The legal question on how to identify the difference between wholesale and retail has been a vital concern for the foreign-invested company in Vietnam (FDI). In particular, on the one hand, if the business activity of an FDI is acknowledged as a wholesale activity, it shall be exempt from the requirement for business license (save for the wholesale of numerous special commodities)[1]. On the other hand, if the business activity of such FDI is contemplated as a retail activity, it shall be further subject to the business license issued by the relevant Department of Industry and Trade (DOIT).
Find the Vietnamese version of this article HERE.
Article 3.6 and 3.7 of Decree No. 09/2018/ND-CP (“Decree 09”) reads:
“6. Wholesale activity involves selling commodities to wholesalers, retailers, and other organizations and traders; exclusive of retail activity.
7. Retail activity involves selling commodities to individuals, households, other organizations for the purpose of consumption.”
Article 3.7 of 2010 Law on Protection of Consumer’s Rights reads:
“Consumer is a person who purchases or uses goods and/or services for personal use or use for families or use for organizations for consumption purpose.”
In light of the above provisions, it can be understood that the target clients of wholesale activity are those individuals and organizations carrying out retail activity. For instance, company A imports canned food and then distributes to company B which owns a supermarket chain so that company B can sell such canned food to its customers via its supermarket chain. The activity of company A shall be considered wholesale activity. Meanwhile, the target clients of retail activity may also be individuals and organizations (mostly individuals in practice), and those individuals and organizations purchase the product for their personal use without selling it on a regular and profitable basis to other individuals and organizations.
At first glance, the definition and interpretation of “wholesale activity” seem to be quite straightforward and simple. However, practical cases have shown that there are several extraordinary circumstances under which the FDI is confused in identifying its own business, and given such confusion, it is reluctant to obtain the business license in accordance with Decree 09. Those circumstances are illustrated below:
(1) Company A imports wheat and distributes to company B (a bread manufacturer) so that company B may use such imported wheat to make bread and sell those bread to consumers. How should the business activity of company A be identified?
(2) Company A sells the office stationery to other companies so that the employee of the purchaser can use that office stationery while they are working. How should the business activity of company A be identified?
In response to these concerns, the Ministry of Industry and Trade (MOIT) has given its written opinion via Official letter No. 6219/BCT-KH on the guidelines on Decree 09 (“OL 6219”), in which:
(1) A company which sells the commodities to individuals and organizations and such individuals organizations do not use these commodities for the purpose of wholesale, retail, or consumption (for instance, the company purchases goods to use in its manufacturing process – 1st circumstance as indicated above) shall be deemed to have carried out the wholesale activity.
(2) A company that sells commodities to other companies for their own use (the 2nd circumstance as indicated above can be used as an instance) shall be deemed to have carried out the retail activity.
Click HERE to download OL 6219 (Vietnamese version only).
Given the guidelines of the MOIT as above, the identification of wholesale and retail has become quite apparent. The issuance of the business license by the DOIT to FDI shall be based on Decree 09 as well as OL 6219.
[1] Decree 09, Article 9.4(b).
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