If you want to do business in Vietnam as a foreign investor, the first thing you should do is read the following six must-know facts.
1. Is it easy to do business in Vietnam?
Doing business in Vietnam 2021 has been on hot search in recent years due to flourishing business opportunities in the country. Vietnam has become a member of WTO since 2007, after almost 15 years of international economic integration, Vietnam has reduced entry barriers in many of its industries. The legal frameworks for business operations have been refined and adjusted to reflect the demands of business owners and to catch up with the trends of the world.
New Investment Law
The birth of the new Investment Law in 2021 will mark a watershed moment for inventors in Vietnam, significantly altering some of the major regulations that will influence both domestic and foreign-owned businesses, mostly in a positive way. The new law has simplified business incorporation registration procedures, lifted some conditions for a number of industries, and eliminated a number of steps or reporting compliances for business operations. Many businesses that were previously prohibited or difficult to obtain for foreign investors are now permitted or easily obtained (such as Real Estate).
Higher efficient Government
The government’s administrative system has also been improved to be more efficient. In major cities such as Ho Chi Minh or Hanoi, most paper procedures can be completed online. Many red tapes have been removed as a result of the e-government policy, creating a favorable environment for businesses. Anti-corruption and transparency are two major movements actively promoted by the current Vietnamese government. They have cracked down on many shady businesses in recent years, creating a level playing field for the country’s businesses.
Remaining barrier
Despite significant improvements in English teaching in schools over the last few decades, the language barrier appears to be a barrier for foreigners in Vietnam. The vast majority of Vietnamese people are still unable to communicate in English as a second language. However, young Vietnamese in major cities such as Ho Chi Minh City, Hanoi, and Danang are known for having good English skills that are adequate for work. Because of the availability of human resources, most international companies choose these three cities as the locations for their businesses in Vietnam.
2. Can a foreigner own a business in Vietnam?
A 100% foreign owned company in Vietnam is absolutely a popular thing here. If you have ever asked yourself the question “Can I start a business in Vietnam?”, the answer is “It depends on which industry you want to do.”
Following its commitments to join the WTO, Vietnam has opened its doors to foreign investment. Some industries have additional market entry requirements, while others do not. The majority of business services, such as consulting, IT outsourcing, IT services, trading, and so on, are completely open to foreigners. Other industries that have not (yet) allowed 100 percent foreign investment include logistics (49-51 percent), advertising (up to 99 percent), and so on. Some industries, such as pharmaceutical sales and distribution, are completely closed to foreigners.
Therefore, to determine whether or not you can open a company in a specific business, you should first check with Vietnam’s WTO commitments or consult with an experienced business consultant to determine the feasibility and conditions for your desired business.
Company registration in Vietnam for foreigners can be very simple for non-conditional businesses like Consulting, IT, trading (like mentioned above). The standard timeline is 4-6 weeks. The documents involve mostly the investor’s passport and bank statements if that is individual ownership.
However, to obtain a business registration certificate in Vietnam for conditional businesses such as Education, Financial service, Logistics, E-commerce platform ect. can be challenging. It involves a higher level of approval (ministry approval) which can take months. The conditions also vary from field to field. You need to understand thoroughly what is required for such a business setup and make sure these conditions are met before submitting the applications. Businesses like Recruitment service, Training/coaching, Restaurant/Cafe or Ecommerce platform will also require additional operational licenses after the main business license is obtained.
3. What types of companies in Vietnam a foreigner can choose from?
The forms of business in Vietnam are not far away from those found in other countries. Limited liability companies, joint stock companies, public companies, and representative offices or branches are all types of businesses in Vietnam.
A foreigner may choose to open a business with any of the above-mentioned legal entities. In fact, the most common type of company chosen by foreign investors is a Limited Liability Company (LLC). A limited liability company (LLC) is an excellent choice for small and medium-sized enterprises (SMEs), including Vietnamese-owned businesses.
4. How to set up a foreign company in Vietnam?
The procedure to register a foreign company in Vietnam can be described as below.
- Check conditions for business
- Obtain a business address
- Appoint a resident legal representative
- Apply for Investment Certificate
- Apply for Business Certificate
- Make the company stamp/seal
- Open the bank account for the company
- Inject committed capital investment
- Tax registration
- Other operational tasks (recruitment, office setup, tax, accounting, and payroll)
We have explained all necessary steps for the incorporation process here: 10 steps to fully setup a company in Vietnam. Following this instruction, one can totally establish a business for himself and get it ready to run in Vietnam.
5. What are the costs to register a business in Vietnam?
The cost of establishing a business in Vietnam varies by industry. Aside from the expenses associated with the establishment phase, you should be aware of other operational costs associated with the post-establishment phase of business. The cost centers are listed below.
Establishment costs:
- State fees
- Business address/location arrangement
- Resident Representative (optional)
- Service fee for the agency (optional)
- Admin fee (translation + notarization)
- Capital investment (depending on the business)
Post-establishment costs:
- Business license tax
- Recruitment & Hiring
- Office setup
- Tax/Accounting compliance
- Annual audited financial statement
- Taxes: PIT, VAT, CIT, FCT, import tax
- Other corporate secretarial costs (additional licenses, legal consultancy, ect.)
Company registration fees in Vietnam are relatively low compared to those in other countries. For application processing, the state charges between $10 and $25 for company registration. Writing application dossiers for Investment Certificates and Business Certificates, on the other hand, is a challenge that only experienced consultants can guarantee the outcome of. This writing must be done entirely in Vietnamese, which presents a significant challenge to non-native Vietnamese. This is where the serviced companies come into play.
The fees charged by these firms can range from $1,000 to $10,000 (or even more) depending on the complexity of the case. A few service providers typically charge significantly less than international agencies. However, be wary of excessively low-cost service offers, which may indicate a lack of communication, scams, or unprofessional service approaches.
6. How to obtain Vietnam citizenship by investment?
Vietnam does not grant citizenship based on investment, but it does grant temporary residency, allowing foreigners to stay in Vietnam for a long period of time. Many ex-pats here are familiar with the term TRC (Temporary Resident Card).
Temporary Resident Card
The TRC allows for a single stay period of up to 2, 3, or 5 years (renewable), depending on the size of the investor’s capital contribution. The TRC is Vietnam’s most powerful stay permit. Aside from the extended stay, TRC can assist in obtaining TT Visas or Dependent Visas in Vietnam for their family members. As a result, it has become the ultimate goal for the majority of ex-pats here.
However, obtaining the Investment TRC is quite difficult because it requires a minimum investment of 3B VND (or USD 130,000.00). Small and medium-sized business owners may believe that obtaining this condition is impossible.
Investor Visa
TRC is not, in fact, the only option. When considering visas for foreigners in Vietnam, consider the Investor Visa (DT4 visa). This visa has a maximum validity of one year but can be renewed if business operations are provided. Another drawback is that the Visa cannot be used to sponsor family members. There are, however, ways to get around this visa restriction for small-investment business owners in Vietnam; however, it will require a few extra steps and additional setup with the company. Continue reading our other articles or contact us for more information.
How to get a Vietnam investor visa?
This procedure would require the business certificate to clearly show your name as the owner or co-owner of a business entity in Vietnam. That would be sufficient to apply for one.
For a newly established company, the immigration officer may not grant the applicant full one-year terms at first, but rather 3-6 months, which will be extended upon the provision of business operations (such as capital investment injection, contracts, invoices, tax reports, ect.).
Finally, investment in Vietnam has become a trend in recent years due to the country’s many business opportunities and the creation of more favorable conditions to encourage foreign businesses. These 6 must-know facts about doing business in Vietnam should be read before you begin. Check out other articles from our website to get a comprehensive picture of the Vietnam investment landscape, making ground for your successful business in the future.
If you want to get assistance in business incorporation or consulting in Vietnam, contact our consultant today for free advice.