Foreign Investment

Domestic and foreign companies are established under two separate legal regimes. Domestic companies are required to register their business in order to obtain an Enterprise Registration Certificate while foreign investors are required to apply for an Investment Registration Certificate before applying for an Enterprise Registration Certificate.

The following projects are subject to approval:

• projects with a significant or potentially serious effect on the environment, including nuclear power plants, conversion of the land use purpose of a national park, natural conservation zone, landscape protection zone, forest for scientific research or experiment of 50 hectares or more; upstream protective forest of 50 hectares or more; protective forest as windbreaker, shelter from sand or breakwater or for reclamation from the sea or for environmental protection with an area of 500 hectares or more; and forests for production with an area of 1,000 hectares or more;
• land use with a requirement for conversion of the land use purpose for wet rice cultivation in two harvests in an area of 500 hectares or more;
• relocation and resettlement of 20,000 people or more in mountainous areas or 50,000 people or more in other areas;
• projects which require application of a special mechanism or policy;
• relocation and settlement of 10,000 people or more in mountainous areas and 20,000 people in other areas;
• construction and commercial operation of airports, and air transportation;
• construction and commercial operation of national seaports;
• exploration, production and processing of petroleum;
• business of betting and casinos;
• production of cigarettes;
• development of infrastructure in industrial zones, export processing zones and functional areas in economic zones;
• construction and commercial operation of golf courses;
• projects with a scale of investment capital from VND 5,000 billion or more;
• projects of foreign investors in the following sectors: business of sea transportation; telecommunications services with network infrastructure; afforestation; publications and press; and establishment of a scientific and technological organization or a scientific and technological enterprise with 100% foreign-owned capital;
• projects to which the state allocates or leases out land without auction, tender or transfer;
• projects with a requirement for conversion of the land use purpose; and
• projects using technology the transfer of which is restricted (as listed).

Depending on the scale, business sector and the impact of an investment project, the approving authority is the National Assembly, the prime minister or provincial people’s committees. Regardless of the approving authority, the application for the investment project should be submitted to the relevant investment registration agency (usually the Department of Planning and Investment of provincial people’s committees) responsible for the area in which the project is proposed to be implemented. The initial approval stage by the provincial people’s committee is generally within 35 days from the date of application. The final approval stage is generally understood to be significantly longer.

A wholly foreign-owned company does not differ significantly from a joint venture company, except that it is 100% foreign owned. It may also take the legal form of an LLC or a JSC.

There are no requirements on minimum investment capital, unless the company’s line of business falls within the conditional sectors (e.g. banking, credit institutions, real estate, post and delivery services, etc.), which by law require a minimum capital (legal capital).

Business cooperation contracts are normally contractual agreements entered into by foreign and Vietnamese parties for the purposes of short-term projects without establishing a legal entity in Vietnam.

A resident representative office is an office of a foreign business maintained in Vietnam which is the simplest form of legal presence for a foreign investor. The foreign company must have operated for at least 1 year in its home country before it can be granted a licence, and licences are valid for up to 5 years. The licences can be extended, with each extension not exceeding 5 years.

The resident representative office is not permitted to be involved in commercial activities to generate income. It may identify business opportunities in Vietnam, engage in marketing, liaison and the general supervision and monitoring of a company’s products and services, monitor the performance of the company’s contracts, hire local staff and conduct various administrative functions.

Foreign contractors include foreign organizations and individuals carrying on business activities not in the form of a licensed investment (without a commercial presence in Vietnam). The foreign contractor is normally carrying on business in Vietnam on a short-term basis and the activities are normally limited to the provisions of services to other entities in Vietnam on a contractual basis. These contractors are taxed through the foreign contractor withholding tax regime.

In contrast with foreign contractors, branch offices are allowed to engage in commercial activities for profit-making purposes. The foreign company must have operated for at least 5 years in its home country before it can be granted a licence. The branch licence is valid for up to 5 years and can be extended, with each extension not exceeding 5 years. A branch office is licensed in accordance with the commitments given by Vietnam in various international treaties to which Vietnam is a party (e.g. with the WTO). In general, branch office registration is more limited than the registration of a representative office and other forms of investment.

There is no restriction on the repatriation of capital, profits and income earned from Vietnam. In addition, there are virtually no foreign exchange controls in place. Pursuant to Circular 186/2010/TT- BTC, from mid-2010, the net profits earned in Vietnam can be remitted offshore once a year after their enterprise has been audited and only if there are no losses to be carried forward from previous years. Profits so remitted are exempt from any profit remittance tax.

Foreign investors are permitted to exchange income earned in Vietnam for foreign currency at licensed banks, for repatriation within 30 business days.

Foreign exchange transactions such as overseas remittances must be in accordance with State Bank of Vietnam (SBV) regulations.

Enterprises with foreign capital may open accounts denominated in foreign currency and/or VND at a bank approved by the SBV for transactions such as for the receipt of capital contribution by foreign investors, the receipt or repayments of overseas borrowings in foreign currencies or profit remittances.

Under the current laws, foreign currency income generated in Vietnam from the export of products or services must be deposited or sold to a licensed bank in the country, except in special cases approved by the SBV.

The employment of foreigners in Vietnam is restricted. A work permit is required for employees working in Vietnam. From 1 April 2016, Vietnam provides an exemption for short-term working which does not require a work permit or any decision on the exemption, thus considerably reducing the bureaucratic burden.

One of the conditions for obtaining a work permit is that the Vietnamese authorities approve the employment of foreigners in the relevant position in general. The foreigner should be working at a management level or be an expert in his field.

Exemptions from work permit requirements include those for:

• experts, managing persons, executive directors or technicians who will work in Vietnam for less than 30 days and not more than 90 days within a year;
• members of a limited liability company with two or more members, or owners of a one- member limited liability company, or members of the board of management of a shareholding company, if working in this function;
• foreign lawyers who have been granted a certificate to practise law in Vietnam;
• foreign students and domestic assistants (provided that the employer of such persons delivers a report to the relevant local Department of Labour 7 days prior to the commencement date of their employment);
• persons entering Vietnam to offer services for a period of less than 3 months on a case-by- case basis;
• a foreigner who enters Vietnam to resolve an emergency situation such as a breakdown or a technically/technologically complex situation which affects production and/or business and which Vietnamese experts or foreign experts already in Vietnam are unable to resolve, for a period of less than 3 months;
• a foreigner authorized to represent the activities of a non-governmental organization;
• a foreigner who has been employed for at least 12 months by an enterprise with a commercial presence in Vietnam, and is internally transferred to work in Vietnam within that enterprise. This exemption only applies to enterprises carrying out business lines included under Vietnam’s WTO commitments, i.e. business services, communication, construction, distribution, education, environment, finance, healthcare, tourism, cultural entertainment and transportation services;
• a foreigner entering Vietnam to work for a project/programme funded by Official Development Assistance (ODA); and
• international correspondents licensed by the Ministry of Foreign Affairs to practice in Vietnam.

Foreigners are required to fulfil the following criteria in order to be granted a work permit for being employed in Vietnam:

• 18 years of age;
• in good health, so as to satisfy the job requirements;
• specialized technical skills;
• professional experience in production operation/management or in general management work that Vietnamese persons are currently unable to perform; and
• no criminal convictions, civil record or pending criminal proceedings in Vietnam or abroad.