What are the Benefits and Challenges of Registering a Company in Vietnam?
Posted 19.08. 2019 by Cekindo / Last update on 7.01. 2020
Since the 1990s with the economic reform, Vietnam has transformed from a highly agricultural economy to today’s more market-based and industrial technology. This has not only raised the income of people substantially, but it has also brought people’s quality of life to a whole new level. Many foreign investors have also touched down on this lucrative land and incorporate businesses through company registration in Vietnam.
With the growing affluence, surging foreign direct investment (FDI) and expanding gross domestic product (GDP), Vietnam presents a thriving environment with numerous investment opportunities. As a matter of fact, with its burgeoning economy, Vietnam has been named the Asia’s newest ‘tiger’ economy recently, just like the other Asia’s tigers: Singapore, Hong Kong, Taiwan and South Korea.
Despite the many benefits of registering a company in Vietnam, there are certain challenges present for investors, especially when it comes to taxing regulatory processes. Based on our expertise, Cekindo has identified the benefits and challenges of company registration in Vietnam in this article, getting you ready before entering the Vietnamese market.
Benefits of Registering a Company in Vietnam
As the third largest economy in Southeast Asia, Vietnam’s recent open business policy and low costs are the reasons attracting foreigners to establish companies in Vietnam.
The benefits of company registration Vietnam include the following:
Vietnam has the highest FDI in Southeast Asia, particularly from Taiwan, Japan, Singapore and South Korea.
It has one of the most-rapidly growing economies globally with 6% annual growth and the growth is expected to increase.
Vietnam has one of the lowest costs of labour compared to many countries in the world. The average monthly wage is only US$210 per month.
The country has a very young and working adult population between 25 and 49 years old. This young population amounts to 60% of its 1.128 million total population.
The tax benefits in Vietnam are also very appealing to foreign investors: corporate income tax, customs duties, and VAT exemptions for companies of free zones and industrial zones; preferential tax incentives for large manufacturing projects; tax exemption and tax reduction for projects of socialized sectors
The economic reform in Vietnam has been ongoing to make the country more and more enticing and accessible for foreign investments
Several free trade agreements were signed between Vietnam and other countries worldwide, including Vietnam European Union FTA and ASEAN Hong Kong FTA.
Challenges of Registering a Company in Vietnam
The challenges still remain when it comes to company registration in Vietnam as well and here are some of them:
Vietnam has a standard corporate tax of 20%. For companies in oil, gas and natural resources exploration and exploitation, the corporate tax is between 32% and 50%.
Foreigners need to fulfill requirements set out under the Vietnamese Company Law: US$10,000 is the minimum paid-up capital to register a company in Vietnam. The amount has to be transferred to a capital account before incorporating the company; you need to appoint a resident legal representative for your company in Vietnam. A foreign legal representative is allowed only when there is evidence of work permit and 12-month experience in managerial position; a branch office setup in Vietnam is allowed only when the parent company has been established overseas for a minimum of 5 years
Vietnam lacks of skilled workers and many enterprises will opt for foreign workers with rather complicated work visa application
The country also has a bad name for its bureaucratic and time-consuming process
There are some inadequacies in property rights protections and infrastructure.