DOES OPENING A BRANCH OF A FOREIGN-INVESTED COMPANY NEED TO SET UP AN INVESTMENT PROJECT?

Compared to domestically invested companies, foreign-invested companies have more legal barriers when carrying out operations in Vietnam, such as: not being free to operate some business lines or needing more legal procedures than usual when establishing business establishments outside the head office.  

Therefore, HT Legal VN provides the article “Does opening a branch of a foreign-invested company need to set up an investment project?” as a useful legal reference to support corporate clients. 

1. Legal basis: 

– The Investment Law 2020 amended and supplemented in 2020, 2022 (hereinafter referred to as the “Investment Law 2020”); 

– Enterprise Law 2020 amended and supplemented in 2022 (hereinafter referred to as “Enterprise Law 2020”); 

– Decree 31/2021/ND-CP detailing and guiding the implementation of a number of articles of the Investment Law amended and supplemented by Decree 35/2022/ND-CP (hereinafter referred to as “Decree 31/2021/ND-CP”). 

2. Content: 

a. In which cases do I need to carry out procedures for issuance of investment certificates? 

Clause 1, Article 37 of the Law on Investment 2020 stipulates the cases in which procedures for issuance of an Investment Registration Certificate are carried out: 

“b) Investment projects of economic organizations specified in Clause 1, Article 23 of this Law.” 

More specifically, Point a, Clause 1, Article 64 of Decree 31/2021/ND-CP stipulates: 

“In case of implementation of a new investment project other than an investment project already granted an Investment Registration Certificate, a foreign-invested economic organization shall carry out the following procedures: 

a) Economic organizations specified at Points a, b and c, Clause 1, Article 23 of the Law on Investment shall carry out procedures for approving investment policies and issuing investment registration certificates as prescribed in this Decree;” 

b. Is the branch’s business activities considered an investment project of a foreign-invested company? 

Clauses 4 and 6 Article 3 of the Law on Investment 2020 stipulate:  

“4. Investment project means a set of proposals for medium-term or long-term capital expenditure to conduct investment and business activities in specific geographical areas within a specified period of time.  

6. New investment project means an investment project implemented for the first time or an investment project independent of an existing investment project.”  

An independent investment project can be understood as the discontinuation of this investment project does not affect the existing investment project. independent. 

For branch operations, the company must put up medium-term or long-term capital to carry out specific business activities at the company’s discretion. In the event of a branch shutdown, neither the company nor the active investment project will be affected. 

Therefore, there are grounds to believe that the business activities of the branch are considered investment projects of foreign-invested companies. 

c. Thus, does establishing a branch of a foreign-invested company require setting up an investment project? 

Clause 3, Article 64 of Decree 31/2021/ND-CP stipulates: “3. Foreign-invested economic organizations may set up branches, representative offices and business locations outside the head office without necessarily having investment projects.”  This is understood as the registration or non-registration of investment projects for business activities of the branch. 

However, as analyzed in Section 2.b, there are legal grounds for the branch’s business activities to be independent investment projects of foreign-invested companies. And, according to Point a, Clause 1, Article 64 of Decree 31/2021/ND-CP, foreign-invested companies need to register investment projects for branches.  

In fact, the views of investment management agencies in each locality are also different. There are localities that require the company to register investment projects for branches and some localities do not. 

Therefore, in this case, in order to avoid legal risks, the foreign-invested company should register the investment project for the branch.  

Above is the entire content of legal advice related to the problem of opening a branch of a foreign-invested company that needs to set up an investment project? 

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