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Foreign investors contribute capital to advertising companies
Foreign-invested advertising companies are one of the most popular types of business in Vietnam nowadays. So, when a foreign investor wants to invest in the form of capital contribution to an advertising company, what procedures and conditions need to be followed? Let’s find out with Siglaw in the article below.
Conditions for foreign investors to contribute capital to advertising companies
Conditions for investment forms in advertising services business
According to the WTO Service Commitments Schedule, Vietnam commits as follows:
Advertising services (CPC 871): No restrictions, except
From the date of accession, foreign service providers are allowed to establish joint ventures or participate in business cooperation contracts with established Vietnamese partners licensed to provide advertising services. It is allowed to establish joint ventures in which the foreign capital contribution cannot exceed 51% of the joint venture’s legal capital. Since January 1, 2009, there has been no limit on the capital contribution ratio to foreign advertising companies in joint ventures.
Thus, foreign investors are not allowed to establish advertising companies with 100% foreign capital in Vietnam but are only allowed to establish joint venture companies, in which the amount of capital contributed to establishing the company is not limited but only needs to meet the requirement of less than 100%.
Conditions of Vietnamese partners
The WTO Commitment stipulates that “foreign advertising service providers may establish joint ventures with Vietnamese partners who have been licensed to provide advertising services”. Therefore, the Vietnamese partner must be a registered enterprise in the advertising industry and have documents proving experience in this field.
Conditions for advertising services business
Article 7 of the Law on Advertising 2012 regulates products and services banned from advertising, including:
- Goods and services banned from business according to the provisions of law;
- Wine with an alcohol concentration of 15 degrees or more;
- Cigarette;
- Prescription drugs; non-prescription drugs that are recommended by competent state agencies to limit use or to be used under the supervision of a physician;
- Dairy products replace breast milk for children under 24 months old, nutritional supplements for children under 6 months old; feeding bottles and artificial nipples;
- Hunting guns and shotgun bullets, sporting weapons and other products and goods that incite violence;
- Types of products and goods that have aphrodisiac properties;
- Other products, goods and services prohibited from advertising are prescribed by the Government when they arise in reality.
Process of capital contribution to advertising companies by foreign investors
According to the law, foreign investors and Vietnamese investors need to contribute capital to establish a joint venture company providing advertising services. Joint venture companies can exist in two forms:
- The advertising company established from the beginning had capital contributions from foreign and Vietnamese investors.
- Advertising companies in Vietnam are established first and then have additional investors contribute capital.
Case 1: The advertising company was established from the beginning with capital contributions from foreign investors and Vietnamese investors.
Step 1: Prepare documents to apply for Investment Registration Certificate
The dossier to request the issuance of an Investment Registration Certificate for advertising services for projects that do not belong to investment policy approval includes:
- A written request for the implementation of an investment project for an advertising services business;
- House/office rental contract to implement investment projects;
- Copy of ID card or passport of Vietnamese people (in case of contributing capital to a joint advertising company with Vietnamese people);
- Documents proving the investor’s financial capacity. If the account is in a foreign country, the documents must be consular legalized, then translated and notarized into Vietnamese;
- Proposed investment project for advertising services business including the following contents: investor implementing the project, investment scale, investment objective, location, investment term, investment capital and plan capital mobilization, investment progress, labor needs, impact assessment, socio-economic efficiency of the project, proposal for investment incentives;
- Propose land use needs. In case the project does not request the State to allocate land, lease land, or allow a change of land use purpose, submit a copy of land use rights documents or other documents determining the right to use the location in District 3 to implement investment projects;
- Explanation of the use of technology in advertising services business investment projects for projects to appraisal, consultation on technology according to the provisions of law on technology transfer.
- In case the foreign investor is an individual, it is necessary to supplement a copy of the foreign investor’s passport;
- For foreign investors who are organizations, additional information is required:
- A copy of the business registration certificate of a foreign organization;
- Copy of ID card or passport of the capital contribution representative for the foreign investment organization in Vietnam;
- Financial statements within the last 2 years audited by foreign organizations (must be consular legalized, valid within 90 days).
After preparing all documents, investors can apply for an Investment Registration Certificate for advertising services in two ways:
- Declare information about investment projects online on the National Foreign Investment Information System at: https://fdi.gov.vn/Pages/TrangChu.aspx. Within 15 days from the date of online declaration, the investor applies documents for an Investment Registration Certificate to the Department of Planning and Investment of the province/city where the company is headquartered.
- Apply directly to the Department of Planning and Investment of the province/city where the company is headquartered for projects outside the Industrial Park, Export Processing Zone, or High-Tech Park and submit to the Management Board of the Industrial Park, Export Processing Zone, High-Tech Park for the project is located inside those zones.
Within 15 days from the date of receiving complete documents, the Investment Registration Authority shall issue an Investment Registration Certificate. In case of refusal, the investor must be notified in writing and clearly state the reason.
Step 2: Prepare and apply for Business Registration Certificate
Dossier to request issuance of Business Registration Certificate for a joint venture company providing advertising services includes:
- Application for business registration;
- Draft company charter depending on the type of business;
- Decision of charter capital contribution and managers appointing; List of authorized representatives (for organizational members);
- List of members (for LLCs with two or more members) or List of founding shareholders and shareholders who are foreign investors (list of authorized representatives if there are shareholders who are organizations) for JSC;
- Copies of the following documents: ID card, passport or other legal personal identification of individual members;
- For members that are foreign organizations: a copy of the Business Registration Certificate or equivalent document must be consular legalized;
- An investment registration certificate for investors has been issued.
A joint venture company that runs an advertising service business applies for a Business Registration Certificate for the Business Registration Office of the province/city where the company is headquartered or submitted to the National Business Registration Portal. Within 03 working days, from the date the Business Registration Authority receives a complete and valid dossier, the company will receive a certificate.
Step 3: Complete the procedures for the joint venture company to operate advertising services
After establishing a joint venture company, the enterprise needs to carry out the following procedures:
- Disclosure of business registration information: Joint venture companies providing advertising services must carry out procedures to publish business registration content on the National Electronic Information Portal within a maximum of 30 days from the date of obtaining the business registration license and fully paying the prescribed fees.
- Engraving the business seal: The joint venture company providing advertising services will decide the number and form of the seal, ensuring full company information such as name and business code.
- Buying electronic digital signatures: Joint venture companies providing advertising services must register to buy digital signatures for tax purposes and submit tax declarations online.
- Register a bank account for the company: A joint venture company providing advertising services needs to register a bank account for the company to be able to carry out money-related activities.
- Declare and pay license tax: After purchasing a digital signature and registering to pay license tax online, the company needs to declare and submit a full tax declaration.
- Contributing capital to the joint venture company: Members and shareholders of the joint venture company will have to contribute capital to the advertising company with enough and the right type of assets as committed when registering to establish the business within 90 days from the date of issuance of the Business Registration Certificate.
Case 2: The advertising company in Vietnam is established first, then foreign investors contribute capital.
Step 1: Prepare documents to register for capital contribution to the advertising company
Foreign investors need to fully prepare the following documents to carry out procedures for registering capital contribution to an advertising company:
- Document to register capital contribution to advertising company;
- Copies of legal documents of the individual contributing capital to the advertising company and of the advertising company where the foreign investor contributes capital;
- Written agreement in principle on capital contribution between a foreign investor and an advertising company with a foreign investor contributing capital or between a foreign investor and a member of that advertising company;
- Copy of the Certificate of Land Use Rights of the advertising company with foreign investors contributing capital in case the advertising company has a Certificate of Land Use Rights on islands, communes, wards, border towns and coastal communes, wards and towns; other areas affecting national defense and security;
- Introduction letter, authorization letter to submit documents.
Step 2: Apply documents
Foreign investors submit applications at
- The Foreign Economic Relations Office – Department of Planning and Investment of the province/city where the company is headquartered if the advertising company is headquartered outside an industrial park, export processing zone, high-tech park, or economic zone.
- Management board of industrial parks, export processing zones, high-tech zones, and economic zones if the advertising company is headquartered inside those zones.
Within 15 working days of receiving valid documents, the Investment Registration Authority shall issue a notice of meeting the conditions for capital contribution to the advertising company.
In particular, in the case of a foreign investor contributing capital to an advertising company that has a Certificate of land use rights in islands, communes, wards, border towns and coastal communes, wards and towns; other areas that affect national defense and security, the Investment Registration Authority shall carry out the following procedures:
- Within 03 working days from the date of receiving the valid dossier, the investment registration agency will seek opinions from the Ministry of National Defense and the Ministry of Public Security on meeting the conditions to ensure national defense, security and land use conditions;
- Within 07 working days from the date of receiving the written request from the investment registration agency, the Ministry of National Defense and the Ministry of Public Security will give their opinions on meeting the conditions to ensure national defense and security for the advertising companies with foreign investors contributing capital; if past the required time limit, there is no comment, it is considered to have agreed to meet the conditions to ensure national defense and security for advertising companies with foreign investors contributing capital;
- Within 15 days from the date of receiving the valid dossier, the Investment Registration Authority shall consider meeting the conditions for capital contribution and, based on the opinions of the Ministry of National Defense and the Ministry of Public Security, notify the investor. The written notice is sent to foreign investors and advertising companies with foreign investors contributing capital.
Step 3: Make capital contributions to the advertising company
After being approved by the Investment Registration Authority for capital contribution, foreign investors contribute capital to the advertising company through establishing a direct investment capital account at a bank in Vietnam. Then transfer the capital contribution through this account.
Members transferring capital shall declare taxes upon transfer according to the law on personal income tax and corporate income tax (if any).
Step 4: Carry out procedures to change the type of company, members, and shareholders of the company
After receiving capital contributions from foreign investors, the advertising company needs to carry out procedures to change members and shareholders of the company. In case the capital contribution to the advertising company leads to a change in any type of company, it is necessary to carry out procedures to change business registration according to regulations.
Above are some shares from Siglaw about conditions and procedures for foreign investors to contribute capital to advertising companies. For any questions related to the process of contributing capital to the company, please contact Siglaw Law Firm for dedicated answers and advice.
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