Conditions for investment in distribution services for foreign investors

Distribution services are activities of wholesale and retail of goods and products on the market. Therefore, distribution activities are very attractive by investors; especially foreign investors who want to expand product consumption markets. However, the establishment of a company for foreign investors in the field of product distribution in Vietnam must meet certain conditions. LSX Law Firm advises on conditions for investment in distribution services for foreign investors.

Legal grounds

WTO, FTAs, VKFTA;

Investment Law 2014;

Commercial Law 2005;

Decree No. 23/2007/ND-CP guiding the Commercial Law on goods purchase and sale activities and activities directly related to goods purchase and sale of foreign-invested enterprises in Vietnam;

Decree No. 35/2006/ND-CP guiding the commercial law on commercial franchising activities;

Conditions for granting distribution service business license

Accordingly the provisions of international treaties

According to international treaties WTO, FTAs, VKFTA:

a) Regarding the scope of activities

• Wholesale
• Retail
• Franchising

b) Do not exercise the right to distribute the following products: Cigarettes and cigars; books, newspapers and magazines, film; precious metals and precious stones; medicine; gunpowder; crude oil and processed oil; rice; cane sugar and beet sugar. The restriction on distribution of these items is gradually lifted accordingly the roadmap; (gradually reducing the items banned from distribution for foreign-invested distributors).

c) Conditions for setting up a retail establishment:

The establishment of a retail establishment (besides the first retail establishment); by a foreign-invested economic organization will be considered on the basis of a demand test economic (ENT)

According to the law of Vietnam

For the establishment of a retail establishment

Foreign investors establish retail establishments in Vietnam when meeting the following conditions:

Foreign-invested economic organizations may only set up their first retail store when they have licensed for distribution rights. The establishment of the first retail establishment does not need to carry out procedures for granting a license to set up a retail establishment.

– The establishment of a retail establishment, including the first retail establishment, must comply with the provisions of law on state management of retail activities and in accordance with the relevant planning of the province or city. Central Street, where planning the retail establishment.

– The establishment of a retail establishment; other than the first retail establishment must be considered on a case-by-case basis; based on an examination of the economic needs of the locality where the retail establishment is located; accordingly the following criteria: retail establishments, market stability, population density and size of the district-level area. This provision does not apply to the case of retail establishments with an area of less than 500 m 2 in area was the province or city under central planning for the purchase and sale of goods and finished construction of infrastructure floor unless there is a change in planning and this condition no longer exists.

For franchising activities

Foreign investors conducting commercial franchising activities in Vietnam must satisfy the following conditions:

– The operating business system has at least 1 year of operation.

– In case a Vietnamese trader is a primary franchisee from a foreign franchisor, that Vietnamese trader must do business in this field for at least 1 year in Vietnam before carrying out commercial franchising procedures.

List of goods banned from distribution and restricted in Vietnam

Firstly, exported goods are not on the list of goods banned from export, the list of goods temporarily suspended from export; the list of goods not entitled to export under international commitments;

Secondly, for exported goods on the list of conditional exports, enterprises must satisfy the conditions prescribed by law;

Thirdly, exported goods are on the list of exported goods according to the roadmap in international commitments, enterprises must comply with the committed roadmap;

Lastly, exported goods must conform to the contents of the export rights that the enterprise has been licensed to perform.

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