Due to the fact that 100% foreign ownership is allowed in many business sectors, foreigners are encouraged to make investment through company incorporation. One way to do it is by setting up a foreign company when it comes to company registration in Vietnam. However, in certain sectors, some restrictions still apply to a foreign-owned company.
As a result, it would be more ideal to establish a local company in Vietnam instead of a foreign-owned company with 100% foreign ownership.
This article clarifies why a local company in Vietnam is a better choice in certain circumstances, and when you should consider starting one.
Reasons to Establish a Local Company
As long as the foreign ownership of a company in Vietnam is less than 51%, the company is regarded as a local company in the country.
Restrictions on Foreign-owned Company in Vietnam
The laws and regulations for foreign ownership of most business sectors in Vietnam are mostly governed by the agreement of the World Trade Organization (WTO) and other international treaties.
Local legislations often apply for businesses that are not fully open to foreign ownership. But here is the thing: some of these business lines do not fall in a specific area and the laws governing them are ambiguous.
In other words, there aren’t any local legislation or international agreements to regulate them. Some of the sectors are:
- Spa business
- Gym business
- Online teaching business
Therefore, if your business sector is one of these industries with ambiguous regulations, the approval is required from the relevant Ministry. And then of course, your company registration process will take a much longer time.
Benefits of Setting up a Local Company in Vietnam
Registering a local company in Vietnam offers several benefits, and being able to complete your company registration faster is one of them.
Generally, it takes approximately 20 working days to set up a foreign company. The reason is that foreign companies must obtain the Investment Registration Certificate (IRC) before they can proceed with the company registration.
What makes the matter worse is that if your business sector falls under the mentioned ambiguous category, it takes several months or close to a year to get an IRC.
The good news is, a local company does not need to obtain an IRC. This owes to the fact that local companies have less than 51% foreign ownership and therefore an IRC is not required.
With that being said, without the IRC application, setting a local company allows you to apply for the Enterprise Registration Certificate (ERC) or Business Registration Certificate (BRC) right away.
The entire process of local company incorporation in Vietnam takes significantly a shorter time, approximately 7 working days.
Requirements for Local Company Setup in Vietnam
- Foreigners must own less than 51% shares (less than 51% foreign ownership) in the company. So you will need a local partner in this case. Cekindo can assist in finding the most reliable partner for your company.
- Sub licenses are required for specific industries, including retail and education. Industries that do not need a sub license are consulting, wholesale trading and software development.
- There is no minimum capital requirement for most sectors in Vietnam. Nevertheless, the capital you put into your business must align with your business plan.
- A registered address is compulsory to register your local company in Vietnam. A virtual office is allowed only when you have a service-based company. For businesses such as retail and manufacturing, you need to submit an address of physical location for your business activities for registration.
The startups in Vietnam have been rapidly growing over the past several years. Check Benefits of Virtual Office for Startup Companies to understand why using a virtual office is a smart choice for startups.
Vietnam Company Registration with Cekindo
Cekindo can serve as your reliable provider to assist you in registering your company in Vietnam. This is all you have to do:
- Submit your inquiry
- Our legal team responds within 24 hours
- Receive free consultation for 1 hour via call or video
- Submit all required documents
- Make payment
- Your application is processed
Get in touch with us today by filling in the form below, so you can start entering the Vietnamese market as soon as possible.