Doing Business in Vietnam

Similar to establishing a business, the establishment of a foreign-invested manufacturing plant in Vietnam still requires two main types of licenses: the Investment Registration Certificate and the Enterprise Registration Certificate. However, due to its complex nature and the need for a larger land area, establishing a factory requires several other procedures. The following are some of the main procedures for establishing a foreign-invested manufacturing plant in Vietnam.

1. Selecting a location for the manufacturing plant

• Leasing existing facilities – ready-built factories from licensed infrastructure leasing companies in Vietnam. This option is suitable for investors who need to lease land to build a small-scale factory;
• Leasing land in industrial parks, export processing zones, or high-tech parks. This option is suitable for investors who need to lease land for a long term and a medium to large area to build a manufacturing plant. When building a factory in an industrial or export processing zone, the investor will benefit from specific regulations applicable to enterprises in these zones;
• Leasing land directly from the State. This option is suitable for investors planning a long-term lease with a large land area. However, this option has a drawback as it can be quite time-consuming and costly to obtain in-principle investment approval from the competent authority regarding land use planning and the site clearance plan (in case the leased land has not been cleared);
• In case an investor owns land and wishes to convert it from residential land to land for factory construction, the investor must fully meet the conditions on construction density as prescribed by the respective province to be granted a construction permit for their factory. Additionally, the factory construction must always be consistent with the detailed construction plan approved by the competent state authority; ensure it aligns with the land use purpose according to the approved state plan, conforms to the approved construction design, and meets the safety conditions for the construction permit for that project.

2. Applying for approval of the Environmental Impact Assessment Report

When a foreign investor invests in a service sector in Vietnam, they will face restrictions from Vietnam’s GATS commitments signed upon joining the WTO, such as regulations on capital contribution ratios and limitations on the types of legal entities for specific sectors in Vietnam. However, when building a manufacturing plant in Vietnam, foreign investors face fewer market access restrictions compared to investing in service sectors, except for certain conditional business lines such as automobile manufacturing and assembly, cosmetics, and medical equipment.

Furthermore, the production process may have negative impacts on the environment. Therefore, certain subjects and projects specified in Appendix II of Decree No. 18/2015/ND-CP of the Government must undergo the environmental impact assessment procedure. This procedure must be carried out during the project preparation phase.

3. Environmental Impact Assessment Dossier

• Dossier for appraisal request:
• One (01) written request for the appraisal of the environmental impact assessment report, following the prescribed form;
• Seven (07) copies of the project’s environmental impact assessment report. If the number of appraisal council members is more than seven (07), the project owner must provide additional copies. The format of the cover, sub-cover, and the required structure and content of the report must follow the prescribed template;
• One (01) copy of the feasibility study report, investment project report, or other equivalent documents.
• Dossier for approval submission after successful appraisal:
• One (01) written request for the approval of the environmental impact assessment report, which must clarify the contents that have been amended and supplemented according to the conclusions of the appraisal council, unless no revisions are required;
• The environmental impact assessment report, hardbound, with the project owner’s signature at the bottom of each page, including appendices, as regulated.

The investor submits the dossier requesting approval of the environmental impact report to the Provincial People’s Committee. The appraisal period is a maximum of 30 days from the date of receipt of the complete and valid dossier.

Note: For cases of constructing a manufacturing plant that do not require approval of an environmental impact assessment report, the investor must carry out the procedure for certification of the environmental protection plan at the Department of Natural Resources and Environment where the factory is located.

The dossier for certification of the environmental protection plan includes:

• Three (03) copies of the environmental protection plan with the cover and content requirements following the prescribed template;
• One (01) copy of the investment report or the production, business, or service plan.

4. Applying for the Investment Registration Certificate

For projects subject to in-principle approval

Depending on the project scale, the investor must apply for in-principle investment approval from different competent authorities such as the National Assembly, the Prime Minister, or the Provincial People’s Committee.

The dossier for in-principle approval includes:

• A written request for investment project implementation;
• A copy of the ID card, citizen identification card, or passport for an individual investor; a copy of the Establishment Certificate or other equivalent document confirming the legal status for an institutional investor;
• An investment project proposal including: the project investor, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, investment schedule, labor demand, proposals for investment incentives, and assessment of the project’s socio-economic impacts and efficiency;
• A copy of one of the following documents: the investor’s financial statements for the last 02 years; a commitment of financial support from the parent company; a commitment of financial support from a financial institution; a guarantee of the investor’s financial capacity; or a document explaining the investor’s financial capacity;
• A proposal for land use demand; if the project does not request the State to allocate, lease land, or permit the change of land use purpose, a copy of the site lease agreement or other document confirming the investor’s right to use the location for the project must be submitted;
• An explanation of the technology to be used for the project, including: technology name, origin, process diagram; main technical specifications, and the operational status of the main machinery, equipment, and technological lines;
• A BCC (Business Cooperation Contract) for investment projects under the form of a BCC;
• A preliminary environmental impact assessment and environmental protection solutions.

The investor will submit the dossier to the investment registration agency to seek in-principle investment approval from the competent authority. After receiving the in-principle investment approval, the investor does not need to carry out the procedure for obtaining the Investment Registration Certificate. The investment registration agency will issue the Investment Registration Certificate to the investor within 05 working days from the date of receiving the written in-principle investment approval.

For projects not subject to in-principle investment approval

To establish a factory in Vietnam, a foreign investor must be granted an Investment Registration Certificate. The dossier for an Investment Registration Certificate includes:

• A written request for investment project implementation (as per the prescribed form);
• A copy of the ID card/citizen identification card or passport for an individual investor; a copy of the Establishment Certificate or other equivalent document confirming the legal status for an institutional investor;
• An investment project proposal including: the project investor, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, investment schedule, labor demand, proposals for investment incentives, and assessment of the project’s socio-economic impacts and efficiency;
• A copy of one of the following documents: the investor’s financial statements for the last 02 years; a commitment of financial support from the parent company; a commitment of financial support from a financial institution; a guarantee of the investor’s financial capacity; or a document explaining the investor’s financial capacity;
• A lease contract for the head office, documents proving the lessor’s right to lease (Land Use Right Certificate, Construction Permit, Business Registration Certificate with real estate business function of the lessor, or equivalent papers);
• A proposal for land use demand; if the project does not request the State to allocate, lease land, or permit the change of land use purpose, a copy of the site lease agreement or other document confirming the investor’s right to use the location for the project must be submitted;
• An explanation of the technology use for projects using technology on the List of technologies restricted from transfer under the law on technology transfer, including: technology name, origin, process diagram; main technical specifications, and the operational status of the main machinery, equipment, and technological lines;
• A BCC (Business Cooperation Contract) for investment projects under the form of a BCC.

The Company must declare project information online on the National Foreign Investment Information System. Within 15 days from the online declaration date, the investor must submit the hard-copy dossier for the Investment Registration Certificate to the Management Board of the provincial Industrial Parks, Export Processing Zones, and High-Tech Parks. After the dossier is received, the investment registration agency will review its validity and issue a code for the investment project. If the dossier is rejected, the agency must notify the investor in writing, stating the reasons.

5. Applying for the Enterprise Registration Certificate

After being granted the Investment Registration Certificate, you can begin the procedures to establish the company.

The dossier for an Enterprise Registration Certificate:

• Application for Enterprise Registration (as per the prescribed form);
• Draft of the company charter;
• A list of members for a multi-member LLC, or a list of founding shareholders for a joint-stock company;
• A valid copy of one of the following personal identification papers:
• For individuals: A valid ID card, passport, or citizen identification card;
• For organizations: The Enterprise Registration Certificate of the organization, accompanied by the personal identification document of the organization’s authorized representative;
• The decision on capital contribution and the letter of appointment for the authorized representative, for members or shareholders that are organizations;
• Other documents in special cases.

After preparing a complete dossier, the Company submits it to the business registration agency via the National Business Registration Portal. Within 03 – 05 days, the business registration agency will issue the Enterprise Registration Certificate if the dossier is valid. Afterward, the investor must publish the company’s information on the National Business Registration Portal.

6. Applying for a factory construction permit

In the case of new factory construction, the investor must apply for a new construction permit.

The construction permit dossier includes:

• An application for a construction permit (as per the prescribed form);
• A copy or a file containing a primary scan of one of the documents proving land use rights as prescribed by land law;
• A copy or a file containing a primary scan of two sets of technical design drawings or construction design drawings that have been approved and appraised by specialized construction agencies as regulated, with each set comprising: The project’s master plan drawing or master plan for each phase at a 1/100 – 1/500 scale; The layout drawing of each structure on the land plot at a 1/100 – 1/500 scale, accompanied by a site location diagram; Elevation and main section drawings of each structure at a 1/50 – 1/200 scale; Foundation plan drawings at a 1/100 – 1/200 scale and foundation section drawings at a 1/50 scale for each structure, accompanied by connection diagrams for rainwater drainage, wastewater treatment, water supply, power supply, and communication systems at a 1/50 – 1/200 scale.
• A copy or a file containing a primary scan of the decision approving the construction investment project;
• A copy or a file containing a primary scan of the design appraisal report from a specialized construction agency for works that require design appraisal by regulation;
• A copy or a file containing a primary scan of the investor’s commitment to ensure safety for the structure and adjacent structures for projects built in-fill or with basements;
• A copy or a file containing a primary scan of the declaration of capacity and experience of the design organization or individual, following the prescribed form, accompanied by a copy of the construction practice certificate, for works whose designs have not yet been appraised by a specialized construction agency.

The Management Board of the industrial parks, export processing zones, economic zones, or high-tech parks will receive the dossier and issue the Construction Permit to the investor if the dossier is valid, or issue a written refusal if the dossier is invalid.

7. Applying for a fire prevention and fighting permit

The dossier for a fire prevention and fighting permit includes:

• An application for a Fire Prevention and Fighting Certificate (as per the prescribed form);
• A certified copy of the certificate of appraisal of fire prevention and fighting design; an acceptance document on fire prevention and fighting for newly renovated or constructed facilities, and for motor vehicles that require fire safety assurance after modification or new construction; a certified copy of the fire safety inspection record for other facilities and motor vehicles;
• A complete list of all equipped fire prevention, firefighting, and rescue equipment (as per the prescribed form);
• Firefighting plans;
• The decision to establish the grassroots fire prevention and fighting team;
• A list of individuals who have completed fire prevention and fighting training.

The investor submits the dossier to the Police Department of Fire Prevention and Fighting and Rescue. If another individual or unit is authorized to carry out the procedure, a letter of authorization must be attached.

In addition to the main procedures mentioned above, the foreign investor must still perform some basic post-establishment procedures similar to setting up any enterprise, such as paying taxes, obtaining a seal, hanging a sign, printing invoices, etc.

For further assistance, please contact Crowe Vietnam.