Completing license and certificate requirements is one of the 12 things to do after starting a company. For foreign traders entering the market, they must also meet certain licensing conditions in specific legal cases.
So, is it mandatory for foreign traders to obtain a license when engaging in retail business in Vietnam? Let’s explore this question with Law Plus.
Table of Contents/Mục lục
I. RETAIL ACTIVITIES FOR FOREIGN TRADERS IN VIETNAM
1.1. Retail activities according to regulations
Pursuant to Clause 7, Article 3 of Decree No. 09/2018/ND-CP, retailing involving selling goods to individuals, households, other organizations for consumption purpose. Specifically, according to the Ministry of Industry and Trade:
“Selling goods to organizations for consumption purposes, such as foreign traders’ representative offices, enterprises purchasing food, beverages, office supplies, etc., to serve the regular consumption needs of staff at representative offices or enterprises without using them directly in production or service deployment according to the registered investment objectives and business sectors, is considered a retail activity.”
Conversely, if goods are sold to customers for purposes other than consumption, it is not considered a retail activity.
1.2. Conditions for foreign traders to engage in retail activities in Vietnam
Firstly, they must establish a foreign-invested enterprise.
Clause 1, Article 16 of the Commercial Law 2005, as amended and supplemented in 2019 (hereinafter referred to as the Commercial Law 2005), states: “Foreign traders mean traders established and making their business registrations according to the provisions of foreign laws or recognized by foreign laws”.
Furthermore, Clause 2, Article 16 of the Commercial Law 2005 states: “Foreign traders are entitled to set up their representative offices or branches in Vietnam; to establish in Vietnam foreign-invested enterprises in the forms provided for by Vietnamese law”. Accordingly, foreign traders operating in Vietnam may establish their commercial presence under three forms:
(i) Establish a foreign-invested enterprise in Vietnam;
(ii) Establish a branch in Vietnam;
(iii) Establish a representative office in Vietnam.
Among these, the “necessary condition” for foreign traders to engage in retail activities in Vietnam is that they must establish a foreign-invested enterprise under case (i). At that time, the foreign trader establishes a foreign-invested enterprise in Vietnam in accordance with the types of enterprises prescribed by Vietnamese law (including joint-stock companies, limited liability companies, partnerships, and private enterprises).
Additionally, the foreign-invested enterprise is permitted to engage in business activities in sectors where the foreign trader is not restricted, according to The Specific Commitments on Trade in Services (referred to as The Specific Commitments) of Vietnam since Vietnam’s accession to the WTO.
Secondly, they must follow the procedures for obtaining/adjusting a Business License.
The conditions for obtaining/adjusting a Business License to foreign investors are specified in Article 9 of Decree No. 09/2018/ND-CP. Additionally, according to Points a and c, Clause 1, Article 5 of Decree No. 09/2018/ND-CP, a Business License is issued to foreign-invested business entities to conduct the following activities:
(i) Exercise the right to distribute retail goods, excluding goods listed in Point c, Clause 4, Article 9 of this Decree;
(ii) Exercise the right to distribute retail goods listed in Point c, Clause 4, Article 9 of this Decree.
Therefore, to engage in retail activities for all types of goods, foreign traders present in Vietnam under the form of foreign-invested business entities must carry out the procedures to apply for a Business License. Thus, applying for a Business License is mandatory for foreign-invested business entities wishing to engage in retail activities in Vietnam.
II. RETAIL LICENSE REGULATIONS
2.1. What is a Retail License?
Current law has not yet provided an explanation for the term “Retail License.” However, through legal practice, this term can be understood as follows: A Retail License is a Business License that records the right to distribute retail goods for specific items.
A Business License may be:
(i) Enterprise Registration Certificate;
or (ii) Certificate of Eligibility for Business, issued to enterprises conducting conditional business sectors stipulated in Clause 1, Article 7 of the Investment Law 2020. This type of license is typically issued after the Enterprise Registration Certificate.
2.2. Content of the Retail License
According to Clause 1, Article 11 of Decree No. 09/2018/ND-CP, a Retail License includes the following contents:
(i) Name, business registration number, head office address, and legal representative;
(ii) Owners, capital contributors, founding shareholders;
(iii) Goods for distribution;
(iv) Activities directly related to the sale and purchase of goods;
(v) Other contents.
Among these, item (iii) is the most important content of the Retail License, clearly indicating that the foreign trader, as a foreign-invested enterprise, has the right to engage in retail activities for the goods specified in the license.
III. IS A RETAIL LICENSE MANDATORY FOR FOREIGN TRADERS?
As mentioned in Section 1.2, to engage.in retail business, foreign traders present as foreign-invested.enterprises are required to apply for a Business License.
In addition to the Business License, the foreign trader, as a foreign-invested business.entity wishing to establish retail outlets, must carry out.the procedure for applying for a License.for establishment of retail outlet, as per Clause 2, Article 5 of Decree No. 09/2018/ND-CP: “A License for establishment.of retail outlet is issued to a foreign-invested business entity.to set up a retail outlet”.
Thus, to engage in.retail business, applying for a Business License.is mandatory for foreign traders, as foreign-invested.business entities. Depending on the business plan.and situation, if they wish to establish retail outlets, they must.apply for a License for establishment of retail outlet as required by law.
IV. PROCEDURES FOR APPLYING FOR A RETAIL LICENSE
To facilitate foreign traders.in applying for a Retail License, the Government.issued Decree No. 09/2018/ND-CP detailing the Commercial Law.and the Law on Foreign Trade Management.regarding sale of goods and other activities.directly related to sale of goods.
The procedures for applying for a Retail License.are specified in Articles 12 and 13 of this Decree for enterprises.without a Business License, and in Articles 14 to 16 of this Decree.for enterprises already.holding a Business License.
The specific procedure for applying for a Retail License (Business License for exercising the right to distribute retail goods) is as follows:
- For enterprises without a Business License:
In this case, enterprises must apply for a Business License to exercise the right to distribute retail goods. - For enterprises already holding a Business License:
Enterprises wishing to engage in retail business must amend the content of the Business License as stipulated in Clause 1, Article 11 of Decree No. 09/2018/ND-CP. Therefore, according to Article 14 of this Decree, enterprises must carry out the procedure for adjusting the Business License to include the right to distribute retail goods.
Note: Enterprises must clearly specify which types of goods they are allowed to exercise the right to conduct retail distribution business and list those specific goods in the Business License.
In conclusion, Vietnamese law creates favorable conditions for foreign traders to engage in business activities in Vietnam. At the same time, the law also establishes solid mechanisms to control foreign traders’ business activities in Vietnam and maintain a stable – sustainable economy.
If you have any questions regarding the application for a Retail License for foreign traders, please don’t hesitate to contact Law Plus via email at info@lawplus.vn or website, hotline 0965 052 039 / 0966 008 030 (WhatsApp, Viber, Zalo).
