Setup company in Vietnam

Vietnam has emerged as one of the most attractive destinations for foreign investors looking to establish their businesses. With a rapidly growing economy, a young and dynamic workforce, and an increasingly favorable business environment, Vietnam offers numerous opportunities for entrepreneurs and companies seeking to expand their operations in Southeast Asia. This guide will walk you through the essential steps, legal requirements, and key considerations when setting up a company in Vietnam.

Why Choose Vietnam for Business Setup?

There are several reasons why Vietnam is an excellent choice for business expansion:

1. Strong Economic Growth: Vietnam has maintained a stable GDP growth rate, making it a favorable market for investment.

2. Strategic Location: Located in the heart of Southeast Asia, Vietnam provides easy access to major global markets.

3. Favorable Trade Agreements: Vietnam is a member of several free trade agreements, including the CPTPP and EVFTA, making trade more accessible.

4. Affordable Labor Costs: The country offers a young and skilled workforce at competitive wages.

5. Government Support: The Vietnamese government encourages foreign investment through various incentives and reforms.

   
   

   

   
   

Types of Business Entities in Vietnam

Before setting up a company in Vietnam, it is essential to choose the right business structure. The most common types of business entities include:

1. Limited Liability Company (LLC): The most common type of business entity for foreign investors. An LLC can be either a single-member LLC or a multi-member LLC (with up to 50 members).

2. Joint Stock Company (JSC): Suitable for businesses planning to issue shares to raise capital. A JSC requires at least three shareholders.

3. Representative Office (RO): A non-commercial entity used for market research and liaison purposes.

4. Branch Office: A legal extension of a foreign company, allowing full business operations in Vietnam.

5. Business Cooperation Contract (BCC): A contractual agreement between foreign and local investors without forming a new legal entity.

   
   

   

   
   

Step-by-Step Guide to Setting Up a Company in Vietnam

Step 1: Determine Business Sector and Ownership Structure

Foreign investors should first identify their business sector and check if it falls under the permitted industries for foreign investment. Certain industries may have foreign ownership restrictions or require special approvals.

Step 2: Choose a Business Structure

Based on the business goals, investors should select the most suitable entity type, such as an LLC or JSC.

Step 3: Register the Business Name

The company name must be unique and comply with Vietnam’s business naming regulations. Investors can check name availability through the National Business Registration Portal.

Step 4: Prepare Necessary Documents

Foreign investors are required to prepare the following documents:

• Investment Registration Certificate (IRC)

• Enterprise Registration Certificate (ERC)

• Articles of Association

• Passport copies of investors

• Lease agreement for office premises

Step 5: Apply for Investment Registration Certificate (IRC)

The IRC is required for foreign-invested enterprises and is issued by the Department of Planning and Investment. The process typically takes 15-30 days.

Step 6: Obtain Enterprise Registration Certificate (ERC)

After securing the IRC, investors must apply for the ERC to officially register their company with the Business Registration Office.

Step 7: Tax Registration and Bank Account Setup

Newly registered companies must obtain a tax code from the tax authorities and open a corporate bank account in Vietnam.

Step 8: Obtain Necessary Licenses and Permits

Depending on the business type, additional licenses may be required, such as industry-specific permits or operational certificates.

Step 9: Hire Employees and Comply with Labor Laws

Foreign companies hiring employees in Vietnam must adhere to local labor laws, including work permits for expatriates and social insurance requirements.

Step 10: Commence Business Operations

Once all legal formalities are completed, the company can officially start operations in Vietnam.

Costs of Setting Up a Company in Vietnam

The costs involved in establishing a company in Vietnam may vary depending on the business structure and industry. Common costs include:

• Company registration fees: $100 - $500

• Legal and consulting fees: $1,000 - $5,000 (depending on complexity)

• Office rental costs: $500 - $5,000 per month (varies by location)

• Government licensing fees: Varies by industry

Taxation and Financial Compliance

Vietnam has a relatively straightforward tax system that businesses must comply with:

• Corporate Income Tax (CIT): Standard rate of 20%

• Value Added Tax (VAT): 0%, 5%, or 10% depending on the product/service

• Personal Income Tax (PIT): Progressive rates from 5% to 35%

• Social Insurance Contributions: Employers must contribute approximately 21.5% of an employee’s salary

Challenges of Doing Business in Vietnam

While Vietnam is a favorable destination for business, investors may face some challenges, including:

• Bureaucratic Procedures: Navigating through government regulations can be time-consuming.

• Language Barriers: Most official documents and government communications are in Vietnamese.

• Changing Regulations: Frequent legal and tax changes may require businesses to stay updated.

• Infrastructure Issues: Some regions may still have underdeveloped infrastructure compared to major cities like Ho Chi Minh City and Hanoi.

Tips for Foreign Investors

To ensure a smooth business setup process, foreign investors should:

• Consult with a Local Business Expert: Hiring a professional consultant or law firm can help navigate legal requirements.

• Understand the Market: Conduct market research before investing in Vietnam.

• Stay Compliant: Ensure all business activities comply with Vietnamese laws and regulations.

• Leverage Local Partnerships: Collaborating with local partners can provide valuable insights and business advantages.

Setting up a company in Vietnam presents lucrative opportunities for foreign investors. With proper planning, knowledge of legal requirements, and local expertise, businesses can establish a successful presence in this dynamic and fast-growing market. If you are considering entering the Vietnamese market, seeking professional assistance can help streamline the process and ensure compliance with all legal and financial obligations.