Vietnam lets foreign investors form joint ventures with both foreign and domestic companies. To comply with foreign ownership rules, international investors frequently form joint ventures with local enterprises. In this article, we’ll go over how to form a joint venture in Vietnam with a local entity.
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The Evolving Joint Venture Landscape in Vietnam
A joint venture is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. In Vietnam, there are two main reasons to organize a joint venture. The first one is to form a two-way, mutually beneficial partnership. Another is to start a business that is restricted to foreign ownership.
A foreign investor needs to partner with a local entity in order to start a business that restricts foreign ownership. If an investor wants to start a business in one of the following industries with ownership restriction, they’ll need to form a joint venture with a local company p:
- Advertising services;
- Services incidental to agriculture, hunting, and forestry;
- Telecommunication services;
- Travel agencies and tour operator services;
- Entertainment services;
- Electronic game business;
- Container handling services;
- Customs clearance services;
- Internal waterways transport, rail, and road transport services;
- Services assistant to all modes of transport.
A joint venture necessitates the involvement of two commercial entities. For several business lines, the local partner must be a 100% Vietnamese-owned company. Such as, in the case of advertising, the local partner must be a company that has an advertising license.
How to Establish a Joint Venture in Vietnam
Whether the individual is a sole investor or part of a joint venture, the process for forming a limited liability company in Vietnam is the same. The following are the stages for forming a limited liability company:
Obtain an Investment Registration Certificate
The first step is to obtain an Investment Registration Certificate (IRC). This certificate is issued by the Department of Planning and Investment (DPI). The paperwork takes around a month to arrive on average.
Get a Business Registration Certificate
The next step is to obtain a Business Registration Certificate (BRC) after receiving the IRC. BRC is also known as Enterprise Registration Certificate (ERC) and is issued by the Department of Planning and Investment (DPI). It usually takes around a week to obtain.
It’s worth noting that the company has 30 days from the time it receives the BRC to complete its tax registration. During this time, they must also pay the annual business license tax. In addition, within 90 days of obtaining the BRC, the company must inject its capital contribution too.
Some business lines necessitate the acquisition of additional licenses to operate. A trading enterprise in Vietnam, for example, will require a trading license. Construction permission and a fire safety license, among other things, are required to start a manufacturing company in Vietnam. The time it takes to get a license varies based on the type of the license. It can take anywhere from a few weeks to several months.
The Minimum Capital Requirement in Vietnam
In most cases, there is no official minimum capital requirement in Vietnam. Some business lines, however, have a predetermined minimum capital requirement. For example, to start a real estate business in Vietnam, one will require at least VND20 billion (approx. US$860,000).
One must offer a capital amount if there is no minimum capital requirement. For the proposed business, the sum must be acceptable and feasible. The DPI will determine if the financing offered is appropriate for the concerned business.
The capital offered must be sufficient to cover operating costs until the company begins to earn. The majority of Vietnamese businesses begin with a capital of US$10,000, although this will vary depending on the business operations. While coming up with capital, consider the following expenses:
- Office rental fees;
- Utilities and bills;
- Labor fees;
- Visa fees for foreign investors and employees.
Note that the money must be put into a capital bank account.
How Can Cekindo Help?
Setting up a company in Vietnam through a joint venture could be a tedious task. Cekindo, with its comprehensive business solution services, will not only help you in your company registration but will also ensure that you stay on top of all legal compliances. Post incorporation, we also offer HR services and accounting services.