create a new business entity in vietnam

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create your business entity in vietnam

why open a business entity in vietnam?

many investors and overseas companies have decided to open their own business entities in vietnam, here are why.

The first step of the long-term business plan

Any long-term business plan must be carried out through an entity. An entity enables the investment to be legally recognized and protected.

In addition, for the sake of legality or tax ease, most Vietnamese enterprises choose to associate with another firm that is also registered in the same nation.

Freedom in business
Many foreign companies may have previously been indirectly involved in business in Vietnam through a network of partners or nominee ownership.
However, this approach was not cheap, and it also limited the scope of activities. The decision-making process and business results become time-consuming and vulnerable to a slew of external factors.
The solution to this problem is to establish their own entity in Vietnam to handle their affairs directly. This reduces the number of intermediary steps, lowers the cost of nominee services, and gives them more freedom in running their business.

Client’s preferences

A large number of foreign companies have decided to set up office in Vietnam simply because their Vietnamese clients want to. In fact, it is always easier for a Vietnamese company to do business (sign a contract, make payment, obtain invoices, etc.) with an entity registered here rather than one from another country.

This bureaucratic hassle, in turn, compelled companies to form a legal entity in Vietnam in order to continue doing business with their clients/partners in the country.

what required to open a business entity?

Opening a business entity in Vietnam is not difficult, for certain business lines, it is even an easy process.

Having a business address

To be established, all business entities must obtain a business address in Vietnam. For most business lines, investors can use a business address service (Virtual Office – VO) as their registered address.

However, for some businesses that have restrictions on their physical address, size, and location, Virtual Office is inapplicable. The key is to understand which business lines allow and do not allow VO, which will save you a lot of time and money during the setup process.

The business address can be changed and updated at any time, and the business license must be amended or updated with each change.

Having a person representing the entity in Vietnam

All business entities require a person in Vietnam to play the role of the legal representative. The person taking this role must obtain a permanent address in Vietnam or stay in Vietnam minimum of 183days/year.

In many cases, this person is also called the “Resident Director”. Both Vietnamese or non-Vietnamese can take this role, but in case a non-Vietnamese is assigned, he must obtain a Work Permit.

Additional business conditions

Aside from a Business Address and a Resident Director, the entity must meet some additional conditions for certain business lines, such as capital investment, business facilities, human resource qualification, and so on. For more information, please contact our consultant.

a company vs. a branch

If the goal of establishing a presence in Vietnam is to generate revenue or conduct commercial activities, investors have two options: establish a completely new company or establish a branch of a parent company in another country.

A company provides the greatest amount of freedom to its shareholders. It is permitted to operate in all business lines obtained and authorized by the government. A company can act as an individual, as a corporation, or as a combination of the two.

Though it may be owned by a company from another country, the company in Vietnam may conduct its business differently or beyond the scope of its parent. Once registered, a company can engage in any business that is not prohibited by Vietnamese law. There can be more than one director in a company.

A branch is an extension of an overseas company in Vietnam. The parent company must be at least 5 years old and must not have any business lines restricted by Vietnamese law in its license. A branch can engage in commercial activities, but it cannot go beyond the boundaries of its parent.

Because a branch is a dependent entity of a corporate owner, the documents and paper procedure will significantly involve the company overseas.

a representative office

The Representative Office (RO) is intended to represent the parent company in Vietnam; it has no commercial activity and is known to operate on a small scale.

According to the Labour Law, a representative office can enter into labor contracts and hire people. It is common practice for a RO to operate on a small scale. A total of 10-15 people can be considered adequate.

However, if a RO exceeds that number, the authority may question. Furthermore, certain job titles, such as sales, field force, account executive, business development, and so on, should not be recruited under a RO. A RO can only have one Chief Representative (the legal representative).

Because of the limitations of RO operations, running a RO is actually much easier than running a company. A RO has much simpler internal accounting work because it is not responsible for tax payment or reporting.

While a company has monthly – quarterly – yearly deadlines for tax/accounting reporting, a RO only needs to submit one operational report per year and, if applicable, a Personal Income Tax report for its employees.

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