Retail activities of foreign investors (Part 1)

ARTICLES

Retail activities of foreign investors (Part 1)

According to “The 2019 Population Census” of the General Statistics Office, the population of Vietnam has more than 96 million people and becomes the 15th most populous country in the world. It shows that consumer demand in Vietnam is quite high. There is also the advantage of Vietnam when attracting many foreign investors in the world to invest, develop the retail market in Vietnam, and creating a rush of the retail industry and a competitive market with domestic enterprises.

Besides, the retail industry is the market to be opened by Vietnam, creating favorable conditions for foreign investors who are members of the WTO to access and develop it quickly. However, the law of Vietnam creates favorable conditions for foreign investors to invest in Vietnam and establish business organizations for retailing activities. Still, the requirements for foreign-invested business organizations to retail trade are what foreign Investors can need to be concerned.

As defined in Decree No. 09/2018/ND-CP Guidelines For The Law On Commerce And The Law On Foreign Trade Management Regarding Sale Of Goods And Other Activities Directly Related To Sale Of Good Of Foreign Investors And Foreign-invested Business Entities In Vietnam, it is stipulating that the foreign-invested business organizations must carry out the business licenses and licenses for setting up a retail outlet before operating.

So, what is retailing? According to Clause 7, Article 3 of Decree No. 09/2018/ND-CP, “Retailing involving selling goods to individuals, households, other organizations for consumption purposes.” With the definition of this retailing, it has also made Investors confused in determining the business purpose for each product or goods. Because, for many organizations distributing a variety of goods, including wholesaling (wholesaling involves selling goods to wholesalers, retailers, other organizations, and traders; excluding retailing[1]) and retailing, they need to identify the goods-users so that it can determine whether it is wholesaling or retailing.

Before applying for retailing licenses, foreign-invested business organizations need to identify the following issues to determine the types of permits necessary to apply for grants:

  • Retailing through company’s websites, or e-commerce websites, or in other forms without setting up retail outlet to sell goods directly at the stores; or
  • Retailing through setting up a retail outlet.

For mode (1), foreign-invested business organizations only need to apply for a business license for retailing but do not set up a retail outlet.

For mode (2), foreign-invested business organizations should apply for two (02) licenses as follows:

  • Business license for retailing with the establishment of a retail outlet; and
  • License for setting up a retail outlet for each retail business location.

Also, before the foreign Investor is planning to retail activities in Vietnam’s market, investors need to determine the business plan, market orientation, operation method, and financial allocation as well as human resources for retailing activities in Vietnam’s market. To be able to prove to the competent authorities that the capacity and the severe investment of Investors in Vietnam, namely the following.

  • Type of retail goods;
  • The origin of goods, utilities and competitive advantage between products that the Investor intends to do business compared to those already present on Vietnam’s market;
  • The suppliers expected to cooperate in supplying goods to the company;
  • Warehouses for goods delivered to retail outlets or delivered to consumers;
  • Estimated investment capital;
  • Financial plan of at least 03 years for the investment and development of the retail market in Vietnam;
  • Human resource planning for retailing activities;
  • The market area expected to choose the retailing business and the expected retailing business location (in the Commercial Center or beyond the Commercial Center, the space and scale of the retail outlet);
  • Experience or strengths of Investors for retailing activities and develop retailing businesses in Vietnam, as well as to provide a source of contribution to the State budget.

After the Investor has completed the procedure for establishing a business organization in Vietnam, the business organization after its establishment will apply for the Business License for the Department of Industry and Trade, where the foreign-invested industrial organization headquartered; and License For Setting Up A Retail Outlet at the Department of Industry and Trade where the foreign-invested business organization locates its retail outlet.

The above are some of the challenges for retailing activities that foreign Investors should take note of before deciding to invest in Vietnam. The conditions to be licensed, as well as the licensing process, will be continuously updated by Apolat Legal in the article of Part 2.

 

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.

 

[1] Clause 6 Article 3 of Decree No. 09/2018/ND-CP