Find out what you need to know about how to start a company in Vietnam to ensure a smooth entry into the Vietnamese market.
Vietnam, the world’s 14th most populous country and Asia’s 9th most populous, is one of the world’s fastest emerging markets. Its population was estimated to be 96.5 million in 2019.Â
Vietnam has made remarkable progress in the last 30 years. Economic and political reforms implemented under the Reformation, which began in 1986, have resulted in rapid economic growth, transforming what was once one of the world’s poorest countries into a lower middle-income country.
Between 2002 and 2018, GDP per capita increased 2.7 times, reaching more than US$2,700 in 2019, with more than 45 million people lifted out of poverty. Poverty rates fell dramatically, from more than 70% to less than 6% (US$3.2/day PPP). The ethnic minorities make up the vast majority of Vietnam’s remaining poor (86 percent). Source: The Worldbank
Vietnam became the World Trade Organization’s (WTO) 150th member when it joined in 2007. Because of the thriving Vietnamese economy, foreigners are encouraged to make investments in Vietnam, and company formation in Vietnam has quickly become an appealing option.
To ensure ease of entry into the Vietnam market, investors and entrepreneurs should expect challenges, particularly in terms of regulations and licensing. However, investors can overcome challenges by equipping themselves with information and knowledge on how this incorporation process works. VNBG is willing to help shed light on this topic as follows.
Before starting a business formation process in Vietnam, investors should make sure the following topics are checked:
- Check on conditions for the intended business
- Decide the company type and corporate structure
- Decide the business location
- Decide the Capital investment
- Timeline of incorporation
- Taxation and business compliance
- Research on laws for business operation (such as labor law, industry’s law)
- Permits for non-Vietnamese employee(s) if any
Let’s have some detailed discussion on each of these topics:
Check conditions for the intended business
The first and most important thing to know before starting anything in Vietnam is whether or not your intended business is permitted in Vietnam and whether or not it is open to foreign investment.
It is simple to check because Vietnam has a Negative List that clearly states which businesses permit and do not permit private investment. And if the business description is mentioned in Vietnam’s WTO commitment, it implies that it is also open to foreign ownership.
Furthermore, investors must check specific conditions for the establishment of each business they wish to start. A new decree that goes into effect in 2021 imposes additional requirements on a few conditional businesses, such as minimum capital, maximum foreign ownership allowed, the qualifications and credentials of the business founder or manager, and so on.
Contact VNBG today to inquire about the terms of your desired business. With a free consultation, our consultants are happy to help you understand what it takes to set up a business in Vietnam.
Decide the company type and corporate structure
There are a number of entity forms you can choose from such as an LLC, a Joint Stock Company, etc. However, the most popular company type is Limited Liability Company (LLC).
For an LLC, it can be a sole or multiple proprietorships. An LLC can have up to 50 shareholders. Some conditional businesses (such as advertising, digital marketing, logistics, ect.) require a joint venture with a local partner.Â
–> VNBG will advise you on the most appropriate business structure which matches your business plan and local regulations.
Read more: 10 steps to setup a company in Vietnam
Decide the business location
The majority of new businesses chose to establish themselves in Ho Chi Minh City, Vietnam’s largest city and economic center. Hanoi (the capital city) and Da Nang are also popular business destinations.
Even in Ho Chi Minh City, it is critical to determine where to set your business address. Is the city center more convenient for you? Or in a high-tech park, close to an industrial zone?
→ Our experienced consultants can explain the differences between each location and assist you in arranging this location.
Decide the Capital investment
The minimum capital required to establish a company in Vietnam is largely determined by the business plan, which is subject to approval by the Department of Planning and Investment.Â
There is no law in Vietnam that specifies a minimum fund for most businesses (unless a few of conditional ones). However, in order to establish a foreign-owned company, an investor is recommended to set the capital from $10,000 USD. If the business plan is not financially feasible, it will be rejected by the Department of Planning and Investment.
Timeline of incorporation
The timeline for company formation in Vietnam depends on the type and scale of a business in Vietnam; 45 working days for less complicated conditions; 90 working days or longer for more complicated conditions, such as headhunting and education. Because of the involvement of numerous government authorities in the approval of a business plan, the time required can be longer.
VNBG legal team who is familiar with the process will guide you through
Taxation and business compliance
The most popular business taxes in Vietnam are corporate income tax (CIT), an import and export tax, a value-added tax (VAT), and a personal income tax (PIT). Currently, corporate income tax is 20%, export tax is 0% (except in rare cases), import tax varies depending on duty charge, VAT is mostly 10%, and personal income tax varies depending on income level (from 5%-35%).
Read more on: Taxation in Vietnam
Our tax/accounting team is ready to help explain and guide you through the taxation process in Vietnam. Contact us to place your inquiry today.
Research on laws for business operation (such as labor law, industry’s law)
Once the company is established, it will need to understand business compliance in Vietnam, such as periodic tax reports and deadlines, labor law (in case the company will hire staff).Â
Each industry may have different laws that the company must follow such as Construction, Architecture, Engineering, Education, etc. Understanding these laws allows a company to be 100 percent compliant and thus avoid penalties in the future.
Permits for non-Vietnamese employee(s) if any
If a non-Vietnamese is hired by the company or assigned into any position of the company, including the CEO or Legal Representative of the company, the company must obtain a Work Permit for the person.
This process takes up to 2-3 months to be completed and requires some of the paperwork. But with support from VNBG, we can help make this process as easy and simple as possible.
Company setup in Vietnam made easy with VNBG
VNBG is proud of its comprehensive product and service packages of business consulting services ranging from accounting and human resource management to business setup and PEO outsourcing, among other things.
Our excellent team of experienced consultants is ready to respond to your questions. We offer initial free advice on setting up your business or company in Vietnam.
Contact us right away!
