Currently, the Vietnamese Government has many preferential policies for foreign investors doing business in Vietnam in order to attract foreign investment Therefore, more and more foreign-invested companies are being established. However, when conducting the establishment of a foreign-invested company in Vietnam, investors need to learn and grasp the provisions of current laws to ensure the most optimal conditions when investing. Let’s find out in this article with LSX Law firm how Vietnamese law regulates the establishment of a foreign-invested company
Investment Law 2020
Enterprise Law 2020
What are foreign-invested companies?
According to Clause 22, Article 3 of the Law on Investment in 2020: “Foreign-invested companies means an economic organization whose foreign investors are members or shareholders.“
Thus, according to this provision; one can understand foreign-invested companies; regardless of the percentage of capital contributed by the foreign party. Companies with foreign direct investment capital include:
– 100% foreign-owned companies.
– Companies with foreign nationals, organizations established under foreign laws investing (contributing capital for the establishment, buying contributed capital).
Conditions for establishing foreign-invested companies
So Organizations, Or foreign individuals wishing to invest in the form of company establishment in Vietnam must satisfy the following conditions in order to establish a foreign-invested company:
* The condition for investor
Vietnam only allows organizations; foreign companies to invest in the form of company establishment in Vietnam when a foreign trader has a nationality that is a member of the WTO.
Forms of establishments of a foreign-invested company in Vietnam include:
- Establishment of a company with 100% foreign capital in Vietnam
- Establishment of a joint venture company in Vietnam.
* Conditions on project implementation location; the location of the head office of the foreign-invested company.
Foreign investors need to choose a project implementation location suitable to the objectives, business plan. This is important as it differentiates between establishing a Vietnamese company and a foreign capital company.
Additionally, Foreign-owned companies will not be able to apply for jobs, Outsourcing production if there is a project implementation location in a small residential house, office buildings. In addition, with individual cases, the conditions of this location will also be very different.
* Conditions on investor experience
Investors need to explain about investing experience with the intended investment objectives. Conditions the project must meet when implementing the project objectives in the conditional investment field.
* Conditions on financial capacity of investors
Foreign investors need to declare information on the investment capital of investment projects. And the company’s charter capital and foreign capital need to correspond to their financial capacity. Also, investors must present documents proving the financial capacity with the amount of capital expected to contribute to the project.
Proof can be a certificate of account balance; or foreign bank guarantee or some other papers.
Procedures for establishing a foreign-invested company
Step 1: Apply for an Investment Registration Certificate
When you want to establish a foreign-invested company; First of all, investors need an investment certificate.
Step 2: Apply for a Certificate of Business Registration; create seals for the company and for the legal representatives
Then, after obtaining the Investment Registration Certificate, investors need to prepare documents; to carry out the procedures for applying for a Business Registration Certificate.
Step 3: Post the notice of business establishment
The company after being granted the Certificate of Business Registration; needs to make a public announcement on the national portal on business registration and pay the necessary fee.
Things to do after establishing a foreign-invested company
- Register to apply the withholding value-added tax method. Enterprises must submit form 06/GTGT requesting the application of the calculation method for withholding value-added tax to the tax authority to issue a red invoice.
- Declare and pay license tax at the tax authority.
- Hanging a sign at the company’s headquarters: the company sign must show information about the company’s name; address; company phone number. Avoid the case in which the tax office comes down to inspect the head office and thinks that the enterprise is not operating at the head office, not allowing the enterprise to register for the use of invoices.
- Open a business bank account; notify the bank account to the business registration office, pay taxes electronically.
- Registration of electronic signatures for electronic tax payment: Enterprises order to buy digital signatures and register them with a digital signature certification service provider. An electronic digital signature has the same value as an enterprise’s seal when paying taxes electronically.
- Print and order invoice printing
Frequently asked questions
So, which agency is competent to issue Investment Registration Certificate?
According to the provisions of Article 39 of the Investment Law in 2020, the agency competent to issue the Investment Registration Certificate includes;
Firstly, the Management Board of industrial parks, export processing zones, high-tech zones and economic zones;
Then, planning and Investment agency;
Thirdly, the investment registration agency where the investor implements the investment project, locates or is expected to set up an executive office to implement the investment project;
Fourthly, the agency that receives investment project dossiers is the agency competent to issue the Investment Registration Certificate; except for the cases specified in Articles 34 and 35 of this Law.
So, what are the taxes that a foreign-invested company must pay?
Foreign-invested companies must pay some basic taxes such as License tax, Corporate Income tax, Value Added Tax. In addition, for specific business activities, foreign-invested companies may be subject to Special Consumption Tax, Export Tax, Import Tax, etc. In the case of paying salaries to employees, The employer is obliged to declare and pay personal income tax on behalf of the employee monthly, quarterly, or each time it is incurred.
So, Are foreign-invested companies entitled to tax incentives?
In order to attract foreign investors to invest in Vietnam; investment incentives in general and tax incentives, in particular, are constantly being updated from time to time; create favorable conditions for foreign investors with many different investment fields. Preferential taxes such as corporate income tax; v.a.t tax; import duties and some other taxes.