Setting up a business in Vietnam

young businessman
Shutterstock.com
Updated 2022-02-24 19:00

As Vietnam is one of the fastest-growing nations in terms of its economy, the notion of setting up a business here is gaining in its appeal. Foreign entrepreneurs from across the globe have been spreading their wings across Asia for decades.

The economy of Vietnam has seen exponential improvement over the last 30 years. Since the beginning of the millennium, roughly half of the population has been catapulted from poverty. More recently, the pandemic has swept its way across the world and has been relentless and unforgiving. Vietnam has shown superb resilience during this crisis and, unlike other nations, its economy has continued to climb during 2021.

Prospective investors to Vietnam are mounting on a yearly basis. New entities are emerging and industries like manufacturing, retail and education are currently flourishing in Vietnam. If you are considering setting up a business in this emerging business hub, the following information may be of particular interest to you.

Requirements for setting up a business In Vietnam

Getting this ball rolling is a relatively unambiguous and pain-free process compared to many other countries. For starters, the Vietnamese government has been updating corporate legislation for years. The majority of these improvements are designed to simplify the transition of foreign entities into Vietnam. There are a number of important guidelines to adhere to, though. Therefore, understanding the requirements of establishing a business in Vietnam is paramount.

When it comes to legal entities in this country, they fall into two primary classifications:

  • A Limited Liability Company (LLC) must have at least one member but may have up to 50. These members are known as owners or founders. Be advised that Vietnamese LLC companies don't have any shareholders. Moreover, an LLC cannot be listed on any public stock exchange.
  • A Joint-Stock Company (JSC) on the other hand, is required to have three shareholders at the absolute minimum. Additionally, there is no upper threshold, making this option attractive for creative entrepreneurs with limited capital. A JSC is particularly tailored for medium to large endeavours, especially those with complex corporate structures.

As the majority of foreign investors own Limited Liability Companies in Vietnam, this article will focus mostly on entities of this nature.

Vietnam's regulations for foreign ownership

In Vietnam, 100% foreign ownership can be enjoyed throughout most industries. However, there are a number of exceptions. For example tourism, logistics and advertising. These sectors require a Vietnamese partner in order for foreign investors to finalise a transition into the country.

Foreign ownership within most industries is regulated by the World Trade Organisation (WTO). In circumstances where the WTO or local law has little jurisdiction, approval from the relevant ministry is required.

What is the minimum amount foreigners can invest?

Luckily, there are no regulations in terms of the minimum amount of capital a foreign investor must have at their disposal. For most business types at least. It is required that new business lines must have enough collateral to cover expenses until the business becomes profitable. Many businesses typically begin with at least 10,000 USD. However, some have successfully set up shop with as little as 3k.

The following types of business ARE required to have a minimum amount of capital.

  • Banking
  • Insurance
  • Finance Fin-tech
  • Real Estate
  • Education / Language Schools

As a foreign investor, your capital should surpass equipment expenses and the overall cost of setting up the company.

Is a registered address mandatory?

In order to successfully and legally establish a company in Vietnam, a registered address is a stipulation. If you are considering setting up a business of a service nature, such as a consulting firm, a virtual address will suffice. However, many industrial norms demand that a physical address is more appropriate. For example, if you're establishing a business in retail, hospitality, or trading, a physical location is compulsory.

During the business' transition into Vietnam, the Department of Planning and Investment will observe and inspect proceedings. You may be required to present documentation to evidence your physical address. This documentation MUST assert that this address will remain in use after the incorporation of your business in Vietnam.

A resident director is also necessary

At least one resident director is required to ensure the company is completely legitimate in Vietnam. There is no legislation that stipulates this person must remain in Vietnam. However, the resident director is required to have a residential address in the country.

If the director of the company is also one of the founders of the company, they are exempt from requiring a work permit. However, if the director is a foreign national, but isn't one of the founding members, a work permit will need to be sought.

The process of company registration

Successfully registering a foreign Limited Liability Company in Vietnam is a straightforward affair. It can take several months to finalise everything from a legal standpoint, however the process is simple.

Obtain an Investment Registration Certificate

This is the first stage of the slightly lengthy process of transitioning into Vietnam's business circle. Registering a company owned by foreigners can only proceed after an Investment Registration Certificate has been acquired. This is issued by the Department of Planning and Investment after roughly a month of deliberation.

Should your business fall into a category that isn't regulated by local laws or the WTO, ministry-level approval will be required. In this instance, it will take longer before receiving the certificate.

Apply for a Business Registration Certificate

This document is also issued by the Department of Planning and Investment. The Business Registration Certificate (BRC) is also known as the Enterprise Registration Certificate (ERC). Obtaining this document typically takes less time than the former documentation. The information you need to provide includes:

  • Enterprise name
  • The physical address of the head office
  • Business line
  • Number of employees
  • List of board members
  • Delegation of capital
  • Articles of association
  • Valid personal identification

Once the BRC has been received, you must make the initial capital contribution within three months. Failure to adhere to this condition will result in mandatory fines.

Setting up Business License Tax

Determining your company tax number is easy as it is also your business license certificate number. Tax is paid through an online system regardless of the sphere your business falls under. Additional reports and tax declarations can be submitted through the same system. An electronic signature is a compulsory requirement in order to successfully access this system.

Apply for permits and sublicenses

If applicable, you may need to apply for a sublicense before your company can operate normally. Although company registration in Vietnam is a fairly swift process, the application for sublicenses will cause perceptible delays.

Business lines such as manufacturing, logistics and trading will all require sublicenses. A number of business entities will require additional permits and licenses. For example, if you plan to sell or distribute liquor or cosmetics, special licenses will need to be sought.

Vietnamese business culture

Getting to grips with Vietnamese business etiquette and the corporate environment will only serve to complement you during your stay. Certain aspects of it can be tricky to understand at first, however, they are well worth memorising.

If you'll be maintaining a presence in Vietnam during your business endeavour, one of the most challenging obstacles will be the language. Vietnamese is a tonal language which means that a single vowel pronounced with an incorrect tone will alter the meaning of your sentence dramatically. Fear not though. As a foreigner, mistakes like this are expected and are completely forgivable.

The setup procedure is generally a one-time process. Once your business is legitimate and functional in Vietnam, you may need to collaborate with Vietnamese entrepreneurs. Take the time to familiarise yourself with local business customs. For example:

  • Wait for the oldest member of the group to begin eating at social events before doing so yourself.
  • Don't raise your voice or amplify your anger in group situations.
  • Vietnamese people typically introduce themselves in the order of Family name - middle name - first name.
  • Business deals are often consummated with a social gathering.
  • Presenting a prospective partner with a gift is a common occurrence.

Corporate compliance is another element of business that must be taken into account during your presence in Vietnam. The legislation was rectified in 2020 and a few small changes to the organisational structure of Limited Liability Companies are now in effect. In a nutshell, companies of this category no longer need to be supervised by a Board of Inspection.

Alternative methods of establishing foreign-owned entities In Vietnam

Foreign ownership restriction may in some cases prevent foreign businesspersons from establishing a presence in Vietnam. In many cases, those restricted in this manner will consider collaboration with a Vietnamese associate. In fact, this is the most common means of dodging various industrial restrictions.

Unfortunately, the Vietnamese government has identified this legal loophole and is making changes to legislation. Nominee companies have been subject to heavier sanctions under this new investment law since January 2021.

The following alternative means of establishing a business in Vietnam are as follows:

  • Importer of Record - If your business is in shipping or logistics, this may be of some value. Importing goods into Vietnam isn't a simple process and requires numerous documents. Obtaining such documentation will inevitably delay the operations of your company. Using an importer or record is a legitimate way around this obstacle.
  • Employer of record - Similar to the above, this method ensures that you can hire employees in Vietnam without the need for a company office.
  • Representative Office - While these offices are not legally permitted to generate revenue locally, they can act as a liaison between the government and a foreign parent company. This is one of the simplest and safest ways of entering the Vietnamese market without fully incorporating your company. Typically speaking, there is little difference between foreign investors and local investors as far as parent company liability are concerned.

Frequently asked questions

How should the company founder prepare?

They are required to submit notarised copies of the picture and signature pages of their passport. The founder will also need to present bank statements with their name dated within the last 6 months. The company founder may need to submit additional documentation depending on their precise relationship with the company. If the founder is a company, they must submit a list of directors, articles of association, financial statements and an incorporation certificate.

How does company registration differ with a local partner?

It doesn't vary in the slightest. Company registration guidelines remain the same regardless of the amount of foreign ownership.

How long is the company registration process in Vietnam?

Providing your company doesn't require ministerial approval, the entire process can be finalised in as little as one month. Bear in mind that if any additional licenses are required, the registration process can take several months.

What are the laws regarding the potential environmental impact of a business?

Law No. 55/2014/QH13 on Environmental Protection is what regulates concerns of this type. The requirements and legislation differ slightly between industries. This is because some are more prone to causing damage to the environment than others. A manufacturing company, for example, would produce a far higher amount of carbon emissions than your typical retail outlet.

Many companies are in fact required to liaise with the local authorities on these matters. The standard procedure is for new corporate entities to submit a Plan on Environmental Protection. This will be subject to the appropriate degrees of scrutiny and either approved or returned for careful revisions.

Business in Vietnam is accessible to everyone

Hopefully, this article has painted a fairly clear picture of corporate life in Vietnam. The obstacles we have highlighted may seem daunting and overwhelming; however, business life in Vietnam is generally straightforward. If this is your first time setting up a company in this country, be sure to keep a ready eye on governmental updates and changes to legislation. Should you have any further concerns, we encourage you to reach out to Expat.com.

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.