Understanding Legal Obligations of a Company in Vietnam

Understanding and fulfilling legal obligations of a company in Vietnam is necessary for seamless business incorporation.

Vietnam has undergone several key transformations over the years to improve its investment environment for foreigners. Therefore, you need to understand the legal obligations of a company if you are ready to start a business and go through a company incorporation process in Vietnam. Although it can be confusing to navigate the bureaucracy & legal compliance issues, but the long term benefits are extremely lucrative.

Investing in Vietnam? See Cekindo’s Business Incorporation Services

But before we dig deeper into the legal obligations, it is necessary to get familiar with the most common establishment options in Vietnam.

Common Entity Options for Company Incorporation in Vietnam

The most common entities to choose for incorporating a business in Vietnam are Limited Liability Company (LLC) and Joint Stock Company (JSC).

Below are the main characteristics of each of these legal entities.

Limited Liability Company (LLC)

  • Incorporation time: between 1 and 3 months
  • Minimum number of shareholders/owners: one (1)
  • Maximum number of shareholders/owners: fifty (50)
  • Initial investment capital: depending on the sector or industry (it is mandatory for the real estate industry but for other sectors, logically sufficient capital is enough)
  • Corporate governance consists of general director, general meeting, chairman of the members’ council, and inspection committee
  • Liability: only limited to the charter capital
  • Addition or change of shareholders and capital: allowed but must be agreed by all shareholders
  • Overseas shareholder’s dividend tax: 5% for individuals and 0% withholding tax for corporate shareholders
  • Tax of capital gain: it is taxed as income tax – 20% for Vietnam tax residents and corporates; 0.1% of the total selling price for non-residents

Joint Stock Company (JSC)

  • Incorporation time: between 1 and 3 months
  • Minimum number of shareholders/owners: three (3)
  • Maximum number of shareholders/owners: not limited
  • Initial investment capital: depending on the sector or industry (it is mandatory for the real estate industry but for other sectors, logically sufficient capital is enough.); VND 1 billion for listed companies
  • Corporate governance consists of general director, general meeting, management board, chairman of the management board, and inspection committee
  • Liability: only limited by the investment to the company
  • Addition or change of shareholders and capital: Preferential and common shares can be sold and traded; transfers of shares must be approved by founding shareholders in the first three years
  • Overseas shareholder’s dividend tax: 5% for individuals and 0% withholding tax for corporate shareholders
  • Tax of capital gain: it is taxed as income tax – 20% for Vietnam tax residents and corporates; 0.1% of the total selling price for non-residents

RELATED: Important Things to Know Before Buying a Business in Vietnam

Legal Obligations of a Company in Vietnam

The law in Vietnam specifies that all companies in Vietnam must know and fulfill their legal obligations accordingly.

  • Declare and pay taxes following Vietnamese Law. Companies should also fulfill other financial obligations under prescribed regulations
  • When companies engage in business categories or activities subject to certain business conditions, they must fulfill and maintain the conditions set out by the Investment Law in Vietnam throughout the entire business operation
  • Companies must ensure employees’ interests and rights are fully protected and satisfied under the Employment and Labour Law. No discrimination, child labour, forced labour, or insults are allowed in the company. Employees must also have proper support from the company including health insurance, social insurance, professional training, and unemployment insurance
  • Submission of valid and reliable financial statements with proper accounting on time according to Vietnam Law
  • Satisfy obligations and carry out responsibilities relating to business registration, establishment and operation information disclosure, change of business registration information, and others
  • Be responsible for the product or service quality and fulfill the standards under the relevant legislation
  • Ensure accurate and truthful business registration information and able to remedy incorrect information immediately
  • Comply with several important regulations such as gender equality, national defense and security, natural resource protection, social order and safety, environment protection, and historical sites and monuments protection
  • Execute rightful acts relating to business ethics to protect the customers’ legal rights and interests

How Cekindo can Assist with Both Incorporation and Compliance

Cekindo delivers a wide range of compliance solutions aimed at ensuring your successful company incorporation in Vietnam.

We want to help all foreign individuals and entities meet their obligations under Vietnam Law. We also make the process simpler for you to comply and highlight the real and tangible risks for non-compliance.

To be able to engineer the most optimal incorporation and compliance solution for your business, Cekindo needs to have a good understanding of your business objectives and requirements.

Feel free to contact us via the form below and we will discuss the different business solutions available to you.

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