What regulations do foreign investors need to comply with when investing in the e-commerce sector in Vietnam?

This article was written by our Managing Partner Nguyen Van Phuc and Nguyen Ngoc Tu Linh published in the Legal Electronic Magazine on February 1, 2024. Below is the English version:

E-commerce has become a field with outstanding growth in Vietnam, especially after the Covid-19 pandemic. With the advantage of large capital, many foreign investors are currently promoting their investment activities in Vietnam’s e-commerce field, aiming to tap into a market full of potential and promise. The current Vietnamese laws explicitly regulate the conditions and procedures for foreign investors in the field of e-commerce. In this article, we would like to provide some important notes for foreign investors when investing in Vietnam's e-commerce sector.

1. Regarding the conditions of access to the Vietnamese market

According to the provisions of Section B.55 of Appendix I of Decree 31/2021/ND-CP, e-commerce activities are included in the list of business sectors subject to market access conditions for foreign investors. Therefore, foreign investors must first understand the market access conditions for e-commerce in Vietnam as stipulated in international treaties to which Vietnam is a signatory, as well as Vietnamese laws.

Sources: https://phaply.net.vn

Regarding international treaties: while the WTO does not make specific commitments on e-commerce market access, the CPTPP provides explicit provisions. Vietnam retains the right to apply and maintain measures inconsistent with its obligations under Article XVI of the WTO's General Agreement on Trade in Services of the WTO (GATS)[1]. Accordingly, it is understandable that in the area of e-commerce, Vietnam can regulate conditions for market access conditions and foreign investors are forced to comply.   

With respect to the provisions of Vietnamese law: pursuant to Article 67c of Decree 52/2013/ND-CP, foreign investors who choose to invest in the e-commerce sector in Vietnam must meet two conditions related to (i) the form of investment and (ii) obtaining the national security assessment opinion from the Ministry of Public Security in cases where foreign investors control at least one enterprise among the top five leading e-commerce service providers in the Vietnamese market. Specifically:

First, regarding the form of investment: Despite e-commerce activities being conducted through "electronic means connected to the internet, mobile telecommunication networks, or other open networks”^[2], foreign investors who wish to invest in Vietnam in the field of e-commerce must still establish economic organizations in Vietnam, or through the forms such as capital contribution, acquisition of shares, investment capital^[3]. Therefore, in principle, foreign investors' investment in Vietnam in the field of e-commerce must be through an enterprise (either established or contributed with capital, acquisition of shares or capital contribution by the investor), at the same time, investment in the form of business cooperation contracts is not allowed.

Second, if the foreign investor controls one or more enterprises in the group of five leading enterprises in the e-commerce services market in Vietnam according to the list announced by the Ministry of Industry and Trade, the foreign investor must obtain the national security assessment opinion from the Ministry of Public Security. In this case, investors should consider two issues: (i) what is "dominant", and (ii) which enterprises are in the group of five leading enterprises in the e-commerce services market in Vietnam.

For the first issue, according to the provisions of Clause 3 Article 67c of the Decree 52/2013/ND-CP, foreign investors are considered to be dominant in the provision of e-commerce services if one of the following conditions is met:

“a) Foreign investors own more than 50% of the registered capital or more than 50% of the voting shares of the enterprise;

b) The investor directly or indirectly decides on the appointment, removal or dismissal of the majority or all of the members of the board of directors, the chairman of the members of the board of directors, the director or the general director of the company;

c) The investor has the right to decide on major issues of business operation, including the choice of technology platforms and forms of business organization; the choice of business lines, geographical areas and forms of business; the choice of adjusting the scale and business lines; the choice of the form and method of mobilizing, allocating and using the business capital of the enterprise”.

For the second issue, according to the provisions of Clause 5 Article 1 of Circular 01/2022/TT-BCT, the Ministry of Industry and Trade will annually announce the list of leading market enterprises in the field of e-commerce services annually before March 15. Currently, this regulation does not specify the channels or means by which the Ministry of Industry and Trade will publish information on leading enterprises. However, for this information, investors can refer to e-commerce reports or e-commerce white papers over the years published by the Department of E-Commerce and Digital Economy under the Ministry of Industry and Trade[4]. In 2023, the "Vietnam E-commerce Report 2023" recognizes a group of the top 05 leading market enterprises in the field of e-commerce market, including Baemin, Be, Gojek, Grab and Lazada[5].

In this case, the investor will have to undergo the evaluation process at the Ministry of Public Security before accessing the Vietnamese market, which may prolong the investor's initial legal procedures.

Sources: https://phaply.net.vn

Another issue that investors should pay attention to stems from the provisions of Clause 2, Article 67a of Decree 52/2013/ND-CP. Specifically, this provision requires foreign traders and organizations with websites providing e-commerce services in Vietnam to register their e-commerce activities and establish representative offices in Vietnam or appoint their authorized representatives in Vietnam in accordance with the provisions of the law. However, investors should note that this regulation applies to foreign traders and organizations that have websites providing e-commerce services in Vietnam (in other words, the form of providing cross-border services) without engaging in investment activities in Vietnam. In the case of investment in Vietnam, foreign investors are required to establish business organizations or contribute capital, acquire shares or invest capital in business organizations in Vietnam as mentioned above.

2. Regarding sub-licensing, legal procedures for each type of e-commerce

E-commerce is not only a business that foreign investors can enter under conditions as stipulated in Article 59 of Annex IV of the Investment Law 2020, but also a conditional business.

Specifically, after a foreign investor establishes an enterprise or contributes capital, acquires shares, or invests capital in an enterprise, the foreign-invested e-commerce service must go through the process of obtaining a business license to operate, as stipulated in Point h Clause 1 Article 5 of Decree 09/2018/ND-CP. This is the first "condition precedent" for foreign-invested enterprises to operate in the field of e-commerce in Vietnam.

A peculiarity of the field of e-commerce is the variety of types of activities. According to Decree 52/2013/ND-CP, as amended and supplemented by Decree 85/2021/ND-CP, e-commerce activities can be divided into five types, including e-commerce websites for sales, e-commerce trading platforms, online promotions, online auctions, and electronic contract authentication activities. Depending on the type of e-commerce that foreign-invested enterprises engage in in Vietnam, there will be differences in the sub-licenses and legal procedures required. 

Under the current regulations, if a foreign-invested enterprise conducts e-commerce in Vietnam through an e-commerce sales website, the required procedure to be followed is to notify the e-commerce sales website if it has the function of online ordering. Meanwhile, if a foreign-invested enterprise provides e-commerce services through an e-commerce trading platform, it is necessary to carry out two procedures, including (i) obtaining a license to establish a trading exchange and (ii) registering the establishment of a website providing e-commerce trading platform services. The same applies to other types of e-commerce activities, with specific procedures also set out in Decree 52/2013/ND-CP for promotion, online auction or electronic contract authentication activities.

The above points highlight important considerations for foreign investors making e-commerce investments in Vietnam, particularly in terms of market access conditions and the procedures and licenses required to operate in Vietnam. These details serve as crucial factors for investors to thoroughly consider and take into account when undertaking investment activities in this field in Vietnam.