Vietnam is an attractive destination for the food and beverage (F&B) business due to its dynamic consumer market. However, F&B services are considered a conditional business sector under Vietnamese law, requiring thorough legal preparation from the pre-investment stage. A clear understanding of the relevant legal regulations and ensuring compliance with such regulations directly affect the progress of project implementation and the operational stability of the project throughout its lifecycle. This article outlines five key legal issues that foreign investors should particularly note when providing F&B services in Vietnam.
1. Conducting business through an enterprise in Vietnam
Foreign investors may only invest in the F&B business in Vietnam through a legal entity established and operating in accordance with Vietnamese law. According to Vietnam’s World Trade Organization (WTO) Commitments on services, the F&B business is not subject to market access restrictions for foreign investors. In other words, foreign investors may choose to (i) establish a 100% foreign-owned enterprise – which requires carrying out two procedures to obtain an Investment Registration Certificate and an Enterprise Registration Certificate; or (ii) acquire shares, capital contributions in existing F&B businesses in Vietnam. For option (ii), investors must carry out procedures for approval for the shares/capital contribution acquisition, as well as procedures for amendment of the owner’s information as stated in the Enterprise Registration Certificate and the investor’s information in the Investment Registration Certificate (if any).
The proper selection of the investment structure in compliance with applicable regulations will help the investors avoid unnecessary entanglement in the future.
2. Selecting a suitable investment location (F&B provider location)
The business location is not only an important factor that may affect the operating results of an investment project – particularly in the F&B business – but also a “ticket” for registering the project’s operation with the competent state authority. In addition to ensuring that the company has the legal right to use the premises, several other matters related to the premises must be considered, including but not limited to, whether the premises meet the fire safety requirements; whether the provision of F&B services at the project site complies with local planning regulations on business sectors; whether the project location and surrounding transportation infrastructure are suitable for parking needs and customer access, etc.
3. Required subsidiary licenses for operating F&B services
After establishing an enterprise, investors can’t yet commence operations of a restaurant, beverage shop, coffee shop, etc. but must carry out certain administrative procedures to obtain the following sub-licenses:
• Certificate of Food Safety Compliance: This is a mandatory license for most F&B establishments. To obtain this certificate, the business establishment must comply with several requirements relating to facilities, equipment, processing procedures, traceability of raw materials, health status, and food safety training for personnel involved in food processing. It should also be noted that this certificate is issued for each specific business location, rather than for the entire business system and the validity period of this certificate is 03 years. Prior to its expiration, the business must carry out the relevant renewal procedures to ensure that its F&B operations remain in compliance with applicable regulations.
• Alcohol Business License (if any): Where an F&B business intends to serve alcoholic beverages for on-site consumption – Conditional business actitivities subject to specific regulatory requirements, depending on alcohol content of the beverages, the company may be required to obtain the appropriate license.
The absence of any of these licenses may result in administrative penalties, revocation of the operating license, or even suspension or forced closure of the F&B business.
4. Labor-related matters
When operating a F&B business in Vietnam, foreign investors may recruit both Vietnamese and foreign employees. In this regard, it should be noted that in order to work legally in Vietnam, in most cases, foreign labors must obtain a Work permit.
In addition to general labor regulations, personnel directly involved in food processing within the company must also meet specific requirements under the Food Safety Law, including: training in food safety knowledge; meeting the health requirements for working in the food industry; complying with hygiene and conduct standards in processing areas such as wearing appropriate protective clothing, and refraining from smoking , eating or spitting in processing area; and not having contact directly with food if suffering from an infectious disease.
5. Potential risks in taxation and financial management
It can be said that tax and financial management may pose risks easily, especially for the F&B business, foreign investors conducting business in Vietnam must particularly notice about output invoice management. The F&B business is the sector where cash transactions occur most frequently. The enterprise must issue VAT invoices for the sales transactions, regardless of payment method. The failure to issue invoices or a lack of transparency in cash flow management constitutes “a critical vulnerability” that is highly likely to be identified during inspections or periodic tax audits. This results in not just administrative penalties but also back taxes and damage to the company’s reputation.
The F&B service in Vietnam always has great development potential not only for Vietnamese investors but also for foreigners. However, to ensure the smooth operation of F&B services and minimize potential legal risks, investors must pay attention to relevant regulations, from business establishment, site selection, obtaining sub-licenses, labor management to tax obligations – each step contains its own legal challenges.
