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Pre-investment  approval  Application for  Investment   Application for  Enterprise  Registration  Certificate  Post licensing  procedures

While Vietnam is a highly attractive investment destination for foreign investors, it still has a complex legal process for establishing a company.

In this section, we discuss the different set up procedures for companies that want to begin operations in the country. We also recommend professional assistance to guide companies through the myriad of laws and procedures in the country.

Step 1 – Pre-investment approval

For some types of investment, companies need to seek the approval of Vietnamese authorities prior to starting establishment procedures. As a result, it is important to understand if an investment will require approval, and if so, preparing requisite documentation and working against the application processing times.

Step 2 – Investment registration certificate

application

The first step in the Vietnamese corporate establishment process is an application for an Investment Registration Certificate (IRC). This is required of all 100 percent foreign owned investment projects and establishes the right of the foreign enterprise to invest within Vietnam.

To apply an investor must: 

  • Application for implementation of investment project (this should include details of the project in Vietnam);
  • Proposal of investment project (should include the details of the investment project, including lease agreements or land use needs); and
  • Financial statements (to be provided for the last two years of a company’s operation; additional information may be required to prove financial capacity).

Timeframe: 15 days from the date when documents are submitted.

Step 3 – Enterprise registration certificate application

The Enterprise Registration Certificate (ERC) is required for all projects that seek to set up new entities within Vietnam. When obtained, the ERC will be accompanied by a number that will double as the tax registration number of the entity.

As part of the application process, the following information should be prepared: 

  • Application for enterprise registration;
  • Company charter;
  • List of all board members;
  • List of legal representatives; and
  • Letters of appointment and authorization  

Any foreign documents or supporting information provided will need to be notarized, legalized by consular officials, and translated into Vietnamese by competent authorities.

Timeframe: Three days from the date when documents are submitted. It should be noted that applications for the ERC and IRC can be processed concurrently; both can be obtained within 15 days when applied concurrently.

Step 4 – Post licensing procedures

Once the IRC and ERC have been issued, additional steps have to be taken to complete the procedure and start business operations. This includes: 

  • Seal carving;
  • Bank account opening;
  • Labor registration;
  • Business license tax payment;
  • Charter capital contribution; and
  • Public announcement of company establishment

Investments and projects requiring approval

Agency

 

Requisite documentation

 

Time (days)

 

  • Projects which currently make use of technology outlined in the Law on Technology Transfer
  • Projects where government land is obtained without the use of the tendering process

 

Provincial People’s Committees

 

  • Application
  • Financial statements
  • Detailed use of restricted technology
  • Proposed use of land

 

35

 

  • Relocations of local populations (10,000–20,000 people)
  • Petroleum exploration
  • Seaports
  • Airports
  • Gambling
  • Development of Infrastructure in economic zones
  • Sea Transport
  • Telecommunications
  • Press and publications
  • Science or technological enterprises with 100% foreign owned capital

Various government agencies

 

All documents listed above in addition to:

  • Environmental impact assessment
  • Socioeconomic efficiency evaluation

 

60

 

  • Projects involving nuclear power plants
  • Projects involving the mass relocation of local populations (20,000-50,000)
  • Projects involving protected environmental areas
  • Projects that repurpose land for rice cultivation

National Assembly

 

All documents listed above in addition to:

  • Relocation plan (if applicable

Should be submitted 150 days before the start of national assembly sessions

Charter capital

Charter capital can be used as working capital to operate the company. It can be combined with loan capital or constitute 100 percent of the total investment capital of the company. Both charter capital and the total investment capital (which also includes shareholders’ loans or third-party finance), along with the company charter, must be registered with the license issuing authority of Vietnam.

Investors cannot increase or decrease the charter capital amount without prior approval from the local licensing authority.

Capital contribution schedules are set out in foreign-invested enterprise (FIE) charters (articles of association), joint venture contracts and/or business cooperation contracts, in addition to the FIE’s investment certificate.

Members and owners of a limited liability company (LLC) must contribute charter capital within the capital contribution schedules set out in these documents and within the contribution timeframes established by the Law on Enterprises.

To transfer capital into Vietnam, after setting up the FIE, foreign investors must open a capital bank account in a legally licensed bank. A capital bank account is a special purpose foreign currency account designed to enable tracking of the movement of capital flows in and out of the country. 

The account also allows money to be transferred to current accounts in order to make in- country payments and other current transactions.

How to Open a Bank Account in Vietnam?

Which bank account do businesses require? 

In the event that a company has established operations and turned a profit within the Vietnamese market, challenges will remain with respect to ensuring that its proceeds may be sent abroad without a hitch.

Whether it be a decision over the method of repatriation or when to take profits, the ways in which investors choose to approach the remittance process can have a significant impact on the quantity and timeframe under which profits will become accessible.

One of the first decisions that will have to be made by investors is that of banking. Upon entering the Vietnamese market, foreign investors who wish to remit profits to their home markets will be required to open a foreign currency bank account. This account is to be utilized for all foreign currency transactions carried out within the country.

For companies that have already established operations in Vietnam, foreign currency accounts will have been set up during the transfer of funds to capitalize on given projects.

Alternatively, those considering Vietnam as a destination for future investment should note that, while the use of foreign bank accounts is important at the latter stage of the remittance process, it is nonetheless crucial to finalize banking arrangements on the front end of the investment.

Understanding which actions require the use of a foreign currency account, where restrictions are placed upon these types of accounts, and what documents must be prepared will all ensure that operations are optimized effectively.

Actions requiring foreign currency accounts

The following are transactions which require the use of a foreign currency bank account:

  • Receipt of charter capital;
  • Increased capital expenditure in which the funding of such expenditure originates in third party countries;
  • Receipt of financing via loans from foreign sources;
  • Disbursement of loan payments to third parties outside of Vietnam (inclusive of interest); and
  • Disbursement of dividends and other profits to shareholders, the origins of which have been derived from Vietnam based operations

Restrictions

When selecting and operating a foreign currency account, investors are faced with a number of restrictions. The following are some of the most pressing issues that investors should prepare for when opening foreign currency accounts:

Institutional selection

When opening a foreign currency account, investors are limited to the selection of a single account with a bank that has been licensed by the SBV. In practice, the only banks that will be able to operate foreign currency accounts for investors are those with this license. While limiting the selection of institutions, a number of large international banks such as Standard Chartered and HSBC are able to host foreign accounts. Individual banks should be contacted in order to ascertain their status with Vietnamese officials.

Requisite documentation

Upon the selection of a government-approved bank, the following documentation should be prepared in order to open the foreign currency account. It should be noted that the specific requirements of banks may vary and that requirements may differ depending on the nature of FDI projects within the country (i.e. 100 percent Foreign-Owned Enterprise vs Joint Venture).

Opening and using accounts in Vietnam banks

Under Circular No. 19/2014/TT-NHNN, an FIE can open two types of banks accounts: direct investment capital accounts and deposit accounts at an authorized bank.

I. Direct investment accounts

a. Direct investment accounts in a foreign currency account or Vietnamese dong

The application dossier includes:

  • Bank account opening form;
  • A written justification (signed by authorized representatives) of the necessity to identify
  • account holder;
  • Notarized photocopies of documents proving legal status, including Decision of Enterprise
  • Establishment, and Business License or Investment License;
  • A notarized copy of the original Certificate of Off-shore Investment;
  • A copy of the approval on investment in the foreign language and its translation in Vietnamese
  • issued by the authorities;
  • The original copy of the document specifying anticipated progress of investment capital
  • contribution of an FIE; and
  • The original copy of the document issued by credit institutions granting foreign investors the right to open an off-shore direct investment capital account.
b. Overseas foreign-currency accounts

FIEs may open foreign-currency accounts at overseas banks to borrow medium-term and long-term foreign loans.

The application dossier includes (submitted to the SBV, Foreign Exchange Management Department): 

  • An application to open and use overseas accounts;
  • Notarized photocopies of documents proving legal status, including Decision of Enterprise
  • Establishment, and Business License, or Investment License;
  • Loan contracts signed with the foreign lenders and the loan registration approval from the
  • State Bank;
  • Documents proving the requirement of the foreign lenders of opening accounts at overseas
  • banks;
  • The plan for monthly foreign-currency revenues and overseas account expenditures; and
  • Other documents as required.

II. Deposit accounts

a. Foreign-currency deposit accounts

FIEs may open and use foreign-currency deposit accounts to bring foreign investor’s capital and profits into and out of the country. Generally, FIEs have to exchange foreign currency for VND by selling it to a bank licensed to make such transactions. 

FIEs can use the foreign currency stored in foreign-currency deposit accounts for the following purposes: 

  • Remittance from overseas;
  • Revenues from the export of goods and services;
  • Domestic transfers, including those resulting from the issuance of commercial papers in
  • foreign currency and their interests, and buying foreign currency from credit institutions that
  • are allowed to conduct foreign exchange activities;
  • Cash deposits, including those for resident organization allowed by the State Bank to collect
  • foreign currency through exporting commodities and services, and cross-bordered (with the
  • certification of border customs);
  • Payments, including those for imported commodities and services (including related costs
  • arisen);
  • Commodities and services to individuals and organizations who are allowed to collect
  • foreign currency;
  • Foreign currency loans (principal, interest and fees and other related costs arisen) borrowed
  • from domestic banks and foreign loans in accordance with the current regulations;
  • Organization’s staff who are sent abroad, to pay for salary, bonus, and other allowances to
  • non-residents and foreign residents working for the organization;
  • Fees and interest;
  • Sale of foreign currency to credit institutions, which are allowed to do foreign exchange
  • business;
  • Investment in securities and commercial papers issued in a foreign currency and principal
  • and interest payments;
  • Exchange into other foreign currency payment instruments, including checks, payment cards
  • and as regulated by the bank, which is allowed to do foreign exchange business;
  • Capital contribution for implementing investment projects as regulated by the Law on
  • Investment; and
  • Other transactions, including those in the form of account transfer or cash deposit having license by the Governor of the State Bank.

Foreign-currency deposit accounts can receive bank interest according to account structure. For demand deposit, specialized or cash-cover accounts, interest is counted on the number of actual deposit days and incorporated into principal monthly or on the balance withdrawal date. 

For fixed deposit accounts, interest is paid once at maturity. If FIEs do not withdraw at maturity, all the principal and interest will be transferred into a new account with a new period upon the account holder’s request at that moment; or into the current account if the licensed banks receive no notice from the account holder about the maintaining fixed deposit account.

b. Vietnamese Dong deposit accounts

All transactions relating to investment activities can be done through VND accounts, including:

  • Receipt of revenues in VND for transactions in-country;
  • Payment in VND for expenses incurred in-country;
  • Purchase of foreign currency from credit institutions allowed to transfer overseas; and
  • Other income and expenditure transactions related to investment in-country.

For newly established FIEs, after obtaining an investment license, normally all capital bank capital bank accounts and deposit accounts in both foreign currency and VND can be opened at the same time. The VND deposit account can receive bank interest according to current interest rate structure. 

Intellectual Property Protection in Vietnam 

A history of IP in Vietnam

In 2005, Vietnam’s National Assembly passed the Law on Intellectual Property Rights (IPRs); this law was later amended and supplemented in 2009.

Aside from local IP legislation, Vietnam also participates in international IP conventions such as the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Rome Convention, the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, the World Intellectual Property Organization, the Patent Cooperation Treaty, the Madrid Protocol and the recently signed Hague agreement.

Understanding IP in Vietnam

As per the World Intellectual Property Organization (WIPO), IP is defined as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.”

There are two types of IP: registered and unregistered. For registered IP, you must apply to have your rights recognized at an official IP organization, such as the Intellectual Property Office in the United Kingdom.  Types of registered IP include patents and registered trademarks. For unregistered IP, you automatically have IP rights over your creation. Types of unregistered IP include copyright, common law trademarks and database rights, confidential information, and trade secrets.

Due to the fact that Vietnam joined the World Trade Organization (WTO) in 2007, the country has had to meet the minimum IP standards set out by that organization – this has also meant that IP in Vietnam has many similarities with IP in more developed countries. As such, Vietnam has divided its IP system into three areas:

The NOIP holds the role of chief coordinator and is the agency which, under the aegis of the Ministry of Science and Technology, assumes the functions of exercising state management and providing services in the field of IP. This includes administrating the registration of industrial designs, trademarks, brand names, and other industrial property rights, and conducting basic legal appraisals to settle intellectual property disputes.

Before delving into the specifics of each type of IP, it is worth noting that the Paris Convention’s “priority rights” can aid in the local registration of patents, designs, and trademarks by allowing rights previously registered elsewhere to become effective in Vietnam. However, this must be completed within the specified time limit.

Copyright

Registration of copyright is conducted at the National Copyright Office. Copyright IP also applies to computer programs that cannot be patented.  Vietnam copyright IP is governed by the Berne Convention on copyright which states that the minimum protection from publication will be:

  • 75 years for cinematographic works, photographic works, dramatic works, works of applied art and anonymous works; and
  • 50 years after the death of the author for other works

While no copyright registration is required in Vietnam, most patent experts suggest registering copyrights with the country’s copyright authorities.

Patents

Vietnam’s patent law operates under the “first to file” principle. The country makes a distinction between patents and utility solution patents:

  • Invention patents have maximum protection of 20 years;
  • Utility patents have maximum protection of 10 years; and
  • Industrial designs have maximum protection of five years (however, this is renewable for two consecutive periods of five years).

Individual patent registrations (such as industrial designs and inventions) must take place in Vietnam. However, for patent rights for things other than industrial designs, applications can be handled by the Patent Cooperation Treaty.

Trademarks

The trademark system in Vietnam protects symbols, three-dimensional objects, colors, and other visual devices that are used to identify a business’s products or services. Trade name rights are established through use rather than being formally registered. With respect to online domains, these are handled on a first-come, first-served basis.

  • Trademarks last for 10 years and can be renewed indefinitely for further ten-year periods; and
  • Registration can take up to 15 months to complete.

Trademarks can be registered in Vietnam or by using the Madrid Protocol.

IP rights enforcement

Companies seeking to enforce their IP rights in Vietnam have three options:

  • Administrative action;
  • Civil court action; and
  • Criminal prosecution.

Most IP disputes are handled through administrative action. Possible actions that can be taken by the relevant government authorities include the issuance of warnings, fines, the seizure or destruction of the counterfeit goods, etc.

Defensive actions include making sure employment contracts have clear IP-related clauses, being on the lookout for production overruns (which could be a sign that your products are being sold elsewhere), talking with other foreign businesses in the same operating field to learn best practices, and registering your IP rights.

As part of the European Union-Vietnam Free Trade Agreement (EVFTA), which is expected to come into effect soon, Vietnam will have to further tighten up its IP protection laws. Additionally, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is pushing Vietnam to meet high standards of IP rights.

Vietnam gets serious on IP protection

Indicating that Vietnam is taking IP issues seriously, it issued Decree No 22/2018/ND-CP in April 2018, updating guidelines and numerous articles focusing on copyright under the Civil Code and the Law on Intellectual Property. More recently, in April 2020, the IP office issued Official Letter No 5360/SHTT-NDHT on assistance to individuals filing international patent applications.

In August 2019, the Vietnamese government has also issued Decision No. 1068/QD-TTg or National IP Strategy on Intellectual Property Strategy with a Vision to 2030. The document will serve as a guideline for ministries, sectors, and state agencies to adopt IP rights – the first time Vietnam has done this as a national strategy.

As Vietnam, becomes more integrated globally, in part through its free trade agreements, IP rights will become an even more important factor in how organizations view the business climate in Vietnam, particularly as the country’s economy and technology continue to develop. Fortunately, Vietnam is keen to develop and work on its IP laws to help push it further in the global economy.

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