Foreigners invest in software companies

Information technology services are an attractive investment field that attracts many domestic and foreign investors, especially in the current era of digital technology. The demand for software is increasing due to its convenience and outstanding benefits. Grasping the demand and seeing the development potential of software services, many foreign investors have decided to invest in software companies in Vietnam. In the article below, Siglaw would like to share the necessary procedures to be carried out when foreigners invest in software companies in Vietnam.

Table of Contents

Legal basis for foreigners to contribute capital to software companies

Conditions for foreigners to contribute capital to software companies

Procedures for foreign investors to contribute capital to a software companies

Legal basis for foreigners to contribute capital to software companies

• Enterprise Law 2020;
• Investment Law 2020;
• Information Technology Law 2006;
• International treaties of which Vietnam is a member.

Conditions for foreigners to contribute capital to software companies

Holding of capital: According to Vietnam’s commitment statement in WTO, foreign investors with the nationality of a WTO country can participate in investment activities to provide computer-related services, including activities such as software production, software development, computer consulting, etc. In which, the capital contribution of foreign investors is not limited, meaning that foreign investors can contribute from 1% to 100% of the charter capital of a software company. This is also a service sector that the Vietnamese government encourages investment in along with a number of preferential tax policies.

Form of investment: Foreign investors are allowed to contribute capital to software companies in Vietnam.

Capital contribution registration: In case a foreign investor contributes capital resulting in the holding of foreign investor’s capital contribution ownership in a software company exceeding 50% of the charter capital, it is necessary to carry out capital contribution registration procedures.

Vietnamese partner: The software companies to which the foreign investor contributes capital must be a company that has been granted an Enterprise Registration Certificate.

Procedures for foreign investors to contribute capital to a software companies

Step 1: Prepare documents for capital contribution registration

Foreign investors need to prepare the following documents to carry out the procedures for capital contribution registration in a software company:

• A registration form for capital contribution for a software company contains: enterprise registration information of the software organization to which the foreign investors expects to contribute capital; list of owners, members and founding shareholders, list of owners, members and founding shareholders that are foreign investors (if any); holding of charter capital by foreign investors before and after the capital contribution; expected transaction value of the contract for capital contribution; information about the business organization’s software investment project (if any);
• A principal agreement on capital contribution between the foreign investors and the software business organization to which foreign investors contribute capital or between the foreign investors and the shareholders or members of such business organization.
• Copies of legal documents of the individual or organization that contributes capital and of the business organization to which foreign investors contribute capital;
• Copy of Certificate of Rights to Use Land of the software company with foreign investors contributing capital in case the software company has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security;
• Letter of introduction, power of attorney letter for submitting the documents.

Step 2: Submit documents

Foreign investors submit documents at the Investment Registration Authority:

• If a software company’s headquarter is located in an industrial park, export processing zone, high-tech zone, the economic zone is the Management Board of industrial parks, export processing zones, high-tech zones, economic zones.
• If the company’s headquarter is outside of an industrial park, export processing zone, high-tech zone, the economic zone is the Foreign Economic Affairs Department – Department of Planning and Investment of the province/city where the company is headquartered.

Within 15 working days from the date of receipt of valid dossiers, the Investment Registration Authority shall consider the satisfaction of the conditions for capital contribution.

In particular, if the business organization to which foreign investors contribute capital are purchased by foreign investors has the certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security, the Investment Registration Authority shall follow the procedures below:

• Within 03 working days from the receipt of the valid application, the Investment Registration Authority shall seek opinions of the Ministry of National Defense and Ministry of Public Security about the satisfaction of the conditions.
• Within 07 working days from the receipt of the Investment Registration Authority’s request, the Ministry of National Defense and Ministry of Public Security shall give their opinions about the satisfaction of the conditions for national defense and security assurance by the business organization to which foreign investors contribute capital; in case of failure to give any opinion by the aforementioned deadline, it is considered that it concurs with the satisfaction of the conditions for national defense and security assurance by the business organization to which foreign investors contribute capital;
• Within 15 days from the receipt of the valid application, the Investment Registration Authority shall consider the satisfaction of the conditions for capital contribution or purchase of shares or stakes, and notify investors according to the opinions given by the Ministry of National Defense and Ministry of Public Security. The notification shall be sent to foreign investors and business organizations to which foreign investors contribute capital.

Step 3: Make capital contributions to the software company

After the Investment Registration Authority approves the capital contribution, the foreign investor contributes capital to the software company by establishing a direct investment capital account at a bank in Vietnam, then transfers the capital contribution through this account.

Members transferring capital shall declare taxes upon transfer in accordance with the laws on personal income tax and corporate income tax (if any).

Step 4: Procedures for changing company type, members, and company shareholders

After receiving the capital contribution of a foreign investor, the software company needs to carry out procedures to change the members and shareholders of the company. In case the capital contribution to a software company leads to a change in the type of company, it is necessary to carry out procedures to change the business registration according to regulations.

Above are some notes from Siglaw Law Firm about the conditions and procedures for foreign investors to contribute capital to a software company. For any questions related to the capital contribution process to the company, feel free to contact Siglaw for answers and dedicated advice.

Siglaw Law Firm

Phone: (+84) 961 366 238

Email:

• vphn@siglaw.com.vn
• vphcm@siglaw.com.vn

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