With the rapid development of E-commerce industry in Vietnam and even globally, Vietnamese lawmakers have promptly updated some legal frameworks to adapt and create more opportunities for development in this potential business sector. The policy has a significant impact on foreign investors in the field of E-commerce. This can be seen with ‘Decree No. 31/2021/ND-CP’ providing guidelines on ‘Law on Investment 2020’ which took effect from 26 March, 2021 and ‘Decree No. 85/2021/ND-CP’ stipulating some rules on E-commerce taking effect from 1st January, 2022. This article shall help foreign investors understand the business opportunities in the E-commerce market in Vietnam by giving analysis of the latest policies.
1. Conditions for foreign investors to enter the Vietnamese market
Before the Investment Law 2020 and corresponding guidelines came into effect, E-commerce was not a part of Vietnam’s WTO Commitments and was not mentioned in any laws on investment. Due to this gap, it would take a lot of time for the authorities to approve investments in this field and the success ratio of these applications was not high. Authorities must send the dossiers of foreign investor to specialized agencies including the Ministry of Industry and Trade, the Ministry of Planning and Investment, etc. for their opinion before approving the application.
Currently, the guidelines laid down in ‘Decree 31/2021’ made E-commerce a conditional business for foreign investors. Accordingly, if foreign investors satisfy the conditions for accessing E-commerce market, the authorities would approve to establish an E-commerce company in Vietnam/acquire a Vietnamese company in E-commerce. Further, a foreign-owned company is allowed to supplement E-commerce activities within its business scope.
‘Decree 85/2021’ (effective from January 1, 2022), specifies the market access conditions for foreign investors, dividing them into 2 groups corresponding to each subject.
(i) The first group consists of the five leading E-commerce service companies in Vietnam (according to unofficial data in 2021, the top 5 enterprises including Shopee, Lazada, Tiki, Sendo, and Thegioididong have foreign investments. While submitting dossiers to amend business activities, there must be an appraisal opinion on national security from the Ministry of Public Security.
(ii) The second group consists of innovative small and medium-sized enterprises pursuant to the law on supporting foreign-invested SMEs. Such enterprises do not have to meet the above conditions of market access.
Accordingly, the procedure for establishment of E-commerce companies with foreign owners is similar to other business sectors, such as management consulting, distribution activities, etc.
2. Established overseas E-commerce platforms are allowed to enter the Vietnamese market
‘Decree 85/2021’ allows an established overseas E-commerce platform to apply for license to operate officially in Vietnam. This is contingent upon whether its owner has a representative office in Vietnam and has carried out procedures for registration of E-commerce activities at the competent authority. Overseas E-commerce platforms are considered to have entered the Vietnamese market when:
- It is set-up under Vietnamese domain name,
- The displayed language is Vietnamese, and
- It facilitated more than 100,000 transactions in Vietnam within one year.
Through this new regulation, foreign investors have an additional option to enter the E-commerce market. Accordingly, foreign traders can retain ownership of E-commerce platforms and use their existing brand name to continue using their network of overseas suppliers, etc. to quickly enter the Vietnamese market.
Please note that the representative office of E-commerce platforms in Vietnam belonging to foreign investors must be registered for operations or authorized to carry out some of the following activities:
- Coordinating with the management authorities in preventing transactions of goods and services in violation of Vietnamese law.
- Fulfilling obligations on protection of consumer rights and ensuring quality of goods under Vietnamese law.
- Submitting periodic reports on E-commerce activities to the authorities.
Besides the registration procedure mentioned above, since the legal status and scope of Vietnamese enterprises and representative offices of foreign investors are different, there are some differences in the process of carrying out the above procedure. However, Vietnamese law currently provides specific guidelines only for Vietnamese companies (as stipulated in Circular 47/2014/TT-BCT). Hence, we believe that in the coming time, guidelines for foreign traders to conduct E-commerce activities in Vietnam will be issued to create more opportunities for foreign investors.
Some rules on foreign investment in E-commerce in Vietnam explained above were introduced in Vietnamese law and detailed guidelines from state agencies are still awaiting. Foreign investors should consider all relevant factors before proceeding to invest in e-commerce in Vietnam.
Part 2: Latest rules on e-commerce – Outstanding Regulations Related to E-Commerce Exchanges (Part 2)
Part 3: Latest rules on e-commerce -Tax declaration and payment responsibility (Part 3)
