Foreign Investment Restrictions and Business Conditions for the Retail Business in Vietnam

A Vietnamese attorney provides a clear explanation of the practical points involved in operating a retail business in Vietnam (including both physical store sales and e-commerce), such as foreign investment restrictions, investment conditions, obtaining an Enterprise Registration Certificate (ERC), and the Economic Needs Test (ENT) system. This article organizes the industry classifications open to foreign-invested equity, restrictions on the equity ratio, restrictions on distribution networks, and points of caution regarding the establishment of physical stores, so that companies can avoid risk before entering the market. NEXORA Law Firm has extensive experience supporting Japanese retail companies entering and expanding in Vietnam, including investment registration, obtaining licenses, store contracts, and establishing local entities, and its strength lies in providing precise support spanning the legal, investment, distribution, and commercial fields.

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1. Overview of Regulations

Business Name: Retail Business

Official Business Name Under Vietnamese Law

CPC Code

VSIC Code

Retail business

631

632

61112, 6113, 6121

Determined according to the product category and sales format.

*Note:

Regarding VSIC Codes

The specific business code varies depending on the product category and sales format. For example: automobile retail, supermarket retail, mini-supermarket retail, convenience store retail, food retail, etc.

Investment and Business Conditions

WTO commitments
Other international treaties
Conditions under Vietnamese domestic law (Decree No. 09/2018/NĐ-CP, which sets out detailed rules under the Commercial Law and the Law on Foreign Trade Management applicable to the goods trading activities, and activities directly related to goods trading, of foreign investors and foreign-invested companies in Vietnam)

The retail business is open to foreign investors and foreign-invested companies. However, cross-border service provision is not permitted, except where goods for personal consumption are delivered directly to the consumer. (*In this case, direct sales from a Japanese e-commerce site to a Vietnamese consumer are permitted.)

A local entity is therefore required to operate a retail business in Vietnam. There is no issue with the entity being 100% foreign-owned.

Restrictions on Products Handled

Products manufactured in Vietnam and goods legally imported into Vietnam may be sold, other than lubricants and grease; rice; sugar; recorded media; and books, newspapers, and magazines.
A company that already operates retail outlets in the form of a supermarket, mini-supermarket, or convenience store must obtain a separate "Retail License for Rice, Sugar, Recorded Media, and Books, Newspapers, and Magazines" in order to sell rice, sugar, recorded media, and books, newspapers, and magazines at those outlets.

Obtaining an Individual License

An individual license (business license) must be obtained in order to operate a retail business.

Competent authority: The Department of Industry and Trade where the company's head office is located.

Obtaining a Retail Outlet Establishment License

For the first retail outlet: a retail outlet establishment license.

For the second and subsequent retail outlets: procedures differ depending on whether an Economic Needs Test is required.

Other

When operating a retail business through an e-commerce site, registration of that e-commerce site is also required.

2. "TIP"

A company holding foreign equity that is nonetheless not treated as a foreign-invested company (referred to as a "domestic company" in the diagram below) does not need to satisfy the foreign investment restriction conditions described above.

3. Points of Caution Regarding Obtaining a Business License (Retail License) and a Retail Outlet Establishment License

(1) Business License (Retail License)

The business license is an individual license that must be obtained before the business commences. Even where the company conducts retail sales via the internet (an e-commerce site) or through individual orders, without operating a physical retail store, a retail license is still required.
Because the competent authority for the retail license is the Department of Industry and Trade, the cost and time burden of the procedure are somewhat greater.

(2) Process for Obtaining a Retail Outlet Establishment License

(3) Requirements Where an Economic Needs Test (ENT) Is Required

When establishing a second retail outlet, an Economic Needs Test (ENT) is required, unless the outlet is under 500 square meters, is established within a shopping mall, and does not qualify as a convenience store or mini-supermarket.
The ENT review committee is established by the People's Committee. (The ENT review committee is composed of the Ho Chi Minh City People's Committee, the Department of Industry and Trade, the Department of Planning and Investment, the Department of Transport, the Department of Natural Resources and Environment, and the district People's Committee.) Even the formation of the ENT review committee takes time. Obtaining the ENT approval result should be expected to take more than six months.

With respect to the ENT, Vietnam committed under the CPTPP to eliminate the ENT procedure as of January 14, 2024. However, upon confirming with the authorities, it was found that eliminating the ENT requires either that the commitment be reflected in domestic law or that individual approval be obtained — the provisions committed to under the CPTPP cannot be applied directly as written. Because the development of Vietnam's domestic legislation has lagged considerably, however, the ENT is still required to be undertaken at this time.