Some sectors will have a constraint that the capital contribution ratio of foreign investors is less than 51% or will not allow foreigners to register.

In addition, in case investors choose to establish an FDI company in the form of direct investment (i.e., must apply for an investment certificate), they need to pay attention to the following conditions:

5. About the company’s headquarters address and location of investment project implementation

• A foreign-invested company, upon its establishment, must prove that its headquarters address and the location of its investment project are legal. This proof is demonstrated through a house, land, office lease contract, etc.

6. Regarding financial capacity when carrying out procedures

• Foreign investors must demonstrate financial capacity when establishing a company. This is demonstrated through bank account statements abroad (must be consularized) or in Vietnam.
• Foreign investors also need to pay attention to implementing capital contribution progress in accordance with the investment certificate to avoid administrative penalties.

7. About experience and conditions according to business lines

• It is necessary to pay attention to implementing, correctly and fully meeting the conditions for each industry requiring business conditions for foreign investors.
• Foreign investors also need to demonstrate experience and capacity in certain specific business sectors as required.

Notes on documents and procedures for establishing a company with foreign investment capital

Depending on the form of foreign-invested company that investors choose to establish, the documents and implementation process will also be different. Specifically as follows:

1. Direct investment form

Investors must perform the following two steps:

Step 1: Apply for investment certificate

Application for investment certificate includes:

• Notarized copy of passport of foreign individual or/and notarized copy of business license/certificate of establishment of foreign organization, along with notarized copy of passport of individual representing capital contribution of that organization;
• Documents confirming information on bank account balance corresponding to the expected investment capital or the investor’s financial statements for the last 2 years; commitment to financial support from the parent company; commitment to financial support from a financial institution; guarantee of the investor’s financial capacity for institutional investors;
• Contract for leasing location for headquarters and investment project implementation;
• Profile demonstrating the capacity and experience of foreign investors;
• Documents on investment project implementation and some other documents as prescribed such as: Investment project proposal, land use demand proposal, explanation of technology used in investment project.

 See more: Procedures for applying for investment certificate.

Step 2: Apply for a business registration certificate

2. Forms of investment: contributing capital, buying shares, buying capital contributions of Vietnamese enterprises

Businesses must take the following two steps:

Step 1: Register to contribute capital, buy capital contributions, buy shares for foreign investors in Vietnamese enterprises.

Step 2: Change business registration certificate.

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Investors and businesses can download the application form and refer to the detailed process of establishing a foreign-invested company in the two forms above in the article on how to establish a company or enterprise with foreign investment capital of fdiinvietnam.com.

Things to know AFTER establishing a foreign invested enterprise

After establishment, in addition to having to carry out the necessary procedures for the enterprise to operate similarly to a Vietnamese enterprise (hanging a signboard, purchasing a digital signature, opening a bank account, declaring initial taxes, registering for electronic invoices, applying for a license to operate in a conditional industry, etc.), foreign-invested enterprises also need to pay attention to the following issues:

1. For direct investment (request for investment certificate)

• After completing the establishment procedures, the company must open a foreign currency direct investment capital account at a licensed bank to conduct legal transactions in foreign currency;
• Investors must make capital contributions in accordance with the schedule committed to contribute capital in the investment certificate; this capital contribution is made in the form of transfer to the direct investment capital account mentioned above;
• In addition, at each prescribed period (month, quarter, year), foreign-invested enterprises must submit reports on the implementation status of investment projects to the Department of Planning and Investment in electronic form;
• In case the company conducts retail distribution activities, it is necessary to apply for a license from the Department of Industry and Trade.

2. For the form of investment in capital contribution, purchase of shares, capital contribution to Vietnamese enterprises

• Buying capital contribution from LLC: Individuals transferring capital must submit personal income tax declaration to the tax authority within 10 days from the date of transfer.
• Buying shares from shareholders of a joint stock company: Individuals transferring capital must submit a personal income tax declaration to the tax authority within 10 days from the date of transfer. In addition, they must pay personal income tax of 0.1% on the transfer value.
• Depending on the tax authority in charge, the declaration can be made directly or electronically, and the declaration can be made by the transferor or the company that declares on their behalf.

Cost of establishing a foreign invested enterprise

The cost of establishing a foreign-invested company in case the investor or enterprise hires a service provider to establish the company is usually not fixed and also depends on the form of investment and whether the business line that the enterprise registers is a conditional line or not. 

Enterprises can refer to the cost of establishing a foreign-invested company at fdiinvietnam.com as follows:

Cost of establishing a foreign invested company at fdiinvietnam.com
Province	Hanoi	Danang	Ho Chi Minh City
Form of investment: capital contribution, share purchase, capital contribution	30,000,000 VND	20,000,000 VND	30,000,000 VND
Direct investment form	23,000,000 VND	20,000,000 VND	15,000,000 VND

 

Reference:

>>  Service of establishing a company with foreign investment capital, from 15,000,000 VND;

>> Set up a company in Vietnam – Service from 15.000.000 VND.

Note: 

• The cost of establishing a foreign-invested enterprise at fdiinvietnam.com is a package, including state fees and fdiinvietnam.com’s service fees, and there are no additional costs.
• In case the business registers to do business in a conditional industry and needs to carry out other related procedures (for example, applying for a sub-license), fdiinvietnam.com will advise and quote the fee to the investor and the business from the beginning.

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Frequently asked questions when establishing a foreign invested company

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