Retail activities of foreign investors (Part 3)

ARTICLES

Retail activities of foreign investors (Part 3)

In this article, we will analyze the conditions for obtaining a retail outlet license for each retail business location in Vietnam.

According to Article 22 of Decree No. 09/2018/ND-CP, for the first retail outlet, Foreign-Invested Business Organizations need to meet the following conditions:

– Having a financial plan for setting up retail outlet: Similar to the conditions for applying for a business license, Foreign-Invested Business Organizations also need a specific plan for allocating financial source for retail outlet expected to apply for a license. Specific criteria need to identify and allocate financial resources, please see details in Part 2.

– There is no overdue tax debt in case it has been established in Vietnam for 1 year or more: this condition is also an indispensable condition to prove that the foreign-Invested Business Organization has well performed its tax obligations. At the same time, it shows the financial ability of the organization.

– Location of retail outlet in accordance with the relevant planning in the geographical market: depending on the specific location of retail outlet, there will be certain conditions to be met as follows:

  • For the first retail outlet: Foreign-Invested Business Organizations only need to meet the above conditions. However, the location of a retail outlet must meet the requirements for fire fighting safety shown by the fire prevention inspection a minute of the Fire Prevention and Fighting Police Department. In addition, Foreign-Invested Business Organizations need to have a lease contract to set up a retail outlet with the owner of the retail location or a memorandum of understanding for leasing such location.
  • For each additional outlet beyond the first one: there will be 2 cases, namely:
    • The first case: Location of retail outlet in a shopping mall with an area of ​​less than 500m2: In this case, Foreign-Invested Business Organizations only need to meet the same conditions as for the first retail outlet.
    • The second case: The location of a retail outlet outside the shopping mall or inside a shopping mall with an area of ​​over 500m2:

In this case, the retail outlet must be tested for economic needs (ENT) through a Council established by the People’s Committee of the province where the retail outlet is based on the proposal of the issuing agency Licenses include the following agencies: Representatives of provincial-level People’s Committees or agency representatives authorized by provincial-level People’s Committees to chair the ENT Council; representatives of Department of Industry and Trade, Department of Planning and Investment and related departments, agencies, and organizations as members of ENT council. In case the location of setting up a retail outlet is located in a geographical area of ​​a ward, commune, or township adjacent to another centrally run province/city, the ENT Council must have a representative of the People’s Committee contiguous provinces/cities.

The ENT Council will use the following criteria to assess the suitability or nonconformity of the retail outlet location:

– The size of the geographic market area affected when the retail outlet operates: this depends on the positive impact of the retail outlet on the area where the retail outlet is expected to operate.

– A number of retail outlets operating in geographic market areas: Foreign-Invested Business Organizations should review and examine retail establishments with similar groups of industries to determine advantages of retail outlets and their plans to compete with other retailers in the same geographical market area.

– The impact of the retail outlet on the stability of the market and the business activities of the retail outlet, traditional markets in the geographical market area: Foreign-Invested Business Organizations should state differences between the retailer’s merchandise and the traditional markets’ products to demonstrate the establishment of this retail outlet will not adversely affect the business activities of the traditional market.

– Influence of the retail outlet on traffic density, environmental sanitation, fire prevention and fighting in geographical market areas: Foreign-Invested Business Organizations need specific explanations on plans stabilizing traffic, having a parking place for consumers visiting shopping, and at the same time setting up fire prevention and fighting plans, sending employees to participate in training courses on fire prevention and fighting to have sufficient skills to handle situations when a fire occurs. In addition, environmental sanitation issues should also be put forward by the foreign-invested economic organization to make plans for daily treatment of waste from the retail outlet, handling of poor quality goods.

– The retail outlet’s ability to contribute to the socio-economic development of the geographical market area, specifically:

+ Creating jobs for domestic workers.

+ Contribution to the development and modernization of the retail industry in the geographic market area: Foreign-Invested Business Organizations should clearly state how the benefits of goods bring about effective retailing in the region.

+ Improve the environment and living conditions of people in the geographic market area: whether the establishment of a retail outlet will change consumer habits and has a significant impact on the environment and life of locals in that area or not.

+ Capability and level of contribution to the state budget: Foreign-Invested Business Organizations need to make plans on tax rates to contribute to the State budget so that the ENT Council can see the potential of the state budget retail outlets and also the criteria for assessing the suitability of setting up retail establishments.

After evaluating the above criteria, the ENT Council will consider the suitability or nonconformity of the location of the retail outlet so that the President of the ENT Council will make a written conclusion concluding the proposal to permit or not the retail outlet premises at that location.

The above are the compulsory conditions for a retail outlet to fulfill and need to be considered and paid attention to by Foreign-Invested Business Organizations when preparing goods retail business.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.