What is retail and what requirements do foreign investors have to atisfy in order to conduct retail in Vietnam? Let us delve into this matter in the following article.
What is retail?
Fisrt of all, it must be noted that this article will only mention retail activities of foreign investors in Vietnam and not of domestic enterprises.The right of retail distribution is a conditional business field applicable to foreign investors. The conditions here are reflected in a number of regulations on retail establishments, on applying for business licenses, certificates of establishment of retail establishments, etc.
So what is retail? According to the guidance in Article 3, Decree 09/2018/ND-CP, “Retail is the activity of selling goods to individuals, households and other organizations for consumption purposes”.
To make it easy to understand, you can simply imagine that retail is selling to buyers for consumption and use, not for reselling to others.
Retail is different from wholesale, whereby Wholesale is the sale of goods to wholesalers, retailers and other traders and organizations; Retail sales are not included.
Whether you are a consulting lawyer or a legal compliance officer, you need to know this to advise and guide foreign investors in the process of establishing foreign-invested enterprises with retail distribution right registration.
Foreign investors registering the purpose of retail distribution can import goods from abroad, or purchase goods in Vietnam for retail purposes. This is a bit different from wholesale operations.
If a foreign-invested enterprise registers the purpose of exercising the right to import, that enterprise is still entitled to wholesale the goods it imports, but may not purchase domestically produced goods for wholesale. If the enterprise registers the right to wholesale, it may wholesale goods imported or purchased by itself from other units.
What are the forms of retail?
There are two forms of retail, retail without a retail establishment and retail with a retail establishment.
A retail establishment is a place where retail activities are performed, such as shops, supermarkets, stalls …….
For the form of retail without setting up a retail establishment, the goods are imported and stored at the distributor’s warehouse, and then transported directly to the delivery location specified by the retail buyer. In other words, goods are not displayed or introduced at the store.
For the form of retail with the establishment of a retail establishment, goods are imported, stored, displayed and sold at the retail establishment. That is, customers will come to buy goods at the retail establishment.
If you register the right to retail distribution with a retail establishment, you can sell goods at and outside of the retail establishment.
However, if you apply for a retail distribution right without setting up a retail establishment, you do not have the right to sell goods at a retail establishment.
What are the licenses required for retail operations?
To retail without setting up retail establishments, foreign investors need to carry out the following procedures: (i) Procedures for establishing foreign-invested enterprises; and (ii) Procedures for applying for a business license.
To retail goods at retail establishments, foreign investors need to carry out the following procedures: (i) Procedures for establishing foreign-invested enterprises; and (ii) Procedures for applying for a business license; and procedures for granting a certificate of establishment of a retail establishment.
For foreign-invested enterprises registering the right to retail distribution and setting up retail establishments, when carrying out the procedures for applying for a business license, they will simultaneously carry out the procedures for applying for a certificate of establishment for the first retail establsihment.
For the second retail establishment onwards, businesses need to carry out additional procedures. It also means that each retail establishment must have its own retail establishment certificate.
Note, in case of setting up a retail establishment in a province (municipality) other than the province (municipality) in which the enterprise has its head office, the enterprise must establish a branch to manage the establishment that retail establishment.
During the process of carrying out the procedures for applying for a Retail Establishment Certificate, businesses need to study and comply with the regulations on economic needs test (ENT).
If you want to know more specifically about what an ENT is and the economic needs test criteria, you can read more about it in the “What is ENT?” article on our website.
Conclusion: So we have learned and grasped the basics to solve the question of what retail is and what are the types of licenses are required for retail operations. These are very basic issues that foreign-invested enterprises need to understand. For lawyers consulting in the field of foreign investment into Vietnam, legal compliance officers working in foreign-invested enterprises, these contents must be understood very specifically and in detail because it concerns the legality and accompanying procedures that businesses must comply with.
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