What conditions do foreign investors in logistics services need to meet?

In recent years, with the continuous development in the field of trade and services, the logistics service industry has increasingly affirmed its importance. Therefore, this is the field chosen by many foreign investors when doing business in Vietnam. However, when providing logistics services in Vietnam, foreign investors need to meet the conditions prescribed by Vietnamese law.

In this article, PL&Partners would like to summarize and send to You some basic conditions that foreign investors need to meet when providing logistics services in Vietnam.

1. THE CONCEPT OF LOGISTICS SERVICE.

Pursuant to Article 233 of the Commercial Law 2005, the concept of logistics services is defined as follows:

Logistics service is a commercial activity whereby a trader performs one or more jobs including receiving goods, transporting, storing, warehousing, clearing customs, other paperwork, customer consultation, packaging, marking, delivering or other services related to goods as agreed with the customer for remuneration”.

Thus, the entity that can run this service must be a trader. In addition, logistics services have a fairly wide field of activity, not only including delivery and receipt of goods, but also jobs such as storing, warehousing, clearing customs, packaging, etc, and traders receive remuneration through these activities.

2. CONDITIONS FOR FOREIGN INVESTORS TO TRADE IN LOGISTICS SERVICES.

1. Conditions on investment form.

Articles 233, and 234 of the Commercial Law  2005 stipulate the prerequisite for an investor to provide logistics service is to establish an enterprise.

Specifically, when providing logistics services in Vietnam, investors can choose one of the following forms:

  • Establishing a new enterprise;
  • Establishing a joint venture enterprise;
  • Contributing capital to, purchasing shares, and capital contribution of logistics service enterprises in Vietnam;
  • Other forms as prescribed by law.

2. Conditions on capital contribution ratio.

Besides having to provide logistics services as an enterprise, foreign investors must also meet the conditions on the capital contribution ratio in the enterprise that they establish or contribute capital to, purchase shares, and capital contribution.

According to the Schedule of Specific Commitments in Services of Vietnam upon joining WTO and Decree No. 163/2017/ND-CP, depending on each specific logistics activity (business line), the limit on capital contribution ratio of foreign investors is different.

NO. Business Lines Forms of investment  Maximum capital contribution ratio of foreign investors
1 Freight transportation less cabotage (under maritime transport service) To establish companies operating fleets carrying flag of Vietnam or contribute capital to, purchase shares or capital contributions of Vietnamese capital enterprises 49%
2 Container handling services (under maritime auxiliary services)  

To establish an enterprise or contribute capital to, purchase shares, or capital contribution of an enterprise.

To be permitted to establish a commercial presence in Vietnam in the form of a business cooperation contract.

50%
3  

Container handling services except services provided at airports (under Services Auxiliary to all Modes of

Transport),

To establish an enterprise or contribute capital to, purchase shares or capital contribution of an enterprise. 50%
4 Customs clearance services (under maritime auxiliary services) To establish an enterprise or contribute capital to, purchase shares or capital contribution of an enterprise, including capital contributed by domestic investors.

To be allowed to establish a commercial presence in Vietnam in the form of a business cooperation contract.

No restriction
5 Bill auditing services; freight brokerage services; freight inspection, weighing and sampling services; freight receiving and acceptance services; transportation document preparation services To establish an enterprise or contribute capital to, purchase shares or capital contribution of an enterprise, including capital contributed by domestic investors. No restriction
6 Freight transportation services (internal waterways) To establish an enterprise or contribute capital to, purchase shares or capital contributions of an enterprise. 49%
7 Freight transportation services (railway) To establish an enterprise or contribute capital to, purchase shares or capital contribution of an enterprise. 49%
8 Freight transportation services (road)  

To perform through a business cooperation contract or to establish an enterprise or contribute capital to, purchase shares or capital contribution of an enterprise.

100% of the drivers of the enterprise are Vietnamese citizens.

51%
9 Storage and warehouse services To establish 100% foreign-owned or joint venture enterprise or contribute capital to, purchase shares and capital contribution of Vietnamese capital enterprises. 100%
10 Freight transport agency services To establish 100% foreign-owned or joint venture enterprise or contribute capital to, purchase shares or capital contribution of Vietnamese capital enterprises. 100%
11 Courier services To establish 100% foreign-owned or joint venture enterprise or contribute capital to, purchase shares and capital contribution of Vietnamese capital enterprise. 100%

Note:

In case the investor intends to provide logistics service in various lines, the capital contribution ratio of foreign investors shall be the lowest among the ratios of expected business lines.

3. Conditions on sub-license.

After being granted an Enterprise Registration Certificate and an Investment Registration Certificate, investors when providing certain logistics services need to apply for sub-licenses in accordance with specialized laws. Example: Transport Business License, Postal License, etc.

Note:

In case a foreign investor is subject to the application of international treaties with different provisions on conditions for providing logistics service, the investor may choose to apply the investment conditions specified in one of these treaties.

***Pursuant to Article 3 of Decree 163/2017/ND-CP, logistics services are classified as follows:

  • Container handling services, except services provided at airports.
  • Container station and depot services under maritime auxiliary services.
  • Storage and warehouse services under services auxiliary to all modes of transport.
  • Courier services.
  • Freight transport agency services.
  • Customs clearance agency services (including customs clearance services).
  • Other services, including: Bill auditing; freight brokerage; freight inspection, weighing and sampling; freight receiving and acceptance; transportation document preparation.
  • Wholesale and retail support services including inventory management, collecting, aggregating, sorting and delivering goods.
  • Freight transportation services under maritime transport services.
  • Freight transportation services under internal waterways transport services.
  • Freight transportation services under rail transport services.
  • Freight transportation services under road transport services.
  • Air transport services.
  • Multimodal transport services.
  • Technical testing and analysis services.
  • Other auxiliary transport services.
  • Other services agreed upon by the logistics service trader and the client in accordance with the basic principles of the Commercial Law.

***Legal basis of the article:

  • Schedule of Specific Commitments in Services of Vietnam in WTO;
  • Law on Investment 2020;
  • Commercial Law 2005;
  • Decree No. 31/2021/ND-CP;

Decree No. 163/2017/ND-CP.

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PL AND PARTNERS LAW FIRM

Headquarters: 46th Floor, Bitexco Financial Tower, No. 2 Hai Trieu, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam

Office: M Floor, Dai Thanh Binh Building, 911 Nguyen Trai, Ward 14, District 5, Ho Chi Minh City, Vietnam

Hotline: 093.1111.060

Email: info@pl-partners.vn
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The article is based on the current legal regulations at the time of writing, and it may no longer be valid or relevant at the time you are reading it due to changes of the law. The article, therefore, is seen as reference only.

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