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Conditions for establishing a 100% foreign-invested enterprise

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Definition and characteristics of a 100% foreign-invested enterprise. Conditions for establishing a 100% foreign-invested enterprise ? Rights and obligations of foreign investors. Let us learn about this topic with LSX Law firm below:

Enterprise Law 2020

Investment Law 2020

Definition and characteristics of a 100% foreign-invested enterprise

100% foreign-invested enterprise means an enterprise; with 100% capital investment by foreign investors to establish and operate in Vietnam.

In addition, the assets of 100% foreign-invested enterprises belong to foreign economic organizations and individuals; so they have the right to decide on the management apparatus of the enterprise.

Conditions for establishing a 100% foreign-invested enterprise

Specifically, to establish a 100% foreign-invested enterprise, a foreign investor must apply for an Investment Certificate and send this dossier to the Investment Certificate-issuing agency.

Moreover, foreign investors shall carry out registration procedures at state agencies for foreign investment projects with an investment capital of less than 300 billion VND and not on the list of conditional investment fields. Provincial investment managers to be granted investment certificates.

In this case, the application file for the establishment of a 100% foreign-invested enterprise includes:

Firstly, the investor’s legal status;

Secondly, the objective, scale, and location of the investment project;

Thirdly, investment capital, project implementation schedule;

Also, Demand for land use and commitment to environmental protection;

Investment incentives, if any;

In addition, the investor’s financial capacity report;

Moreover, joint venture contract, enterprise charter, or business cooperation contract.

Besides, for projects with a scale of VND 300 billion or more and in the list and fields of conditional investment, in addition to the procedures mentioned above, foreign investors must also carry out verification procedures to obtain a license. Investment certificates. 

Capital of 100% foreign-invested enterprise

As can be seen, the legal capital and the investment capital are entirely contributed and taken care of by foreign investors.

The legal capital of a 100% foreign-invested enterprise must be at least 30% of the investment capital. For investment projects in mountainous, deep-lying, and remote areas, afforestation, infrastructure construction projects in regions with difficult socio-economic conditions, the legal capital ratio may be as low as 20% of the investment capital. However, the investment certificate-issuing agency must approve it.

During the operation process, 100% of foreign-invested enterprises cannot reduce their legal capital but have the right to increase their legal capital and investment capital. The enterprise decides the increase in legal capital or investment capital. The investment certificate-issuing agency must approve it.

For critical projects, the Ministry of Planning and Investment guides foreign investors to transfer capital to Vietnamese enterprises to transform into joint ventures. Conditions, rate, and time of capital transfer are as in the application for the Investment Certificate.

Rights and obligations of foreign investors

Rights of foreign investors

First, be assured of capital and assets under their ownership;

Secondly, to transfer profits, principal, and interests of foreign loans, investment capital, money, and other assets under their lawful ownership to their home country or another country;

Thirdly, to reach an agreement with the business cooperation party, the Vietnamese joint-venture party on choosing the form of arbitration or court to settle disputes arising in the investment process;

Besides, enjoy the customs regime, entry, residence, and travel in Vietnam according to the provisions of the competent state agencies of Vietnam.

Obligations of foreign investors

Firstly, strictly comply with the Investment Law and the laws of Vietnam during the investment process in Vietnam;

Secondly, fully perform the obligations specified in the business cooperation contract, joint venture contract, BOT contract, BTO, BT, Investment Certificate;

Thirdly, pay taxes on the repatriation of profits abroad. When transferring profits abroad, foreign investors must pay a profit transfer tax. ,

Besides, regulations on tax rates for transferring profits abroad are as follows:

First, 3% of profits remitted abroad for:

Overseas Vietnamese invest in Vietnam;

Investment in industrial parks, export processing zones, high-tech zones;

Foreign investors contribute legal capital from 10 million USD or more.

Secondly, 5% of profits remitted abroad in case foreign investors contribute legal capital or capital to perform business cooperation contracts from 5 million USD to less than 10 million USD when investing in the field of medical treatment and education.

Finally, 7% of profits remitted abroad if foreign investors contribute legal capital or capital for joint ventures from less than 5 million USD. 

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Related questions

What are the rights and obligations of foreigners working in foreign-invested projects?

Foreigners working in foreign-invested projects are entitled to the customs regime, immigration, residence and travel in the Vietnamese territory, the right to information, and communication according to the provisions of Vietnamese law: remittance abroad salary and other lawful income. At the same time, these people working must respect Vietnamese law, fulfill their obligations as committed to investors, and pay income tax under the law on an income of Vietnam. 

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