The population of Vietnam is 98,856,989 people (updated on May 17, 2022 according to the latest data from the United Nations), therefore, Vietnam is an attractive and potential retail market to foreign investors to participate. However, when foreign investors want to carry out retail activities in Vietnam, they need to meet certain conditions.
According to Vietnamese law, a company with foreign capital in Vietnam (FDI Enterprise) that wants to conduct retail distribution activities in Vietnam must be granted a business license to exercise the right to retail distribution of goods by the Department of Industry and Trade.
To be considered for a business license, an FDI Enterprise needs to fully satisfy the conditions specified in Clause 1, Article 9 of Decree No. 09/2018/ND-CP dated January 15, 2018 as follows:
- Satisfy conditions on market access in international treaties to which Vietnam is a contracting party;
- Have a financial plan to carry out the activities requested for a business license;
- No more overdue tax debt if established in Vietnam for 01 year or more.
To carry out the procedures for granting a business license, it is necessary to prepare documents, including:
- An application for a business license (Form No. 01 in the Appendix issued with Decree 09/2018/ND-CP dated January 15, 2018).
- Explanatory document has following contents:
- Explanation of the conditions for granting the corresponding business license as stated
- Business plan: Description of contents and methods of conducting business activities; present business and market development plans; labor demand; assess the impact, socio-economic efficiency of the business plan;
- Financial plan: Report on business results on the basis of audited financial statements of the latest year in case the enterprise has been established in Vietnam for 01 year or more; explanation of capital, capital sources and capital mobilization plans; enclosed with financial documents;
- Business situation of goods purchase and sale activities and activities directly related to the purchase and sale of goods
- Documents from tax authorities proving that there is no overdue tax debt.
- Copy of Business Registration Certificate; Certificate of investment registration in the project of goods purchase and sale activities and activities directly related to the sale and purchase of goods (if any).
With a business license to carry out retail distribution, FDI Enterprise can conduct online retail on enterprise websites and e-commerce platforms. However, in order to retail at a retail store, enterprise must obtain a business license and establish a retail store.
For the first retail store, FDI Enterprise needs to consider and meet the requirements:
- Have a financial plan to set up a retail store;
- No more overdue tax debt in case it has been established in Vietnam for 01 year or more;
- The location of the retail store must be consistent with the relevant planning in the geographical market area.
To carry out the procedures for applying for a retail store license, FDI Enterprise needs to prepare documents, including:
- An application form for a license to establish a retail store (Form 04 in the Appendix issued with Decree No. 09/2018/ND-CP dated January 15, 2018);
- Explanatory document has following contents:
- Location for setting up retail store: Address of retail store; description of the general, relevant area and the area used for the establishment of the retail store; explain the satisfaction of conditions for the location of the retail store in accordance with the relevant planning in the geographical market area; enclosed with documents on the location of the retail store;
- Business plan at the retail store;
- Financial plan for setting up a retail store.
In case the FDI Enterprise wants to set up more than one retail store, from the second retail store onwards, the FDI Enterprise must meet the conditions prescribed by law to be licensed, including conditions such as the first retail store and add criteria of economic needs test (ENT) if an ENT is required by law.
According to the provisions of Article 23 of Decree No. 09/2018/ND-CP, if the FDI Enterprise that fully meets the following conditions, it is not required to carry out ENT when opens opens second retail store onwards: (i) with an area of less than 500m2, (ii) located in a commercial center and (iii) not in the type of convenience store, mini supermarket. Therefore, if the FDI Enterprise does not meet the above conditions, it is necessary to perform ENT when establishing a retail store outside the first store.
Procedures for ENT and non-ENT when opens second retail store onwards are different. Accordingly, for the case of ENTs, there will be more steps and that includes the establishment of the ENT Council and the evaluation of ENT criteria in accordance with the law.
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Note: This article is for informational purposes only and it is not a legal advice. The content of the article represents its own of TTVN Legal, it subject to change without prior notice.