The business of leasing machinery and equipment without operators is not a conditional business line for Vietnamese investors. Therefore, establishing a Vietnamese-owned company is relatively straightforward, without needing to meet any specific conditions or obtain sub-licenses before commencing operations. Accordingly, many Vietnamese-owned companies provide machinery and equipment leasing services, including the increasingly popular service of leasing electric vehicle batteries, driven by the strong growth of electric cars and motorcycles.
However, this service of leasing machinery and equipment without operators is a conditional business line for foreign investors. Article 3.1 of Decree No. 09/2018/ND-CP prescribes that the leasing of goods, excluding financial leasing, is considered one of the activities of trading in goods and activities directly related to the trading of goods. Furthermore, Clause 22, Section B, Appendix I of Decree No. 31/2021/ND-CP prescribes that the trading of goods and activities directly related to the trading of goods shall be industries and trades subject to market access conditions for foreign investors.
Article 5.1.dd of Decree No. 09/2018/ND-CP prescribes that foreign-invested companies operating in the leasing of goods, excluding financial leasing (except for the leasing of construction equipment with operators), must obtain a Business License. Article 9 of Decree No. 09/2018/ND-CP prescribes the conditions for obtaining a Business License as follows:
Case 1: Foreign investors from countries or territories that are parties to international treaties to which Vietnam is a member, and which contain commitments to open the market for the trading of goods and activities directly related to the trading of goods:
(i) Meeting the market access conditions prescribed in the international treaty to which Vietnam is a member (including: the foreign investor’s charter capital ownership ratio in the economic organization, the form of investment, the scope of investment activities, the capacity of the investor, and the partners participating in the investment activities);
(ii) Having a financial plan to carry out the activities for which the Business License is sought;
(iii) Having no overdue tax debts in case where the company has been established in Vietnam for one year or more.
Case 2: Foreign investors not from countries or territories that are parties to international treaties to which Vietnam is a member:
(i) Having a financial plan to carry out the activities for which the Business License is sought;
(ii) Having no overdue tax debts in case where the company has been established in Vietnam for one year or more;
(iii) Meeting the following criteria: Compliance with specialized laws; Conformity with the level of competition of domestic enterprises in the same field of activity; The ability to create jobs for domestic workers; The ability and level of contribution to the state budget.
According to Vietnam’s WTO Schedule of Commitments, Vietnam has not committed to opening the market for the leasing of machinery and equipment without operators. However, depending on their nationality, foreign investors may consider not applying the WTO Schedule of Commitments, and instead applying other international treaties to which Vietnam is a party and which contain commitments to open the market or do not restrict the activity of machinery and equipment leasing. In such cases, the foreign investor will be considered under the conditions prescribed in Case 1 above, making the issuance of a Business License for the company easier and more convenient.
The Department of Industry and Trade where the foreign-invested company’s head office is located is responsible for issuing, re-issuing, amending, and revoking the Business License after obtaining the approval of the Ministry of Industry and Trade. Based on our experience, many foreign-invested companies have been authorized by competent state authorities to provide this service of leasing machinery and equipment without operators.
Disclaimers:
This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.
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Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Business and Investment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.
