Foreign investors seeking to invest directly in Vietnam can choose to establish a new foreign-invested enterprise or establish a foreign-invested enterprise in the form of the share and stake acquisition.
a) Establishing new foreign-invested enterprises
Foreign investors will contribute capital right from the start upon establishing a company in Vietnam. The capital contribution rate of foreign investors depends on each specific business field and can range from 1 -100% of the company’s charter capital.
After carrying out initial procedures such as applying for investment guideline approval, applying for an Investment Registration Certificate, applying for an Enterprise Registration Certificate, and applying for a Business License or a Qualified License (for conditional business lines), the foreign investor shall continue to perform the obligation to contribute investment capital through the capital account, then transfer money from the above capital account to the current account to use for business operating expenses of the enterprise.
Thus, foreign investors need to open a capital contribution account. The investor shall fulfil the obligation to contribute capital to this capital account according to the time limit for capital contribution stated in the Investment Registration Certificate.
b) Establishing foreign-invested companies in the form of share or stake purchase
Other than establishing a new foreign-invested company, foreign investors can invest in Vietnam in the form of share or stake purchase from a Vietnamese company, then the Vietnamese company will become a foreign-invested company.
Foreign investors contribute capital or purchase shares/ stakes from Vietnamese companies that have been established and have obtained an Enterprise Registration Certificate. Foreign investors, depending on each specific field of activity, can make a capital contribution or share/stake purchase ranging from 1 – 100% of the total capital of the company. After the foreign investor completes the procedures to buy shares and contribute capital, the Vietnamese company will become a foreign-invested company.
Based on Vietnam’s WTO schedule of commitments in the field of trade and services, the percentage of foreign Investors’ capital when establishing an enterprise in each specific field is specified as follows: Vietnam does not limit the rate of capital contribution of foreign investors in such business lines as trade, construction, manufacturing, health care, education, etc. However, many fields have certain limits for investors such as advertising, tourism, transportation, logistics,… Besides, investor nationality will also affect the rate of capital contribution when establishing a company.
Because a Vietnamese enterprise has already been established before, the investor does not have to carry out the procedures for establishing a business. Instead, they only need to complete the procedures, applying for registration to buy shares and contributing capital to Vietnamese enterprises. Capital contribution, share and stake purchase shall be made as follows: The Vietnamese company opens a direct investment capital account. Investors make a capital contribution and transfer capital through the direct investment capital account. After the foreign investor completes the capital contribution, the company conducts procedures for changing the business registration. The change of business registration to record the capital contribution or share purchase by foreign investors in the enterprise registration dossier shall be settled by the competent state agency.
Thus, foreign investors have assorted options to choose a suitable form of investment. No matter which investment form the investor chooses, they still need to open a foreign direct investment capital account.
c) Opening a direct investment capital account
The State Bank of Vietnam issued Circular No. 06/2019/TT-NHNN, dated June 26, 2019, Guiding foreign exchange management for foreign direct investment activities in Vietnam. Under the circular, foreign investors and Vietnamese investors in enterprises with foreign direct investment capital in Vietnam may contribute investment capital in foreign currencies and Vietnam dong (VND) according to the amount of capital contributed by the investor as recorded at:
– Investment Registration Certificate.
– Registration Certificate, operation license.
– Notice of approval of capital contribution, share and stake purchase.
Subjects to opening direct investment capital accounts
- Enterprises established in the form of investment to establish economic organizations, in which foreign investors are members or shareholders.
- Other enterprises with foreign investors owning 51% or more of the enterprise’s charter capital, including:
+ Enterprises with foreign investors contributing capital to, buying shares or stakes from the enterprise (operating in conditional or non-conditional business lines and investment lines applicable to foreign investors) resulting in foreign investors owning 51% or more of the charter capital of the enterprise.
+ Enterprises established after separation, merger, or consolidation resulting in foreign investors owning 51% or more of the charter capital of the enterprise.
– Newly established enterprises according to specialized laws.
– Project enterprises established by foreign investors to implement PPP projects.
– In addition, foreign investors participating in BCCs, and foreign investors directly implementing PPP projects if a project enterprise is not established.
A foreign currency direct investment capital account must be opened at an authorized bank to conduct lawful receipts and payments in foreign currencies related to the foreign direct investment activity in Vietnam. In case an investment is made in Vietnam dong, a direct investment capital account in Vietnam dong may be opened at an authorized bank where a foreign currency direct investment capital account has been opened to conduct legal transactions in Vietnam dong related to the foreign direct investment activity in Vietnam.
Time period for capital contribution
The time period for investment capital contribution is specified in the investment registration certificate. Normally, this time limit is 90 days from the date of issuance of business registration. Foreign investors need to carry out the following steps respectively:
– Transfer investment capital into foreign currency to a foreign currency capital account. Transfer investment capital in Vietnam dong to the Vietnam dong capital account.
– Sell foreign currency and transfer it to the company’s payment account to carry out business activities.
Transfer money to carry out pre-investment activities
Before being issued the Investment Registration Certificate/Notice of satisfaction of the conditions for capital contribution, share or stake purchase from foreign investors/registration certificate/operation license by the competent authority: foreign investors are allowed to transfer money from abroad or from a foreign currency or Vietnam dong payment account of that foreign investor opened at an authorized bank in Vietnam to pay legal expenses in the implementation stage of investment preparation activities in Vietnam.
After being issued the Investment Registration Certificate/Notice of satisfaction of the conditions for capital contribution, share or stake purchase from foreign investors/registration certificate/operation license by the competent authority, the amount of money that foreign investors have transferred into Vietnam to carry out investment preparation activities is used to:
– Convert partly or fully into contributed capital.
– Convert partly or fully into foreign loan capital of enterprises with foreign direct investment capital.
– Remit to foreign investors in foreign currency or Vietnamese dong the amount remitted into Vietnam for pre-investment activities after deducting legal expenses related to investment preparation activities in Vietnam.
In case the competent authority does not issue the Investment Registration Certificate/Notice of satisfaction of the conditions for capital contribution, share or stake purchase from foreign investors/registration certificate/ operation license, or the investor does not continue to implement a direct investment project in Vietnam: Foreign investors are allowed to remit the remaining amount in foreign currency or buy foreign currency to transfer abroad for the amount already transferred into Vietnam and the arising interest (if any) after deducting the legal expenses related to investment preparation activities in Vietnam.
d) Payment account
“Organizational payment account is an account opened by an organizational customer at an organization providing payment services. The organizational current account holder is the organization that opens the account. The legal representative or authorized representative (collectively referred to as the legal representative) of the organization opening a payment account on behalf of that organization to perform transactions related to the payment account within the scope of representation”. (Circular No. 02/2019/TT-NHNN dated February 28, 2019 of the State Bank of Vietnam guiding the opening and use of payment accounts at payment service providers).
Currently, the law does not require enterprises to open payment accounts. However, tax administration authorities still tend to require tax payment to be made through the form of electronic tax payment, especially for enterprises with foreign direct investment capital. Opening a payment account also makes it easier for businesses to transact with partners and customers. Enterprises use payment accounts to pay expenses: salary for employees, payment of utility bills such as electricity, water, premises, and raw materials, etc.
- Advantages of opening a payment account
+ Opening a payment account makes business transactions more convenient:
- Enterprises can easily pay taxes, fees, and mandatory fees without having to go to the bank or the state treasury.
- Improving the level and professionalism of the business in the eyes of partners and customers.
- Saving time and costs when making transactions with partners and customers.
- Easily proving the validity of goods and service purchase invoices from 20 million VND upward.
- Making it more convenient to manage the income/ expenditure of the business and control financial matters.
+ Opening a payment account helps businesses deduct expenses when calculating corporate income tax. An enterprise may deduct all expenses when determining taxable income if it meets the following conditions as prescribed in the Law on Corporate Income Tax:
- Actual expenses incurred in connection with production and business activities of the enterprise.
- Expenses for vocational education activities.
- Expenses for performing defense and security tasks of the enterprise as prescribed by law.
- Expenses with sufficient invoices and documents as prescribed by law.
For enterprises wishing their expenses to be deductible when calculating corporate income tax and input value- added tax to be deducted, expenses of VND 20 million or more need to be paid from the company’s account. Therefore, opening a payment account for businesses is of necessity, helping businesses qualify for value-added tax deductions.
When opening a payment account, enterprises need to notify all their accounts to the Department of Planning
and Investment in line with the provisions of law to avoid penalties for late notification of bank account information change.
– How to use business payment account
+ Withdraw money from the company account:
- Withdrawing money from company and business accounts for consumption, production and business activities of the company is not as simple as personal accounts. To withdraw money from a company account, you need to use a check.
- Businesses can register to buy checks at the bank that opened the account. Withdrawal checks must be stamped with the enterprise’s stamp and signed by the legal representative, as well as the information about the person withdrawing the money, to be accepted by the bank.
- Transferring money from business account:
Enterprises need to comply with tax and accounting regulations in transferring and receiving money through corporate accounts. Improper remittance or receipt of money will affect the books of the business and may lead to the business being fined for administrative violations of regulations on accounting accounts as prescribed in Article 10 of Decree No. 41/2018/ND-CP, dated March 12, 2018, of the Government on the Regulation on sanctioning of administrative violations in the field of independent accounting and auditing.
– Reporting regime
Enterprises and economic organizations implementing investment projects shall timely report to the investment registration agencies and statistical offices in their localities on the implementation of investment projects, including the following:
+ Investment capital.
+ Business investment results.
+ Labor information.
+ State budget remittance.
+ Investment in research and development.
+ Environment handling and protection.
+ Specialized indicators by field of activity.
The submission of periodic reports shall be done online through the National Investment Information System. Investors can visit the website: https://fdi.gov.vn to perform reporting activities.
To the Department of Planning and Investment
Deadline for report’s submission:
- Monthly report: 12th of the month following the reporting month.
- Quarterly report: 12th of the first month of the quarter following the reporting quarter.
- Annual report: March 31 of the following year of the reporting year.
Reports shall follow the form provided in Circular No. 03/2021/TT-BKHDT, dated April 9, 2021, of the Ministry of Planning and Investment prescribing the forms and reports related to investment activities in Vietnam, offshore investment and investment promotion activities and follow the form provided at the National Investment Information System.
To the General Statistics Office
Deadline for report’s submission:
- Monthly report: 12th of every month.
- Quarterly report: 12th of the last month of the quarter.
- 6-month report: June 12 and December 12.
- 6-month report on livestock quantity and products on April 12.
- Annual report: March 31 of the following year.
Statistical reports shall be made in writing.
Reports shall follow the form provided in Circular No. 03/2021/TT-BKHDT, dated April 9, 2021, of the Ministry of Planning and Investment prescribing the forms and reports related to investment activities in Vietnam, offshore investment and investment promotion activities.