Foreign Direct Investment (FDI) in Vietnam has risen, thanks to the country’s robust economic growth and favourable business environment. However, navigating the legal landscape can be challenging for foreign investors. This comprehensive guide outlines the essential legal requirements for FDI in Vietnam and provides a compliance checklist to ensure a smooth investment process.
I. Overview of Vietnam’s FDI Legal Framework
Vietnam’s legal framework for FDI is primarily governed by the Law on Investment and the Law on Enterprises. These laws, along with various decrees and circulars, form the backbone of FDI regulations in the country.
Key laws and regulations include:
- Law on Investment (2020)
- Law on Enterprises (2020)
- Law on Land (2013)
- Various sector-specific regulations
Recent updates: In 2020, Vietnam introduced significant changes to its investment laws, aiming to streamline procedures and create a more favorable environment for foreign investors.
II. Essential Legal Requirements for FDI in Vietnam
A. Investment Registration Certificate (IRC)
Step 1: Prepare the Application Dossier
Investor Information: A certified copy of the ID card/CCCD or passport (for individuals), and a certified copy of the Business Registration Certificate (for organizations).
Project Information: A request letter for project investment, a detailed project proposal including objectives, scale, investment capital, location, timeline, and expected benefits.
Proof of Financial Capability: Bank statements, financial reports, financial commitments from organizations, etc.
Documents Related to the Investment Location: Lease agreements for the office, land use rights certificates.
Other Documents: Depending on the specific project, additional documents may be required, such as technology usage licenses, environmental impact assessment reports, etc.
Step 2: Submit the application dossier at the Department of Planning and Investment or the Management Board of the Industrial Park, depending on the project location.
Processing Time: Within 15 days from the date of receipt of a complete and valid application for the Investment Registration Certificate (IRC), the investment registration authority will issue the IRC to the investor.
B. Enterprise Registration Certificate (ERC)
After obtaining the IRC, foreign investors must secure an ERC to establish their business entity in Vietnam.
Step 1: Prepare the Documents
Business Information: Application for business registration, company charter, list of members.
Documents Related to the Investor: Identification documents or legal entity documents of the investor.
IRC: Issued Investment Registration Certificate.
Step 2: Submit the Documents
Submit the application at the Department of Planning and Investment where the project will be carried out.
Processing Time: Within 7 days from the date of receiving a complete and valid ERC application, the business registration authority will issue the ERC to the investor.
C. Capital Requirements
Vietnam has specific capital requirements for foreign investors, which vary depending on the sector and type of investment.
Key considerations:
- Minimum capital requirements for certain sectors (e.g., real estate, banking)
- Capital contribution timeline: generally within 90 days of ERC issuance
- Proper documentation of capital transfers
D. Sector-specific Regulations
Certain sectors have additional requirements or restrictions for foreign investors.
Examples:
- Conditional sectors: education, finance, telecommunications
- Prohibited sectors: national security, rare minerals exploitation
- Foreign ownership limitations in specific industries
E. Land Use Rights and Property Ownership
Foreign investors cannot own land in Vietnam but can obtain land use rights.
Key points:
- Land lease agreements with the government or authorized entities
- Maximum lease term: 50 years (70 years for special cases)
- Property ownership restrictions for foreign individuals and entities
III. Compliance Checklist for Foreign Investors
A. Pre-investment Phase
- Conduct thorough market research and due diligence
- Identify the appropriate investment structure
- Verify compliance with foreign ownership restrictions
- Prepare required documentation for IRC application
B. Investment Phase
- Obtain Investment Registration Certificate (IRC)
- Secure Enterprise Registration Certificate (ERC)
- Open bank accounts (capital account and operating account)
- Register tax code and declare taxes
- Obtain necessary sub-licenses or permits (if applicable)
- Comply with the capital contribution timeline
C. Post-investment Phase
- Maintain proper accounting records and financial reports
- Submit regular reports to relevant authorities
- Comply with labor laws and social insurance regulations
- Adhere to environmental protection requirements
- Renew licenses and permits as necessary
Conclusion
Navigating the legal requirements for FDI in Vietnam requires diligence, patience, and expert guidance. By following this comprehensive checklist and staying informed about regulatory changes, foreign investors can position themselves for success in Vietnam’s dynamic market. Remember that compliance is an ongoing process, and staying proactive in addressing legal and regulatory matters is key to long-term success in Vietnam.
For a printable version of our FDI compliance checklist or to schedule a consultation with a legal expert specializing in Vietnamese FDI laws, don’t hesitate to get in touch with our office, Harley Miller Law Firm “HMLF”. We’re here to help you navigate the complexities of investing in Vietnam with confidence and compliance.
Address: 14th floor, HM Town Building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone: +84 937215585
Website: hmlf.vn
Email: [email protected]