We would like to advise on possibility of setting up a foreign invested company (hereinafter referred to as the “NewCo”) in Vietnam to manufacture clothes in Vietnam as follows:
1. Law on investment in Vietnam.
Under Vietnam Law, the establishment of the NewCorequires an Investment Certificate from the licensing authority. Depending on the location of the company, the licensing authority may be the provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones).
Under Vietnam Law on Investment, in order to obtain an Investment Certificate for establishment of a foreign invested company, Foreign Investor is required to propose an Investment Project.
Investment Project is understood as “a collection of proposals for the expenditure of medium and long-term capital in order to carry out an investment activity in a specific geographical area and for a specified duration”. Then, relevant competent authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine whether to grant Investment Certificate or not.
Assessment of the legitimacy of an Investment Project shall be based on legal framework of Vietnam, including Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the NewCo shall register its head-office.
Meanwhile, a conclusion regarding to the feasibility of an Investment Project shall be based on assessment on the financial ability of the Foreign Investor, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
Thus, procedure for establishment of a foreign invested company in Vietnam generally takes a rather long time in comparison with other countries in the region. Our practical experiences show that although the total time for establishment of a foreign invested company as stipulated under Vietnam Investment Law 2005 is only 20 – 45 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to valuate the investment project.
2. Specific comments
2.1. Pre-licensing procedure
Under Vietnam Law on Investment, before starting the licensing procedure for obtaining the Investment Certificate for setting up the NewCo to manufacture clothes in Vietnam, you must proceed three following main works:
- Consulting and obtaining an in-principle approval on the Land Use Right toward the proposed land lot from the People’s Committee of the relevant city or province (the “People’s Committee”);
- Consulting and obtaining the support letter for the whole project from the People’s Committee; and
- Consulting and obtaining the Planning Certificate of the proposed project from the Planning and Architecture Department of the relevant city of province (the “Architecture Department”).;
a. In-principle approval on the land from thePeople’s Committee (applicable when you leased the land from the State):
Before submitting the application for the Investment Certificate from the Licensing Authority, foreign investors need to consult and negotiate with the existing land user of the proposed land and the People’s Committee relation to the land to be used for the project. The value of the LUR to be contributed into the proposed project will be negotiated between the parties who may involve a valuation expert.
b. Letters of support from thePeople’s Committee for the proposed project
The letters of support from the People’s Committees of relevant province where the real estate is developed should be addressed to the Licensing Authority and all relevant State authorities. The letters of support should include the following (i) a statement that the proposed project is compatible with the resources and needs the relevant city or province; and (ii) undertakings of the People’s Committee to support the project. It usually takes about 01 to 02 months to obtain these letters from the People’s Committee.
For the convenience to obtain the support letter from People’s Committees, you must provide a sufficient explanation on the feasibility of your investment project. Scope of investment project and the Investment Capital shall be carefully evaluated to grant the final conclusion.
c. Planning Certificate issued by the Architecture Department
A Planning Certificate (or the “red-line demarcation”) issued by the Architecture Department, will be required for any building or civil work. The issue of the Planning Certificate usually takes up to 2 months after the submission of relevant documents.
An application for the Planning Certificate will include (i) details of the investment project, (ii) the scale of construction works; (iii) the requirements for land and the demand for use of technical infrastructure. The Planning Certificate must be obtained before or at the same time as the application file for the Investment Certificate is submitted to the Licensing Authority.
However, you can ignore the above stated step in case you would like to lease a land lot from an existed Industrial Zone. In such case, the Land Lord shall be responsible for obtaining necessary approval from competent authority for you to lease the land lot.
a) Obtaining Investment Certificate
After completing above works, you shall be required to prepare an application dossier for submitting to the People’s Committee/ Management Board of Industrial Zone for the issuance of the Investment Certificate.
Generally, it shall take you about 01 month to obtain the Investment Certificate. However, you can save much your time if you would like to establish the NewCo in the Industrial Zones.
The Investment Certificate shall be treated as the Certificate of Business Registration or Certificate of Incorporation of the NewCo.
b) Publishing the establishment of NewCo, obtaining Seal and Certificate of Seal Sample Registration, Tax Code Registration.
After obtaining the Investment Certificate, it is required the NewCo to published the establishment of the NewCo on newspaper, obtaining Seal, Certificate of Seal Sample Registration and Tax Code Registration
c) Issuance of the Land Use Right Certificate (applicable when you lease the land from the State)
After the Investment Certificate has been issued by the Licensing Authority to a foreign invested company, the procedure for land lease shall be as follows:
- issue of the Chairman of the People’s Committee’s formal approval on land lease;
- signing of a land lease;
- Payment of the land rental to the State; and
- issue of the Land Use Right Certificate.