- Can a foreigner own a business in Vietnam?
- Challenges for foreigners in setting up a business in Vietnam
- Top Business Opportunities in Vietnam in 2023
- The formation process of a foreign company in Vietnam (with Downloadable Guide)
- Required documents to set up a foreign-owned company in Vietnam
- Recent legal updates for FDI companies (2022)
- Cost of Setting up a Business in Vietnam
- How quickly can you set up a company in Vietnam?
Vietnam has turned into a utopia for foreign investors, thanks to the government’s extensive assistance and trade agreements, the growing middle-income groups, and evolving consumer attitudes. The country’s promising economic opportunities act as a catalyst for foreigners to form and register businesses in the country.
This small Southeast Asian country is one of the few that recorded a GDP growth during 2020 and 2021 whereas much more developed countries suffered from COVID-19-induced economic recession.
Thinking about setting up a business in Vietnam? Let us help you.
Over the first half of 2022, Vietnam has made considerable progress in recovery with sharp increases in new and returning businesses, as well as commendable efforts from the government to stimulate the economy.
RELATED: Is COVID Finally Over in Vietnam?
Foreign investment is a key element in Vietnam’s economic growth and capital generation, facilitated by a sustainable supply chain premise and attractive incentives from the government, such as income tax deductions (up to 100%) for tech companies.
Can a foreigner own a business in Vietnam?
Yes, foreign citizens are entitled to expand to Vietnam and incorporate a foreign-owned company in the country. However, there are certain restrictions: 100% Foreign Invested Enterprise in Vietnam can be started only in the form of Limited Liability Company (LLC) or Joint Stock Company (JSC).
If you are a foreign investor interested in expanding your business to this dynamic and quickly evolving young economy, you must first learn about business formation. To start doing business in Vietnam, you need to create a compliant legal entity. This should take anywhere from one to three months, depending on the entity type.
Challenges for foreigners in setting up a business in Vietnam
1. Legal framework and bureaucracy: Vietnam has made significant progress in improving its business environment, but navigating the legal framework, obtaining licenses, and dealing with bureaucracy can still be challenging and time-consuming for foreign entrepreneurs. New regulations can be introduced with little notice, so foreign entrepreneurs should continually monitor, adapt, and adhere to these changes.
2. Intellectual property protection: Enforcing intellectual property (IP) rights in Vietnam can be tricky. While the country has IP laws, their enforcement may not always be consistent or effective, making it essential to take extra precautions to protect valuable IP assets.
3. Cultural and linguistic differences: It’s crucial to understand Vietnamese business culture and create personal relationships while building trust with partners, employees, and customers. Meanwhile, the challenging Vietnamese language still used in most documents & procedures. A fully bilingual native legal consultant or secretary can be especially helpful.
4. Finding a local partner: Partnering with a local business or individual can help you navigate the legal, cultural, and language challenges. However, finding a reliable and trustworthy local partner can be a daunting task in itself. Here’s how you can simplify partner & distributor matching with a partner.
5. Human resources and talent: Finding skilled and qualified employees in Vietnam can be challenging, particularly in specialized sectors. Offering competitive salaries and investing in employee training and development can attract and retain talented professionals. SMEs and startups, in particular, can benefit from HR services for efficient recruitment and retention.
6. Infrastructure: While Vietnam’s public infrastructure is improving, issues such as traffic congestion and inconsistent power supply can impact business efficiency, particularly in urban areas like Hanoi and Ho Chi Minh City. Industrial zones in cities such as Bac Ninh are known to have more advanced manufacturing-oriented facilities.
Top Business Opportunities in Vietnam in 2023
1. Manufacturing and Electronics:
With a strong manufacturing base, Vietnam has become a hub for electronics production, particularly in the smartphone, computer, and semiconductor sectors. Companies like Samsung, Intel, and LG have established their presence in the country. The annual growth rate of the manufacturing sector was predicted jump from 2.5% to 7.5% in 2022.
2. Information Technology and E-commerce:
The IT sector in Vietnam is on the rise, thanks to the young and tech-savvy population and supportive government policies. The BPO sector and software development have also experienced growth. E-commerce has grown rapidly and is projected to see a compound annual growth rate of 12.75% in the next four years.
3. Textile and Apparel:
One of the largest industries in Vietnam is the textile and apparel industry, employing millions of people and contributing significantly to exports. The industry’s annual growth rate reached 15% in 2021, with increasing demand for Vietnamese garments worldwide.
4. Agriculture and Food Processing:
Agriculture is essential to Vietnam’s economy, employing more than half of the population. Rice, coffee, and aquaculture production are key segments of this industry. The food processing industry has also grown, with annual growth rates of over 7%.
5. Tourism and Hospitality:
Vietnam’s tourism sector has experienced significant growth in recent years, with 18 million international tourists visiting the country in 2019. Revenue growth of the tourism sector can reach 23.3% in 2023, making it one of the fastest-growing industries in Vietnam.
Check out our podcast if you want to learn more about the process of foreign company registration in Vietnam!
The formation process of a foreign company in Vietnam (with Downloadable Guide)
The Law on Investment and the Law on Enterprise are two important laws that govern the formation and operation of both domestic and international businesses in Vietnam.
Business structures in Vietnam
Foreign investors have four options to set up a company in Vietnam, depending on their market entry strategy, scale of operations, and other business-related factors.
- Limited Liability Company (LLC): This is the most common company type and is the ideal solution for most foreign investors of small-to-medium businesses, having from one to 50 members. You can get started in only 45 days thanks to reduced paperwork and quick processing procedures.
- Joint-Stock Corporation (JSC): JSCs would be more suitable for starting larger businesses, as you need at least three shareholders, but there’s no upper limit. Shares can be transferred, sold, or bought. The company can also be listed on a public stock exchange when it reaches a certain size.
- Representative Office: If you are expanding your business to Vietnam, you might want to do market research and establish a footprint first. A Representative Office offers access to events, promotional activities, recruitment, and TRC sponsorships. However, it cannot generate income or function as a valid business.
- Branch Office: A Branch Office operates under and alongside its parent company abroad, without needing a separate legal entity. This means that you can start generating profit with full business activities. You would need to employ a Legal Representative to establish a branch.
Each of the four legal entity’s formation requires different procedures and might take anywhere from one to three months.
Generally, there are three main elements to such a process, which are listed below.
|Legal||Accounting & Tax||HR & Payroll|
|Includes registration paperwork, company seal & bank account||Includes tax registration, tax submission & FDI audits||Includes taxes, insurance & consultation|
International investors should closely follow all of the steps below for complete compliance with Vietnam’s foreign company registration procedure.
- Submit your company and/or personnel’s documents
- Register an office address & find a Legal Representative
- Obtain Investment Registration Certificate (IRC) from the Department of Planning and Investment
- Obtain Enterprise Registration Certificate (ERC)
- Engrave an official company seal (required to authorize any issued document)
- Open a bank account with your investment capital
- Submit Tax Registration & obtain E-Signature (for e-invoicing)
- Obtain any other business license necessary for your specific sector
We made the most detailed step-by-step guide to setting up a business in Vietnam for investors, now available as an interactive checklist:
Required documents to set up a foreign-owned company in Vietnam
Completing the set-up procedure for business registration in Vietnam involves a lot of paperwork. Depending on the kind of business chosen by foreign investors, additional documentation may be required.
First, coming to Vietnam, you will have to file for an IRC as mentioned above. For this you will have to enquire with the appropriate local authorities.
After that, starting an official business requires an ERC, which certifies your company’s legitimacy in the country. Here are the required documents to submit:
- 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;
- List of board members;
- Company charter/ articles of association;
- Copy of passport/ID card or other valid personal identification documents of individual members;
- Copy of IRC, as specified under the Law of Investment.
Recent legal updates for FDI companies (2022)
As of 2022 and beyond, foreign investment companies are to undergo an annual audit, also known as the FDI Company Yearly Audit. This will be conducted internally as well as by an independent party. The audit includes:
- Corporate information;
- Board of General Directors’ report;
- Independent Auditor’s report;
- Audited financial statements, with a balance sheet, income statement, cash flow statement and other notes.
Deadline to submit your FDI report: Match 31st, yearly
Cost of Setting up a Business in Vietnam
The costs vary depending on the types of business structures that investors opt for. Following are certain costs you will need to take into account:
- Costs for registering a company and obtaining business licenses;
- Minimum capital requirements (vary according to the selected business sectors);
- Cost for co-working space/ local offices and relevant facilities and management fees;
- Tax Registration & Accounting
- Other possible types of charges: Salaries for employees, compliance costs for maintenance of the company, or hiring a Vietnam accounting service to keep your business free from hassle;
- HR & Accounting must also be factored in.
The average cost of incorporating a fully foreign-owned company in Vietnam is USD 2,800. For the full business setup, see our business cost calculator page.
How quickly can you set up a company in Vietnam?
Setting up your business in Vietnam can take up to 60 days if you set it up from scratch. However you a faster option includes buying a shelf company, which gives you an entity in a mere 7 days.
Setting up a new foreign-owned business entity
If you choose to set up a company from scratch in Vietnam, the registration process will take a maximum of 40 to 60 days in total. The time required for the process will depend on the preparation and availability of the required documents. These companies will be fully owned by the investor(s).
Buying a ready-made business
Apart from starting a company from scratch, you can also purchase a shelf company and start doing business in a matter of days. A shelf company is a local, ready-to-go company where all required documents and procedures have already been taken care of. Therefore, this is the fastest method to set up your investment and start generating profit. Once you have obtained the entity, it can also be converted into a 100% foreign-owned company.
There are a few types to choose from when setting up a foreign entity in Vietnam: Limited liability comapny (LLC) for small to medium companies, Joint-stock company (JSC) for larger companies and corporations, Representative office for maintaining a presence in the country (without making profit), and Branch office for doing business under a foreign parent company.
To set up a company, you must first obtain an Investment Registration Certificate (IRC), then an Enterprise Registration Certificate (ERC), open a bank account, and submit tax registration. There might be other sector-specific certificates you need to obtain.
Apart from the incorporation process, startups might also want to consider outsourcing the business processes, such as accounting, tax compliance, HR and payroll.
Starting from 2022, foreign-owned companies also have to conduct a yearly FDI audit.
InCorp Vietnam is a leading provider of global market entry services. We are part of InCorp group, a regional leader in corporate solutions, that encompasses 8 countries in Asia-Pacific, headquartered in Singapore. With over 1,100 legal experts serving over 15,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business perfectly fit into the market with healthy growth.
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