Vietnam is in a period of rapid development and integration with the world. Therefore, being fluent in a common foreign language is extremely important to help people connect and find opportunities from the outside world. Grasping the huge trend and demand from the market of nearly 100 million people, more and more foreign investors want to establish quality foreign language centers with a team of native teachers.
In this article, we will introduce the process of setting up a foreign language center for foreign direct investment enterprises.
According to the Law on Investment of Vietnam, foreign investors doing business in Vietnam must satisfy at least 2 conditions, including: (i) market access conditions and (ii) business line conditions according to specialized laws for the field of operation of a foreign language center
Firstly, market access conditions: Education services (10) are industries and occupations with conditional market access for foreign investors, therefore, they must meet the conditions set by the Government of Vietnam.
Secondly, business conditions: The operation of a foreign-invested educational institution (139) belongs to a business line with conditions such as: minimum capital, facilities, curriculum, personnel, etc.
The establishment of a foreign language center for foreign investors goes through many stages, including the appraisal process before being allowed to operate.
The process of establishing a foreign-invested language center can be carried out in the following order of steps:
Step 1. Apply for an Investment Registration Certificate (IRC)
Step 2. Company establishment – apply for an enterprise registration certificate (ERC)
Step 3. Register to establish a language center
Step 4. Register for operation of a language center
Step 5. The following procedures to establish a foreign language center, such as: engrave a seal, open a bank account, place a signboard, etc.
Foreign language teaching is a conditional business activity as mentioned above. Therefore, investors need to meet the conditions before going into operation. Below are some of the conditions that must be met by law:
During the process of applying for a license to establish and operate, in addition to the required legal documents, the licensing agency will organize face-to-face examinations to assess the ability to meet the conditions prescribed by law. Therefore, investors need to perfect the facilities and curriculum before the Department of Education and Training requests an inspection.
After being licensed to opera foreign language center needs to review, summarize and report to the direct management agency the results of its activities. Failure to comply with this report may result in a fine of up to VND 30,000,000.
Corporate income tax: in case the foreign language center’s operation meets the type, scale, and standards specified in Decision 1466/QD-TTg dated October 10, 2008 as amended and supplemented by Decision 1470/QD-TTg dated 22/07/2016 on types, criteria, scale and standards of establishments implementing socialization in the field of education, corporate income tax shall be applied: This is 10% instead of 20% as usual. Note that other income is still subject to the tax rate of 20%.
Value-added tax (VAT): if the center follows the deduction method, the revenue from teaching activities is not subject to value-added tax. For other arising activities such as education and training support services, the 10% VAT rate will still apply.
The above is an overview of the steps to establish a foreign language center and the conditions for foreign investors to enter this field. In case of any related questions, please contact PLF for support.
The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.