FOREIGN CONTRACTOR IN VIETNAM, KEY LEGAL REQUIREMENTS

Vietnam is becoming an attractive destination for foreign contractors due to its rapid economic growth and increasing infrastructure demand. However, to operate in Vietnam, foreign contractor must adhere to strict legal requirements, including registration, construction licensing, tax obligations, and standards for labor safety and environmental protection, etc. Understanding and complying with these regulations not only ensures operational efficiency for contractors but also fosters a foundation for sustainable development and cooperation.

Foreign contractor can undertake diverse roles in construction projects, provided they meet mandatory competency requirements

Under current law of Vietnam, foreign contractor may serve as general contractor, main contractor, joint contractor, or subcontractor.

Foreign contractor in construction activities include both foreign organizations and individuals. These entities must meet minimum competency standards, defined according to the laws of their home country. Specifically, individuals are required to have legal capacity and legal personality to enter into and fulfill contracts, while organizations must possess legal status and civil legal capacity to engage in contractual agreements.

Foreign contractors may only operate after obtaining a valid license

Even if fully licensed in their home country, foreign contractors are required to obtain a construction activity license (license for foreign contractor) before engaging in construction activities in Vietnam.

This license is issued after competent authorities review and confirm that the contractor meets all legal requirements.

Key licensing conditions include an awarded contract or selection decision, compliance with joint venture or subcontracting requirements involving Vietnamese contractors, and a commitment to adhere to relevant regulations governing contracting activities in Vietnam.

Operation of foreign contractor must comply with the law of Vietnam and international treaties

While foreign contractors are protected in their legitimate business interests in Vietnam, they must also adhere to relevant regulations both domestically and in their home country. This dual compliance aims to ensure project quality, create a safe and healthy investment environment, and promote transparency in business operations.

a. Executive Office

A foreign contractor must establish an executive office at the project location upon receiving a construction operation license. This includes registering the office address, phone number, fax, email, seal, bank account, and tax code.

The executive office set up by the foreign contractor in Vietnam is designated for managing and executing tasks directly related to the specific project covered by the licensed contract. This office is temporary, existing only for the project’s duration and dissolving upon contract completion.

Depending on the specific construction work, the foreign contractor establishes the executive office in accordance with the relevant regulations.

b. Seal

The executive office’s seal is restricted for use within the scope of activities under the contract and construction operation license issued in Vietnam. The foreign contractor must register the seal after establishing the representative office and submit it for cancellation when the contract concludes.

c. Tax and Accounting

Foreign contractor must comply with tax and accounting management regulations set forth by the Ministry of Finance and the State Bank of Vietnam. This ensures transparent control over cash flows from business activities and adherence to financial obligations.

Key tasks include tax registration, fulfilling tax payment obligations, opening a bank account, and strictly following relevant accounting regulations.

d. Recruitment and employment of labor

The recruitment and employment of labor by foreign contractors must strictly adhere to the labor laws of Vietnam. Contractors are responsible for recruiting personnel, which includes utilizing both Vietnamese and foreign labors.

It is important to note that foreign contractors are only permitted to bring in specialists in the fields of economic management, technical management, and highly skilled personnel that the domestic labor market cannot meet.

e. Import and export of machinery and materials

Foreign contractor is responsible for fully executing the import and export procedures for materials, machinery, and equipment related to the construction contracts in Vietnam, ensuring strict compliance with current legal regulations. This not only ensures the legality of business operations but also optimizes project implementation processes and enhances investment efficiency.

f. Joint ventures and use of subcontractors

Foreign contractors are required to form joint ventures with Vietnamese contractors or utilize Vietnamese subcontractors as stipulated by regulations. It is essential that these arrangements are registered with the competent state authority and maintained throughout the project execution. This includes clearly defining the scope, volume, and value of specific work assigned to each party involved.

g. Insurance

Similar to Vietnamese contractor, foreign contractor must purchase insurance in accordance with regulatory requirements. Depending on the scope of work undertaken, foreign contractors are obligated to secure professional liability insurance, cargo insurance, and various types of insurance related to construction activities, along with other applicable insurance schemes as mandated by law.

h. Ensuring safety and quality of construction

A critical responsibility of foreign contractors is to ensure the safety and quality of construction projects. This is achieved through the quality inspection of imported materials and equipment as per the contract, as well as safety inspections for construction equipment and vehicles used in the project. Additionally, contractors must comply with standards and regulations regarding quality management, occupational safety, and environmental protection as prescribed by law.

This responsibility also encompasses the preparation of completion documentation, warranty provisions, final accounting of materials, handling surplus equipment, contract liquidation, and related notification procedures upon project completion.

i. Reporting obligations

Foreign contractors must adhere to the reporting requirements specified in their construction activity licenses.

Reports on the operational status of foreign contractors in Vietnam should include details regarding contracts with investors, subcontracting agreements, financial status, and evidence of compliance with accounting, auditing, and tax obligations.

In addition to adhering to the laws of Vietnam, foreign contractors must also comply with relevant international treaties that Vietnam has signed or acceded to throughout their operations in the country.

Project owner is also responsible for violations related to foreign contractor

Failure to comply with or incomplete adherence to any obligations set forth for foreign contractors will be classified as a violation and may incur penalties as stipulated by law, depending on the nature and severity of the breach.

Foreign contractors may face fines starting from VND50 million and could be suspended from operations for up to 24 months for each instance of violation.

Additionally, investors utilizing non-compliant foreign contractors may also be subject to fines beginning at VND100 million and may face suspension of construction activities for up to 06 months for the project, construction works, or specific components thereof.

>> PROCEDURES FOR ISSUANCE OF FOREIGN CONTRACTOR LICENSE https://linconlaw.vn/procedures-for-issuance-of-foreign-contractor-license/

>> ISSUANCE OF TEMPORARY RESIDENCE CARD FOR FAMILY MEMBER OF FOREIGN INVESTOR https://linconlaw.vn/issuance-of-temporary-residence-card-for-family-member-of-foreign-investor/