Registering a company in Vietnam is a strategic move for businesses looking to capitalize on one of Southeast Asia’s fastest-growing economies. With a robust GDP growth rate, favorable government policies, and a rapidly expanding middle class, Vietnam offers numerous opportunities for both local and foreign investors. This guide provides a comprehensive overview of the company incorporation process in Vietnam, detailing the steps, legal requirements, and benefits of setting up a business in this dynamic market.
Understanding Vietnam’s Business Environment
Vietnam’s economic landscape has undergone significant transformation over the past few decades. The country boasts a stable political environment, a growing consumer market, and a strategic location that makes it an attractive destination for investors. According to recent data, Vietnam’s GDP growth rate has consistently hovered around 6-7%, making it one of the fastest-growing economies in the region. Key industries driving this growth include manufacturing, technology, agriculture, and tourism.
Benefits of setting up a company in Vietnam: Establishing a business in Vietnam offers several advantages:
- Strategic Location: Vietnam’s proximity to major global markets makes it a prime location for trade and business.
- Economic Growth: Consistent GDP growth provides a stable economic environment.
- Government Incentives: The Vietnamese government offers various incentives to attract foreign investment.
- Young Workforce: Vietnam has a large, youthful, and increasingly skilled labor force.
- Cost Efficiency: Competitive labor and operational costs enhance profitability.
Key industries and sectors with growth potential:
- Manufacturing: Vietnam is a global hub for manufacturing, particularly in electronics, textiles, and footwear.
- Technology: The tech sector is booming, with significant investments in software development and IT services.
- Agriculture: Vietnam is a leading exporter of agricultural products, including rice, coffee, and seafood.
- Tourism: With its rich cultural heritage and natural beauty, tourism is a growing sector.
Types of business entities in Vietnam
Most Vietnamese industries allow 100% foreign ownership. Before choosing which type of company to open in Vietnam, consider its structure, legal liability, statutory compliance requirements, time to establish, activities, and more. Below are links to the main entity kinds in Vietnam and their corresponding factors.
Requirements for company formation
Starting your Vietnam company formation requires for several main requirements you should follow:
Minimum capital requirement
Vietnam has no minimum capital for most industries. The Department of Planning and Investment will determine if the registered capital is enough to cover the business’s expenses until it generates enough revenue, usually in the first year or two, based on investor calculations. Depending on the business and province/city, a basic business services company can be started for less than USD 10,000, however most are above this threshold.
Investment capital and charter capital
Total investment capital includes charter and loan capital. Loan capital, sometimes known as mobilized capital, is third-party finance or loans to shareholders. Together with loan capital, charter capital—that is, contributed capital—must be registered under Vietnam’s licensing issuing body.
Registered address, resident director and chief accountant
Registered address
Vietnam law requires all companies to have a registered business address. For startups or business owners on a budget or who are not ready for a long-term lease, a virtual office in Vietnam is a perfect option. You can update the business address later.
Legal Representative
Vietnam company incorporation requires a resident director. After company establishment, maintain a residential address in Vietnam. Work permits are required for foreign directors who are not the company’s founder to lease property. A foreigner without a Vietnam address chooses a nominee director.
Chief Accountant
In addition to the LR, companies must also appoint a Chief Accountant to oversee financial operations.
Essential legal documents for company incorporation
Company registration in Vietnam requires a lot of documentation. Foreign investors may need additional papers depending on their business. The essential documents for company registration include:
Application for enterprise registration: The application should include the enterprise name, the address of a registered office, business line, charter capital of the owners, types of shares, number of employees, details of relevant partners/representatives, and tax registration credentials
Articles of incorporation and Shareholder agreements:
- Outline company’s structure and governance
- Details rights and responsibilities of shareholders
Capital requirements:
- Verify minimum investment required
- Ensure capital is deposited in a Vietnamese bank account
- Verification Process: Submit bank statements and investment certificates.
Copy of passport/ID card or other valid personal identification documents of individual members;
Step-by-step company registration process in Vietnam
Step 1: Choose a business option and address
To incorporate in Vietnam, foreign investors have four main legal structures to choose from:
- Limited Liability Company (LLC): A popular choice for its flexibility and limited liability protection.
- Representative Office (RO): Ideal for market research and promoting your parent company, but cannot engage in direct profit-making activities.
- Branch Office (BO): Allows for a wider range of activities than an RO, including direct sales and service provision.
- Joint-stock Company (JSC): Suitable for large-scale projects and offers the option to raise capital through public offerings.
After deciding the legal structure, you need a business location. Besides using your own address or leasing office space (with restrictions), you can also explore:
- Serviced Office & Coworking Space: Quick and easy-to-set-up office locations across Vietnam with minimized costs
- Virtual Office: Start a company without being present in Vietnam through a virtual address.
Step 2: Getting your application ready
- Lease Agreement: To ensure a smooth registration process, each applicant must possess a valid lease agreement or a pre-lease agreement. This document should clearly indicate the designated location for the company’s official registration.
- Proof of Financial Capacity: Investors must demonstrate they have sufficient funds in the bank or the financial capacity to meet their investment commitments in Vietnam.
- Investor Documents: Each investor will need notarized or legalized documents from their home country for the application.
Step 3: Application for an Investment Registration Certificate (IRC)
Pre-approval phase: The pre-approval phase involves submitting initial documents to the Department of Planning and Investment (DPI) and receiving preliminary approval.
Submitting Initial Documents
- Include company charter, identification of shareholders, and proof of address
- Receiving Preliminary Approval
- Estimated timeline: Typically takes a few weeks
Once you receive preliminary approval, you can proceed with the official registration.
Filing with the Department of Planning and Investment: Submit detailed documents including charter, shareholder agreements, and proof of capital contribution.
Common challenges: Ensuring compliance with investment conditions, addressing any discrepancies in documentation.
Step 4: Application for an Enterprise Registration Certificate (ERC)
After securing the IRC, they can then apply for the Enterprise Registration Certificate (ERC). The ERC is the official certificate of incorporation for all companies operating in Vietnam, regardless of ownership. The ERC signifies the company’s legal existence and allows it to conduct business activities. Upon issuance, the company’s basic information will be publicly available on the National Enterprise Registration Portal.
Common challenges: Meeting minimum capital requirements, ensuring the company name is available and complies with regulations.
Step 5: Post-registration procedures
After obtaining the business registration certificate, you must complete several post-registration steps.
- Tax registration: Register for taxes with the relevant authorities
- Opening a corporate bank account: Essential for business operations and financial transactions
- Obtaining necessary licenses and permits: Ensure all required licenses and permits are in place to operate legally
Compliance and reporting requirements
Ongoing corporate compliance for a Vietnamese corporation includes:
Accounting and tax compliance: The company’s accounting and tax compliance and reporting are maintained through annual and quarterly filings.
Annual audit: FDI company is required to submit annual audit reports within Vietnam’s annual finalization calendar. Your financial statements must be audited by an independent Vietnamese auditing company at the end of each fiscal year. An annual audit compliance is not required for a foreign trader’s RO in Vietnam. An annual report of a RO’s activities is mandatory. The report is to be submitted to the licensing authority separately,
Labour compliance: It is essential that you follow to Vietnam’s regulations when employing individuals under your organization. There are a variety of requirements, including the registration and payment of social insurance as a component of payroll, a limit of the types and quantities of employees, and the assurance that foreign employees have the necessary work permits and visas.
License tax and special license: The annual payment of business license taxes occurs in the second business year of a company. Compliance and renewals may also be applicable for any special business licenses that are necessary.
Foreign Investment report: It is mandatory to submit foreign investment reports on a quarterly, semi-annual, and annual basis. These reports include the Report on Investment Implementation (quarterly and annually) and the Report on Investment Supervision and Assessment (semi-annual and annually).
7 key considerations: factors to consider before registering your company
1. Industry-specific regulations
Different industries have specific regulations and licensing requirements. Understand the rules governing your sector to ensure compliance.
2. Minimum capital requirements
Vietnam mandates minimum capital for certain businesses. These vary by industry and operational scale.
3. Foreign ownership restrictions
Some sectors have limitations on foreign ownership. Be aware of these and explore solutions like joint ventures with local partners.
4. Intellectual property protection
Protecting your intellectual property is vital. Vietnam has procedures for registering trademarks, patents, and copyrights.
5. Gather essential legal documents
Legalizing your business requires specific documents. Ensure you have everything in order, including your business license, registration, and any industry-specific permits. These are crucial for a smooth and compliant operation.
6. Appointing Legal representative and Chief accountant
Article 13, Clause 3 of the Vietnam Enterprise Law 2014 mandates that all enterprises operating within Vietnam must designate a legal representative (“LR”) who resides within the country. In situations where an enterprise appoints two LRs, one LR must reside in Vietnam. The second representative is permitted to reside abroad.In addition to the LR, businesses must also appoint a Chief Accountant to oversee financial operations.
7. Partner with experienced professionals
Save time and resources by engaging a reputable business establishment service like Indochina Link Vietnam. We streamline the process, ensuring efficiency and accuracy.
Conclusion
Registering a company in Vietnam offers substantial benefits, including access to a growing market and numerous economic opportunities. With careful planning, adherence to legal requirements, and the right support, you can successfully establish and grow your business in this vibrant market. Taking the first step now can open the door to a wealth of opportunities in Vietnam’s dynamic economy. Seek professional assistance if needed to ensure a smooth and successful registration process.