Regulations on Investment in Telecommunications Services in Vietnam

 The field of telecommunications has appeared in Vietnam for more than 30 years and has helped the business environment and social life of Vietnam to develop. Our telecommunication lawyers in Vietnam shared opinions on the investment in telecom and related services and their restrictions.

The process of liberalizing the telecommunications sector in Vietnam has led to the expansion of the telecommunications network and has become an attractive field for investors to set up company in telecom service, internet service, or join with Vietnamese partner on business cooperation contract in the same fields.  

Currently, telecommunications services are not just telephones and telex, but vary with many types from simple to complex such as audio, video, data transmission services,… Besides the conveniences brought in life, telecommunications services have really become one of the important infrastructures of the economy. However, Vietnam government also impose certain requirements on foreign investors entering Vietnam in this sector.

Forms of investment in telecommunication sector

Specifically, at present, foreign investors can only participate in investments in the form of joint ventures or business cooperation contracts with Vietnamese enterprises to provide telecommunications services.

Conditions to provide telecommunication services in Vietnam

However, for the provision of services with network infrastructure, the partner in which the investor joins the joint venture must be a licensed telecommunications service provider in Vietnam. In addition, foreign investors are also limited on the percentage of charter capital in joint ventures. Accordingly, for services without network infrastructure, foreign investors own not more than 65% of charter capital and for services with network infrastructure, foreign investors do not own more than 49% legal capital of the joint venture.

On the other hand, foreign investors participating in business cooperation contracts will be able to sign a new agreement or switch to another form of presence with conditions no less favorable than those they are currently receiving. Furthermore, an organization or individual that already owns more than 20% of the charter capital or shares in a telecommunications enterprise may not own more than 20% of the charter capital or shares of another telecommunications enterprise doing business in the same company a market for telecommunications services.

Therefore, if the investor meets the above conditions, the investor will carry out the procedures for establishing an economic organization. Like other foreign-invested organizations, the establishment will go through two stages: investment registration and business establishment. For foreign investment projects in the business of telecommunications services, it is necessary to receive the investment approval of the Prime Minister.

Procedures to invest in telecommunication services in Vietnam

Accordingly, the investor submits the application for approval of the investment policy of the investment project to the investment registration agency and within 03 working days from the date of receipt of the complete dossier, the investment registration agency submit the application for appraisal opinions of the Ministry of Information and Communications.

Within 15 days from the date of receipt of the dossier, the Ministry of Information and Communications shall give its appraisal opinions on the extent under its state management and send it to the Ministry of Planning and Investment.

Within 40 days from the day on which the application is received, the investment registration agency shall organize the appraisal of the dossier and make an appraisal report and submit it to the Prime Minister for approval of the investment policy. After receiving the approval of the investment policy, the investor proceeds to establish the business as domestic entities.

How telecommunication lawyers in Vietnam could help?

The telecommunication services are subject to strong regulations hence the conditions for foreign investors to invest and set up company in telecommunication services or take part in providing telecommunication services are also relatively complicated. Therefore, investors are suggested to undertake research on telecommunication regulatory specific to their business with the help of telecommunication lawyers in Vietnam to make the investment effectively.

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Policies to Attract Foreign Investment in Hanoi

 Over the years, Hanoi city has organized quality conferences of foreign investment attraction, focusing on implementing measures to attract transnational corporations engaged in investment and business in Hanoi.

To perform domestic and international cooperation activities on investment promotion. Hanoi is constantly promoting and improving the efficiency of investment promotion activities, creating a reasonable and effective connection between domestic and foreign investment promotion activities in Hanoi in all fields, economic sectors; connecting investment promotion activities with trade promotion, tourism, and other related activities.

In addition, Hanoi has issued the preferential policies according to priority development groups in each locality based on the advantages and potentials of each locality; innovating the implementation method to well perform the works of attracting, calling and directing foreign investment; renovating mechanisms and policies to attract maximum financial resources from all economic sectors, especially mobilize idle capital from the population to develop production and business.

Hanoi is one of the cities that has favorable business conditions for high technology investors. The improvement of the business environment has greatly contributed to attracting domestic enterprises, foreign enterprises, and corporations to invest in industrial areas in Hanoi. Hanoi not only focuses on developing preferential policies for investors but also promotes the completion of industrial areas, especially high-tech parks. Many FDI enterprises and corporations investing in Hanoi appreciate the improvement of the business environment of Vietnam in general and Hanoi in particular. So the FDI corporations have affirmed that they will choose Hanoi as a place to expand their investment and business in the coming years, especially in the high-tech field.

According to the government in Hanoi, in recent years, Hanoi has become a center of attracting FDI of Vietnam. Currently, this city has more than 6,300 valid FDI projects with a total registered capital is more than 46,8 billion USD. In 2020, despite the Covid-19 epidemic influence, Hanoi still has attracted 4 billion USD of FDI capital and 145,000 billion of domestic capital.

Based on the attracting FDI schedule, from 2021 to 2025, Hanoi will attract 30-40 billion USD of foreign investment capital, in which 20-30 billion USD of disbursed capital. To achieve this goal, Hanoi will promote the investment attraction, focus on the investment in economic infrastructure development, developing the high-tech parks, industrial areas, industrial clusters according to planning, making the investment attraction lists for regions, fields, and products, selecting the investment for the projects using high technology which help the investors could make the investment in the city in an easy way.

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Forms of Foreign Investment in Vietnam

 From 01/01/2021, the Law on Investment 2020 in Vietnam came into force. According to the Vietnam Law on Investment 2020, there are five types of foreign investment in Vietnam.

- Investment in the establishment the economic organizations:

This type comprises two methods: Establishment of a company with 100% capital from foreign investors or establishment of a company between the domestic investors or the domestic government and foreign investors.  Before establishing the economic organizations, the investors must have the investment project, perform the procedures for issuance of the Investment Registration Certificate, satisfy the conditions on the percentage of charter capital ownership according to the Law on Securities, on equitization and transformation of state-owned enterprises, and the other conditions according to the international treaties that Vietnam signed (if any).

- Investment in the capital contribution, purchase shares, purchase contributed capital:

Capital contribution, purchase shares, purchase contributed capital are the types of indirect investment for foreign investors through the purchase of stocks, bonds, and other valuable documents. Investors must conform to the legal provisions on capital contribution, purchase share, and purchase contributed capital.

- Implementation investment project:

Foreign investors can sign the PPP contract. This is an investment method based on limited-term cooperation between the State and private investors through the signing of PPP contracts to attract private investors to participate in the implementation of investment PPP projects.

- Investment under the BCC contract:

BCC contract is signed between the domestic investors according to the Civil Law. BCC contract with at least one party being a domestic investor that performs the procedures for granting the Investment Registration Certificate.

- New forms of investment and economic organizations according to the Government’s rules.

We could assist the client to set up company in Ha Noi, Ho Chi Minh City, Da Nang or in other provinces in Vietnam.

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Quick Tips for Foreigners to Set up Company in Vietnam and Comply?

 

Feel challenging to set up company in Vietnam?

For a foreigner to a country like Vietnam which opportunities avail for business, it is attempting to create a business to operate and snatch the chance. But after the first eagerness feeling of potential business to generate, after settling in, the entrepreneur might wonder, how difficult it is to set up company in Vietnam or how challenging the business environment in Vietnam for operating and doing business when dealing with administrative procedures from registering investment, setting up the company, complying with periodical reporting and tax declarations… If you are reading this and feeling so, you are not alone. 

As a place with a favorable geographical position and plentiful labor resources, and growing consumer market, Vietnam is increasingly developing strongly, becoming a country attracting global investment among Southeast Asia countries. In order to carry out effective investment activities, foreign investors need to undertake research about the policies, investment incentives, legal requirements as well as the process and procedures for establishing a business in Vietnam. This will provide some quick tips for the fundamental considerations that international investors should consider if they have any ideas to chose Vietnam to make investment.

Investment to set up company in Vietnam is encouraged

An individual with foreign nationality or an organization established under foreign law could register investment and conduct business activities in Vietnam. Foreign investors are permitted to engage in any legal business, however, there are some specific industries that investors must meet the required conditions to be able to register investment. Some few areas that foreign investors are not permitted to conduct business in Vietnam for the reason for national security or state monopoly.

What license is required to set up company in Vietnam?

According to Vietnam law, an investor whom wishes to establish a company in Vietnam must obtain an investment registration certificate from an authorization agency.

The normal time limit for issuance of the Investment Registration Certificate (IRC) will be 15 days from the date of submission of valid dossier for an investment project. But it is important to build in the time for preparing the proper documents i.e. application, financial report, bank balance, personal documents and many of such documents require apostille, or notarization and legalization and translation into Vietnamese before being submitted.

Vietnam law does not require a minimum capital to set up a business, except for conditional investment or business lines. But investors are obliged to contribute capital according to the schedule stated in the IRC and that the government authority has the right to request the investor to explain the business plan to their satisfaction based on the proposed investment capital.

In case the investor cannot contribute enough capital according to the committed time limit, the competent authority may apply sanctions, including revocation of the IRC or the investor has to adjust the IRC to reflect the actual contribution of investment. Once having the IRC, the investor then request to obtain Enterprise Registration Certificate (IRC) which takes 5 days from the date of submission of valid dossier for business establishment to complete the business setting up process.

After licensing, what to do to comply?

Now, after have a business set up in Vietnam, the enterprise starts to conduct business i.e. sign contract to lease space officially, hire people, enter into business transactions to buy and sell services or products. 

To make it legally bound, the documents needs to be signed and sealed.  Then the question is how to have a seal?  Back in the past, it was more challenging to have the seal made for an enterprise after being established because it was managed by the Public Security authority.

There has been a discussion between legislators and business experts about totally removing the seal being stamped on the legal documents in Vietnam because the signature of the legal representative is most important. Over the time, the once strict law governing the seal issuance has been loosen up. But in Vietnam the seal is still very important that together with the legal representative signature it show the official notice i.e. a decision by the legal representative of the business to terminate a labour contract; or an obvious approval of an entity to a transaction it enters to hire a construction company for building a factory. 

Depending on the terms in the company’s charter, the investor has the right to make more than one seal to use. The enterprise must send a notice to the business registration office where its head office is located for publication on the National Business Registration Portal before using, altering, destroying, or changing the number of seals. The seal can be used starting on the day the notification process has been finished and the seal sample has been uploaded on the National Business Registration Portal for verification purpose.

Remember to declare and pay taxes in Vietnam

During the operation of the business after being started, the investor needs to pay attention to tax obligations, which is very important in most jurisdictions except in tax heaven countries.  But Vietnam is not on the exemption list. Every company needs to submit tax declaration. Every year, the business will need to pay a number of different taxes and fees such as license fees (based on registered charter capital); Corporate Income Tax (CIT) when the company makes profit; declare and pay Value Added Tax (VAT) for sold goods or services, on behalf of individual declare and pay Personal Income Tax (PIT), or in some cases export tax and import tax, tax on lands.

Remember to submit mandatory reports in Vietnam

In addition, foreign investor also needs to fully comply with the investment project reporting regime in accordance with the law. These reports will be made periodically (monthly, quarterly or annually) on such contents as: implemented investment capital, business investment results, information on labor, employed foreign workers, reports on environmental protection… Complying with the implementation of tax payment obligations and periodically reporting to ensure timely implementation as prescribed will help the company avoid unnecessary risks such as administrative sanctions, business suspension, penalties that could impact the business.

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12 Steps on How to Open Company in Vietnam Amid Global Geopolitical Shifts

 

Why Open Company in Vietnam Attractive?

Amid the current geopolitical conflicts worldwide, Vietnam continues to emerge as a favorable destination for business ventures. Foreigners increasingly find Vietnam an attractive option to invest and open company in Vietnam due to its relatively low costs and strategic location, making it a viable base for providing services to global customers.

When investing to open company in Vietnam, and while there are compliance costs to consider, including hiring English-speaking consultants, lawyers, accountants, and auditors, the overall business potential remains strong.

The following will explore the steps to open company in Vietnam, highlighting the advantages and considerations for foreign entrepreneurs.

The Appeal of Vietnam for Foreign Entrepreneurs

Vietnam’s stable political environment, growing economy, and favorable investment policies make it an appealing destination for foreign investors. The country’s competitive labor costs, affordable living expenses, and strategic location in Southeast Asia enhance its attractiveness. Despite the geopolitical tensions in other parts of the world, Vietnam continues to maintain a robust economic growth trajectory, providing a fertile ground for new businesses.

5 Steps Guide to Register Company in Vietnam

Step-by-Step Guide to Open Company in Vietnam

12 Steps on How to Open Company in Vietnam

1. Determine the Business Structure

2. Conduct Market Research

3. Choose a Business Name

4. Prepare Required Documentation to Open Company in Vietnam

5. Apply for an Investment Registration Certificate (IRC)

6. Obtain the Enterprise Registration Certificate (ERC)

7. Open a Bank Account

8. Contribute Charter Capital

9. Obtain Necessary Licenses and Permits

10. Hire Local Employees

11. Set Up an Office

12. Ensure Compliance with Local Regulations

1. Determine the Business Structure

The first step to open company in Vietnam is to decide on the type of business structure. The most common forms for foreign investors are:

-Wholly Foreign-Owned Enterprise (WFOE): Fully owned by foreign investors.

-Joint Venture (JV): Partnership with local Vietnamese businesses.

2. Conduct Market Research

Understanding the local market is crucial. Conduct thorough market research to identify potential opportunities and challenges. This will help you tailor your business strategy to the Vietnamese market.

3. Choose a Business Name

Select a unique and appropriate name for your company. The name must comply with Vietnamese naming regulations, avoiding similarities with existing businesses.

4. Prepare Required Documentation to Open Company in Vietnam

Gather all necessary documents, including:

-Application form: For business registration.

-Charter: Outlining the company’s structure and operation.

-Investor Passport: Notarized copies of the investors’ passports.

-Bank Statement: Proof of financial capacity.

5. Apply for an Investment Registration Certificate (IRC)

Submit your application to the Department of Planning and Investment (DPI) to obtain an Investment Registration Certificate. This process usually takes about 15 working days.

6. Obtain the Enterprise Registration Certificate (ERC)

After receiving the IRC, apply for the Enterprise Registration Certificate. This step officially registers your company in Vietnam and typically takes about five working days.

7. Open a Bank Account

Open a corporate bank account in Vietnam to manage your company’s financial transactions. Ensure you choose a bank that offers services suitable for foreign businesses.

8. Contribute Charter Capital

Deposit the charter capital into your corporate bank account within 90 days of receiving the ERC. The amount of capital depends on the business type and industry.

9. Obtain Necessary Licenses and Permits

Depending on your business activities, you may need additional licenses and permits. Consult with local authorities or legal experts to ensure compliance.

10. Hire Local Employees

Vietnam’s labor market is cost-effective, with a growing pool of skilled workers. When hiring, ensure compliance with local labor laws, including contracts, social insurance, and taxes.

11. Set Up an Office

Choose a suitable location for your office. Consider factors like proximity to business hubs, transportation links, and the cost of rent. Office expenses in Vietnam are generally lower compared to many other countries.

12. Ensure Compliance with Local Regulations

Hire English-speaking business consultants, lawyers, and accountants to help navigate the local regulatory environment. This includes tax compliance, annual audits, and reporting requirements.

Cost Considerations for Opening Company in Vietnam

- Living Costs

Vietnam offers a relatively low cost of living compared to many Western countries. This includes affordable housing, transportation, food, and healthcare, making it an attractive destination for expatriates.

- Labor Costs

Labor costs in Vietnam are competitive. The average monthly wage is significantly lower than in many other countries, providing a cost-effective labor force for businesses.

- Office Expenses

Office rental costs vary depending on the location. Ho Chi Minh City and Hanoi are the most expensive, but still more affordable compared to cities like Singapore or Hong Kong.

- Compliance Costs

While the cost of hiring English-speaking consultants, lawyers, accountants, and auditors can be higher, their expertise is crucial for ensuring compliance with Vietnamese laws and regulations.

Advantages to Open Company in Vietnam

- Strategic Location

Vietnam’s location in Southeast Asia provides easy access to major markets, including China, Japan, and ASEAN countries. This strategic position is ideal for businesses looking to expand regionally.

- Growing Economy

Vietnam’s economy has been growing steadily, driven by industrialization, exports, and foreign investments. This growth presents numerous opportunities for new businesses.

- Favorable Investment Policies

The Vietnamese government offers various incentives to attract foreign investment, including tax breaks and reduced tariffs for certain industries.

- Young and Dynamic Workforce

Vietnam has a young and dynamic workforce that is increasingly skilled and educated, particularly in technology and engineering sectors.

- Stable Political Environment

Vietnam’s stable political environment provides a secure backdrop for business operations, reducing the risks associated with political instability.

Potential Challenges

- Administration Processes

Navigating the administration processes can be challenging for foreigners. Understanding the local administrative procedures and regulations is crucial for smooth business operations.

- Language Barrier

While English is becoming more widely spoken, the language barrier can still pose challenges. Hiring local staff who are proficient in English can help mitigate this issue.

- Cultural Differences

Understanding and respecting local business culture is essential for successful operations. Building relationships and networking are key components of doing business in Vietnam.

- Compliance and Regulatory Changes

Vietnam’s legal and regulatory environment is constantly evolving. Staying updated with the latest changes and ensuring compliance is essential to avoid legal issues.

Investing to open company in Vietnam presents numerous opportunities for foreign investors, particularly given the country’s economic growth and strategic location amid global geopolitical conflicts.

By following the steps outlined in this guide and leveraging the expertise of local professionals, foreign entrepreneurs can establish a successful and sustainable business in Vietnam. Despite the challenges, the potential for growth and profitability makes Vietnam an attractive destination for business ventures.

Vietnam offers a compelling environment for foreign entrepreneurs looking to establish a base for providing services to global customers.

With careful planning, market research, and compliance with local regulations, the investment to open company in Vietnam can be a rewarding endeavor. The country’s favorable economic conditions, competitive costs, and strategic location provide a strong foundation for building a successful business.

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