There are reasons why doing business in Vietnam has become appealing to foreign entrepreneurs and investors. Vietnam is one of the key emerging economies in Asia these days, thanks to the economic reform and growing affluence. In the medium and long term, it’s forecast that the country’s economy will continue to grow more than 6% every year. This progress is driven by a growing young and educated population and an expanding domestic consumer market. What is more, Vietnam has the fastest-growing middle class in the entire Southeast Asia.
Asia’s newest ‘tiger’ economy is the new name for Vietnam, as the country’s economy is currently following in the footsteps of South Korea, Singapore, Hong Kong, and Taiwan. For that reason, Vietnam has seen a dramatic increase in foreign direct investment (FDI) as many investors recognise the opportunities in this thriving investment environment.
However, doing business in Vietnam doesn’t come without potential challenges. This article identifies the major challenges business owners should be ready for before you start establishing your business in Vietnam.
Setting up a Company in Vietnam
Vietnam has been ranked the 115th in the world’s Ease of Starting a Business and the 70th in the world’s Ease of Doing Business.
Though the reform is still on-going, there are still certain requirements you have to meet before you can start a company, such as:
- A company address and a signed lease for your company are required before you can register your legal entity
- Restrictions are imposed for some foreign investments in certain fields such as businesses dealing with particular chemicals, drugs, minerals, firecrackers, and some biological businesses. These sectors are forbidden for foreign investments.
The exchange rate is stable between the Vietnamese dong and the US dollar, benefiting trading partners of all industries. Hence, the Vietnamese dong is regarded as one of the most stable Asian currencies for foreign investments.
However, the government regulates the transactions involving foreign currencies very strictly: control of foreign currencies inflow is more relaxed than their outflow.
Vietnamese Language is Used in Paperwork
All reporting and filing paperwork, including licenses, must be written in the Vietnamese language. For documents that are in English or other languages, they must be translated into Vietnamese through certified translations at court in the home country. It does not stop here. The certified translated documents must then be validated by a Vietnam embassy.
Taxes in Vietnam
Although reform for Vietnam’s complicated tax system is underway, there are still 10 corporate tax payments that must be made every year. Other taxes also include VAT and social insurance.
Through the reform, the government of Vietnam intends to simplify all tax calculation and declaration procedure, and sort out unclear tax issues in order to create a favourable business environment.
A lot of work must also be done by the authority in respect of the improvement of technology for tax reporting such as electronic tax declaration.
Read also: Tax Incentives in Vietnam
Lack of Transparency and Bureaucracy
Even though the country is going through a huge transformation in terms of its economy; bureaucracy and lack of transparency of regulations are still common in Vietnam.
Vietnam’s overlapping jurisdiction of ministries results in a lack of consistency in policies as well as a lack of corporate financial transparency, which can also bring forth many challenges.
Payment in Cash
Vietnam depends heavily on cash for payment in the country. More than 90% of the country’s transactions are done in cash due to the lack of reliable and trustworthy cashless system and ATMs.
The corrupted local banks also add challenges for the Vietnamese to adopt and trust other types of payment method.
The government, however, aims to make Vietnam one of the few cashless countries in the region, with an emphasis towards ease of digital payments systems and adoption of blockchain technology.
Cekindo Helps Overcome These Challenges when Doing Business in Vietnam
Whether you’re thinking of investing in Vietnam, or have already been doing business in Vietnam for some time, it is very critical to get the assistance you need to help you navigate this ever-evolving economy with many unforeseen circumstances that are coming your way.
Get in touch with Cekindo now by filling in the form below and we’ll have our local experts to help you take your business in Vietnam to a new height.