How to Establish a Trading Company in Vietnam
HCMC – If a business wishes to engage in import and export activities as well as domestic distribution (i.e., retail, wholesale, and franchising trade activities) in Vietnam, the most common method chosen is establishing a trading company.
Generally, a trading company is inexpensive to establish and can be of great assistance to foreign investors by combining both sourcing and quality control activities with purchasing and export facilities, thus providing more control and quicker reaction times compared to sourcing purely while based overseas.
Trading companies are also the ideal choice for foreign companies that need to source in Vietnam in order to resell in Vietnam. Without a Vietnamese trading company, the alternative would be to buy from overseas, and have the goods shipped out of Vietnam before then reselling back into Vietnam via local distributors (which would mean additional logistical costs, customs duties, and VAT).
Trading and distribution is still a sensitive sector for foreign investors. Therefore, the licensing process can vary 4-6 months from the date of submitting the application dossier to the licensing authority, until the Investment Certificate can be issued.
To set up a trading company (distribution company) without a retailing outlet or a trading company with its first retailing outlet, the investor must prepare an application dossier to apply for an Investment Certificate and submit to the licensing authority at the provincial level. The application dossiers after that will be submitted by the provincial licensing authority to the Ministry of Industry and Trade (MOIT) for approval. Once receiving the approval by MOIT, the provincial licensing authority will grant the Investment Certificate to the investors. In case the licensed foreign trading company want to have a second retailing outlet or more, they will be required to complete the procedure for setting up a retail establishment.
Under World Trade Organization (WTO) commitments, around 95 percent of goods can be distributed by businesses that are 100 percent foreign owned. For certain types of investment projects, such as those that are deemed to have a significant impact on Vietnam’s national policies, environment, etc., the government must issue an official investment policy on the project.
The application for the Investment Certificate must contain the following documents:
- Application letter
- Copy of Identity Card/Passport of individual; Copy of Business License or other equivalent documents
- Investment analysis with the following contents: information of investors, target of investment, scale of investment, investment capital and planning of capital contribution, location, duration, schedule of investment, labor demand, investment incentives, impact assessment, economic-social efficiency of the project
- A copy of one of the following documents: financial statements from the investors for the two most recent years; commitment of financial support by the parent company; commitment of financial support from a financial institution; guarantee of the financial capacity of the investors; bank reference letters explaining the financial capacity of the investors
- Proposal for land use or copy of land leasing contract/office leasing contract
- Business Cooperation Contract (BCC) for projects invested under a BCC contract
Foreign investors who wish to engage in import/export activities must obtain an IC, or follow the procedures for the adjustment of their current IC. It should be noted that the IC also serves as the company’s business license. The application comprises the following documents:
- Dossier of verification for the granting of an Investment Certificate
- A written explanation showing the satisfaction of the conditions laid out in Form MD-6 for goods trading and directly related activities
- Documents proving the financial capability and experience of the investor in the exercise of the right to export and right to import
The application for a license to engage in the activities of goods trading and directly related activities comprises the following documents:
- A written explanation showing the satisfaction of the conditions laid out in Form MD-6 relating to goods trading and other directly related activities
- Documents proving the financial capability and professional experience of the investor(s) in the exercise of operational targets relating to goods trading and other directly related activities
Foreign invested enterprises (FIE) are allowed to set up one retail establishment if they have received an Investment Certificate. However, if the FIE wishes to set up multiple retail establishments, it must apply for a license to set up these retail establishments. This application comprises the following documents:
- Application for the license to set up a retail establishment
- A written explanation satisfying the conditions of the law on state management for retail activities and conforming with the related master plans of central-affiliated cities and provinces
- Document from the provincial People’s Committee approving the economic demand of the additional retail establishment
- Completed Form BC-3
- Vouchers, which are issued by the relevant tax agencies, about enterprise income tax liability for two consecutive years. If an enterprise has no vouchers, it can issue a written explanation clearly stating the reasons why
Once the Ministry of Industry and Trade has accepted the application, the relevant state agency will grant the license for the setting up of retail establishments.
This article is an excerpt from the December 2014 edition of Vietnam Briefing Magazine, titled “Import and Export: A Guide to Trade in Vietnam“. In this issue, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations. Finally, we analyze Vietnam’s important free trade agreements and its World Trade Organization obligations.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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