When foreign investors invest in Vietnam, in addition to investment conditions and procedures, they must also strictly comply with the provisions of the Specialized Law when conducting business in specific industries.
What is a foreign-invested Company?
An economic entity that has a foreign investor as a member or shareholder is defined as having foreign investment, according to the Investment Law’s regulations.
“An individual with a foreign nationality or an entity created under a foreign legal system that engages in business investment activities in Vietnam”
Therefore, whenever a foreign investor contributes capital to an economic organization, regardless of the amount of capital, that economic organization is generally considered as having foreign investment.
When carrying out the following activities, it is required to apply for a Trading license; Retail license:
a) Retail distribution of goods (excluding rice; sugar; video-recorded items; books, newspapers and magazines)
b) Import and wholesale distribution of goods being lubricating oils and greases;
c) Retail distribution of rice; sugar; recorded items; books, newspapers and magazines;
d) Providing logistics services; except for logistics service sub-sectors to which Vietnam has committed to open the market in international treaties to which Vietnam is a member;
đ) Leasing of goods, excluding financial leasing; except for rental of construction equipment with operators;
e) Providing trade promotion services, excluding advertising services;
g) Providing commercial intermediary services;
h) Providing e-commerce services;
i) Providing services of organizing bidding for goods and services.
Cases in which a Trading license; Retail license is not required
Beside the above-mentioned activities, a foreign-invested economic organization is entitled to conduct the following goods purchase-and-sale activities and activities directly related to the sale and purchase of goods as below, after registering to perform such activities in relevant licenses according to the provisions of the Investment Law and Enterprises Law (no need of Trading license; Retail license):
a) Exercising the right to export;
b) Exercising the right to import;
c) Exercising the right to distribute;
d) Providing commercial assessment services;
đ) Provide logistics services;
e) Leasing of goods, excluding financial leasing;
g) Providing trade promotion services, excluding advertising services;
h) Providing commercial intermediary services;
i) Providing e-commerce services;
k) Providing services of organizing bidding for goods and services.
Penalties for not applying for a Trading License / Retail License
One of the following violations bears a penalty of between VND 10,000,000 and VND 15,000,000: “Trading in products and services in a conditional business line without a Trading license according to the law;”
The Vietnamese Government has recently intensified its inspections of businesses around the nation, particularly foreign investment Companies, to make sure they are complying with the law. And t he amount of penalty is increasing, so foreign investors and companies should abide by the law to prevent the fines.
Some notes of the relevant documents from government for further details:
- Investment Law 2020: effective from January 1, 2021;
- Decree 09/2018: effective from January 1, 2018;
- Decree 98/2020/ND-CP: effective from October 15, 2020.