Converting foreign-invested companies into Vietnamese companies

See details of documents and procedures for converting a foreign-invested company (FDI) into a Vietnamese company and what to do after the conversion in this article of fdiinvietnam.com.

Cases of converting FDI companies into 100% Vietnamese-owned companies

The conversion of a foreign invested company (FDI enterprise – FDI company) into a 100% Vietnamese-owned company will occur in the following cases:

• Foreign investors no longer want to continue implementing investment projects in Vietnam or want to switch to investing in other projects, so they decide to withdraw their investment capital or transfer all their capital contributions/shares in their company to Vietnamese people (this person can be a member, shareholder of the company or someone outside the company);
• Members and shareholders who are Vietnamese people buy back all capital contributions and shares of members and shareholders who are foreign investors in the company;
• Vietnamese individuals and organizations buy back the entire 100% foreign-owned company for business purposes.

Procedures for converting FDI companies into 100% Vietnamese-owned companies

The essence of converting a foreign-invested company into a Vietnamese company is the transfer of all capital of foreign investors to Vietnamese individuals and organizations. The entire conversion process will include the following 3 important steps:

Step 1: Transfer all capital and shares of foreign investors to Vietnamese individuals/organizations.

➤ For companies with foreign direct investment capital accounts:

Foreign investors carry out procedures for transferring shares and capital contributions to Vietnamese individuals/organizations according to the provisions of Clause 1, Article 10 of Circular No. 06/2019/TT-NHNN of the State Bank of Vietnam dated June 26, 2019 guiding foreign exchange management for foreign direct investment activities in Vietnam, specifically:

This means:

• If a foreign investor not residing  in Vietnam (i.e. staying in Vietnam for less than 183 days) transfers capital to a Vietnamese person, payment for the capital transfer transaction must be  made through a foreign direct investment capital account;
• If a foreign investor residing in Vietnam  (i.e. staying in Vietnam for 183 days or more) transfers capital to a Vietnamese person, payment for the capital transfer transaction cannot be  made through a foreign direct investment capital account;

After transferring shares and capital contributions to Vietnamese individuals/organizations:

• The company must close the direct investment capital account (as prescribed in Clause 6, Article 5 of Circular No. 06/2019/TT-NHNN).
• Foreign investors must declare personal income tax from the transfer of capital contributions and shares. In case of transferring shares, they must pay additional personal income tax at a rate of 0.1% on the transfer value each time.

 See more: Instructions for calculating personal income tax on capital contribution and share transfer.

➤ For companies with indirect investment capital accounts:

• Enterprises must carry out the transfer and declare and pay personal income tax/corporate income tax in accordance with the law on personal income tax and corporate income tax.

Note: In case the investor is a foreign organization, the individual or organization receiving the transfer of the shares/capital contribution must be responsible for declaring and paying on behalf of the foreign organization the corporate income tax payable from the above transfer.

Step 2: Carry out procedures to convert a foreign-invested company into a 100% Vietnamese-owned company.

After completing the procedures for transferring capital from foreign investors to Vietnamese individuals and organizations, the following problems may occur in enterprises:

• First , the number of company members can remain the same or decrease. In case there is only 1 capital contributing member, the company must be converted into a 1-member LLC; in case there are only 2 capital contributing members, it must be converted into a 2-member LLC if it is a joint stock company;
• Second , change the capital contribution ratio and share holding ratio of company members.

During the process of converting into a 100% Vietnamese-owned enterprise, the company can simultaneously change members, shareholders, and owners depending on the type of company.

The dossier for converting an FDI company into a Vietnamese company includes:

• Notice of change of members and shareholders;
• Contract for transfer of capital contribution or shares;
• Notarized copy of ID card/CCCD/Passport of Vietnamese members/shareholders or notarized copy of business registration certificate of Vietnamese members/shareholders who are organizations;
• Notice of change of ownership (for single-member LLC);
• List of members (if LLC with 2 members);
• List of shareholders who are foreign investors, in which the updated capital information is 0 (for joint stock companies);

 DOWNLOAD FORM: Profile of converting FDI company into Vietnamese company.

After preparing the necessary documents, the enterprise submits the application to the Business Registration Office of the Department of Planning & Investment in the province or city where the enterprise is headquartered.

Within 3 – 5 working days from the date of receiving complete and valid documents, the Business Registration Office will reissue a new Business License to the enterprise.

Note: If the capital conversion changes the type of company (into a single-member LLC or a 2-member LLC), in addition to the above documents, the enterprise must prepare additional documents to convert the corresponding type of enterprise. Enterprises can refer to the article on procedures for converting a 2-member LLC into a 1-member LLC on fdiinvietnam.com. 

Step 3: Termination of investment project (for FDI companies with investment certificates).

When a foreign investor transfers all shares/capital contributions to a Vietnamese individual/organization, the company must complete procedures to terminate the investment project (based on the provisions of Point a, Clause 1, Article 48 of the Investment Law).

Within 15 working days from the date of decision, the enterprise shall send the decision to terminate the investment project together with the investment certificate to the investment licensing authority.

Things to do after converting an FDI company into a Vietnamese company

After completing the procedures for converting from a foreign-invested company to a 100% Vietnamese-owned company as above, the enterprise needs to immediately do the following:

• Re-engrave the legal seal (in case the company changes its name or changes its type);
• Update corporate account holder information with the bank where the account is opened;
• Update information on digital signatures, electronic invoices, electronic tax accounts, customs accounts, social insurance accounts (in case of capital conversion leading to company name change);

Frequently asked questions when converting FDI companies into Vietnamese companies

Call us at 0978 578 866 (North) – 033 9962 333 (Central) – 033 9962 333 (South) for support.