How can a foreigner start a business in Vietnam?

Introduction

A brief overview of Vietnam's economic climate

Vietnam stands as a country with a swiftly advancing economy that captures the interest of international investors worldwide. Its vibrant economic expansion and reliability position it as among the most appealing markets in the region for business and investment. Here are some important factors delineating Vietnam's economic environment:

• Steady economic expansion is bolstered by diverse sectors including manufacturing, exports, tourism, and service industries.
• The region is actively striving to enhance its business climate. It has streamlined processes for company registration in Vietnam, ensuring swift market entry for international investors.
• Vietnam's position along the Pacific Ocean enables connectivity to crucial international markets. The nation has established free trade pacts with numerous countries, easing the flow of goods both entering and exiting its borders.
• Vietnam is becoming an increasingly attractive destination for investing in IT and software technology.

Vietnam as a point for attracting foreign investment

Vietnam actively attracts overseas investments and promotes a favorable climate for international entrepreneurs. This is facilitated through numerous incentives and simplified procedures.

• Foreign entrepreneurs aiming to launch a venture in Vietnam get tax advantages and financial support, particularly in key industries such as manufacturing, infrastructure, and technology.
• The nation is currently focused on streamlining enrollment processes for businesses and investment initiatives. This involves decreasing the duration required to initiate a business.
• Vietnam has numerous special economic zones where overseas investors can obtain extra advantages and perks.
• Vietnam's strategic position within Southeast Asia serves as a gateway to numerous markets, encompassing China, Japan, South Korea, and various other nations throughout the region.

Vietnam's appeal to foreign investment and business opportunities make it highly desirable for investors.

Legal status of foreign investors

Opportunities and conditions for doing business for foreigners in Vietnamese jurisdiction

Vietnam is inviting foreign investors, presenting a diverse array of opportunities for business ventures within its borders. Nonetheless, akin to any other nation, there exist particular regulations and criteria that necessitate consideration:

• Vietnam offers several forms for foreign investment. This could involve direct participation, such as starting your own business or collaborating with local counterparts on joint initiatives, or indirect involvement, such as purchasing shares or business assets.
• Certain industries are accessible to foreign investors, yet sectors like defense or specialized services might impose restrictions or necessitate further approvals.
• To operate legally in Vietnam, foreign entrepreneurs must go through a formal process to register their business, which includes choosing a business form, relevant documentation and approvals.
• While foreign corporations must adhere to local tax regulations, Vietnam also provides numerous tax benefits aimed at assisting new investors.
• Companies with international investment must adhere to domestic labor regulations, encompassing workplace conditions, labor entitlements, and social protections.

Considering the presented conditions and regulations, Vietnam is a promising territory for foreign entrepreneurs seeking to expand their business.

Basic legislation regulating foreign investment

These statutes and guidelines constitute the cornerstone of the legal structure overseeing overseas investments in Vietnam and define the guidelines and prerequisites for commerce and enterprise within the nation. Foreign investors are obligated to adhere to these provisions when engaging in operations in Vietnam.

Limitations and prospects

Conditions for doing business by foreign investors in Vietnam

Foreign entrepreneurs intending to conduct business in Vietnam must consider specific limitations mandated by the nation's regulations. Here are some key points:

• Activities that may have a negative impact on the environment require special permits and licenses. Such companies must meet high environmental requirements.
• In certain industries like finance or media, restrictions may exist regarding international ownership, necessitating further authorization.

Foreign entrepreneurs looking to establish a thriving enterprise in Vietnam must thoroughly familiarize themselves with local regulations and confirm the accessibility of all necessary paperwork.

Participation of foreigners in various economic sectors

Vietnam specifies different levels of foreign investor participation based on the industry. Some features:

• Banking sector: under Vietnamese regulations, overseas investors are limited to holding a maximum of 30% equity in local banks to preserve the nation's monetary stability.
• Agriculture: in certain situations, investors might face limitations when establishing an enterprise in Vietnam within the agricultural and fisheries sectors. Plot ownership in this business may be restricted in terms of maximum area and duration.
• Media: foreign investors aiming to participate in media enterprises might also encounter limitations concerning the foreign control of newspapers, magazines and radio and television broadcasting companies.
• Education: there are also limitations on foreign ownership and influence in the educational field. Foreign investors desiring to establish educational institutions must adhere to specific regulations and constraints.
• Healthcare: restrictions may also apply to healthcare facilities and the pharmaceutical industry.

Those desiring to commence a business in Vietnam should thoroughly examine the legislation and prerequisites within their sector to understand the potential limitations that could be imposed on their enterprise. In some instances, adherence to regulations may require collaborative agreements with local partners or other particular actions.

Tax advantages and features

Even if tax incentives are available, it is highly advised to speak with tax experts before launching a business in Vietnam since local laws may differ and be customized to a certain situation.

Formation of a business structure

Limited Liability Company (LLC)

One of the most popular organizational structures for foreign investors wishing to start a business in Vietnam is an LLC. LLCs have several upsides, such as flexible management and less risk for members. Important information about LLCs and the registration process are provided here.

Advantages of registering an LLC in Vietnam:

• Limited liability: the amount of risk shared by LLC members is limited to what they have invested in the business. In general, their personal belongings are secure.
• Management at your own discretion: members can manage the company independently and make decisive decisions, ensuring autonomy and control over their business.
• Potential tax benefits: depending on the sector and region, an LLC may be eligible for certain tax benefits.

Procedure for registering an LLC in Vietnam:

• The initial step is to select an exclusive name for the upcoming company and obtain endorsement from the appropriate authority.
• The creators need to decide the extent of the approved capital, which can be supplied as money, assets, or entitlements to assets.
• This involves drafting the foundational documents, endorsing the articles of incorporation, and establishing the organizational hierarchy of the company.
• The registration paperwork should subsequently be delivered to the relevant registration authority.
• Once your company registration is complete, you will be issued a Business Registration Certificate, enabling you to commence business operations officially in Vietnam.

In Vietnam, forming an LLC is usually a simple procedure, but local rules and regulations must be strictly followed. As a result, seeking expert advice is advised to guarantee the formation and smooth running of your business.

Joint Stock Company (JSC)

A structure known as JSC enables foreign investors to obtain capital from a number of owners. Large-scale projects and businesses needing significant investment volumes and wide share distribution are best suited for this.

Features of opening a JSC in Vietnam:

• JSC has shareholders who own shares in the company. Foreign investors can be either sole shareholders or co-owners of a company with local investors.
• The Board of Directors of a JSC is required to oversee the company's operations. In order to manage the business in the best interests of the shareholders, this is a necessary prerequisite.
• Some JSCs may be listed as public JSCs, which means they are listed publicly on stock exchanges. This might necessitate further adherence to rules and stipulations.

JSC establishment process in Vietnam:

• Begin by crafting a business strategy, encompassing an outline of the enterprise model, funding approaches, and fiscal forecasts.
• Select a distinctive name for your business that the registration authorities will accept, much like with an LLC.
• Decide what amount of share capital is required for your project and distribute shares to investors.
• Draft foundational documents, establish the makeup of the Board of Directors, and outline other critical facets of corporate governance.
• Submit paperwork for enrollment and secure authorization to distribute stocks. This phase may involve regulatory consents.

Greater prospects for large-scale projects and soliciting capital from various owners are provided by registering a JSC in Vietnam. But it also means a higher degree of complexity in terms of administration and regulation, so careful planning and skilled legal and corporate governance advice are required.

Partnership

In Vietnam, a partnership could be the most advantageous legal structure for launching a small business, especially if many individuals or groups choose to combine their resources to engage in cooperative entrepreneurship. In the following critical areas, working together could be the best course of action:

When to choose a partnership:

• A partnership allows partners to jointly manage the business, make strategic decisions and share responsibilities.
• If each partner contributes resources, knowledge, and capital, it can help launch and grow the business more successfully.
• Risks and responsibilities are shared between partners, which can reduce financial and legal risks for each party.
• A partnership can make raising finance easier as multiple partners can jointly invest in the business.
• Each partner can bring unique skills, experience or resources to the company, which contributes to its diversified development.
• If collaborators possess unique expertise or connections in a specific field or domain, a partnership might be the optimal method to utilize these benefits.

The process of creating a partnership in Vietnam:

• The selection of partners is critical. Partners can be individuals or companies.
• Create a partnership agreement that outlines each partner's obligations, shares, and rights as well as the processes for making decisions and resolving conflicts.
• Depending on the chosen form of partnership (general or limited), registration with the relevant authorities may be required.
• Think about the financial and tax ramifications of forming a partnership, such as issues with tax liabilities and profit sharing.
• To correctly establish a partnership and adhere to Vietnamese regulations, it is advisable to consult with legal professionals.

If small companies and individuals want to combine their resources and efforts to operate in Vietnam, a partnership might be a great choice.

Business Collaboration Contract (BCC) and its application

For international investors and company owners in Vietnam, the business cooperation contract is a versatile and practical means of cooperation, especially when creating a long-term legal entity—like an LLC or JSC—is not necessary. The following are some essential elements of the business collaboration contract and how it is used:

When to consider applying for a BCC in Vietnam:

• BCC may be an ideal choice for temporary projects that do not need the establishment of a permanent legal structure.
• BCC can be an easy approach to manage the connection if you are collaborating with another business or individual to do a certain task, including production, research and development, or the supply of goods.
• It is possible to establish a short-term partnership or joint venture using a BCC instead of forming a new business.
• If you need freelancers or independent professionals to perform certain tasks, you can enter into a BCC to collaborate with them.

Advantages of concluding a BCC in Vietnam:

• BCC offers a great deal of freedom in defining the parties' rights and responsibilities as well as the parameters of their collaboration.
• Limited legal liability: in most cases, parties are only liable to the extent of the agreed terms of the contract, which can reduce risk.
• The process of entering into a BCC is relatively simple and quick, without requiring complex legal procedures.
• Setting up and managing a BCC can be more cost-effective than setting up a full-fledged legal structure.

Process of establishing BCC in Vietnam:

• A contract that outlines the parties' rights and obligations, collaboration conditions, timeframes, and other important details must be drafted.
• In most cases, a business cooperation agreement does not require special registration with government agencies.
• The parties must necessarily comply with Vietnamese laws and regulations relevant to their cooperation.
• The appropriate laws must be followed in determining and fulfilling tax obligations.

A useful instrument for controlling interactions between foreign investors and Vietnamese partners or independent contractors is the business partnership contract. It guarantees adaptability and dependability when carrying out various initiatives and commercial operations.

Business registration process

Applying for an Investment Registration Certificate in Vietnam

For international financial institutions seeking to engage in commercial activities within Vietnam, securing an Investment Registration Certificate constitutes a paramount prerequisite. This critical document serves as the foundation for the enterprise's legal establishment and operational framework, while simultaneously validating their eligibility for investment endeavors. The acquisition process entails the compilation of requisite documentation, submission of formal applications, and a period of authorization preceding the issuance of the aforementioned certificate.

Stages of obtaining a license to found a company in Vietnam

It is crucial to go through the licensing process in order to launch a business in Vietnam. This process begins with gathering the required paperwork and concludes with getting the license itself.

Procedure for registering with a tax authority

Companies from abroad that are conducting business in Vietnam must complete registration with the taxation authorities. Below are the primary procedures involved in this endeavor:

• The organization is required to gather and furnish the subsequent documentation:
  • registration form for tax accounting;
  • a copy of the company founding license;
  • company Charter;
  • copies of documents for rent or ownership of office space in Vietnam;
  • other specific documents depending on the situation.
• Get in touch with your nearby tax office and initiate the process for tax registration. This can be completed either in person or by appointing a representative to act on your behalf.
• Once the paperwork has been filed, the tax authorities will assess your submission. Following a successful validation process, the company will be included in the taxpayer database.
• Once your company is registered, you will be assigned a unique Tax Identification Number.
• As a duly registered taxpayer, the company is obligated to fulfill all tax obligations, including making payments and submitting reports.
• If key information such as address or company structure changes, the tax authority must be informed.

Registering with the tax authority is a crucial requirement for international firms looking to operate in Vietnam, ensuring adherence to tax regulations and timely tax payments.

Financial aspects of starting a business

Basic capital criteria and their characteristics

The minimum capital injection requirements for foreign entities in Vietnam vary depending on the chosen business vehicle and its governing regulations. It's crucial to note that these regulations are subject to change. Therefore, it's prudent to seek up-to-date information from pertinent authorities or legal counsel prior to commencing operations. Here's a synopsis of key considerations regarding initial capital requirements for Vietnamese business ventures:

• The capital required to establish financial institutions such as commercial banks or branches of foreign banks can fluctuate significantly, spanning from hundreds of millions to billions of VND, contingent upon the scale and type of business.
• Investing in the educational sector, including universities and academies, also involves large capital investments, sometimes reaching several million VND.
• In different sectors like manufacturing or services, the initial capital requirements can be quite modest, beginning at a few thousand dollars.
• The Ministry of Planning and Investment in Vietnam establishes the specific initial capital requirements for a given industry. Should foreign direct investors require comprehensive assistance with the investment and registration procedures, they are advised to liaise with this organization.

To successfully initiate a business in Vietnam, international entrants must thoroughly acquaint themselves with the financial prerequisites in their industry and verify the accessibility of the essential funds. Simultaneously, it's crucial to observe all regulations and criteria imposed by Vietnamese authorities for investment and business endeavors.

Tax conditions and preferences for startups

Vietnam provides new businesses, including international investors, with a plethora of tax benefits and advantages. It's essential to comprehend the tax structure and potential advantages while conducting business in Vietnam:

Business License Tax (BLT):

This annual tax applies to businesses active in Vietnam. The magnitude of BLT varies according to the authorized capital of the company:

• companies with a capital of over 10 billion VND pay a BLT of 3 million VND (approx. 122 USD) annually;
• companies with capital up to 10 billion VND pay 2 million VND (about 81 USD) annually;
• annual payments from other company units, such as branches and representative offices, total 1 million VND, or around 41 USD.

Statute No. 22/2020/ND-CP, promulgated February 25, 2020, indicates that business entities formed during the concessional period and those that are newly established, subsidiaries, liaison offices, and certain other business types may qualify for exemption from BLT during their initial year. A three-year fiscal exoneration is also available to some small and medium-sized businesses, provided that they meet specific requirements.

Other tax nuances:

Besides the BLT, multinational enterprises conducting business in Vietnam could face diverse additional tax responsibilities, which hinge on the form and configuration of their activities. Additional taxation responsibilities could encompass:

• fee for processing documents for enrolling a company;
• rent and salary expenses could potentially be liable for taxation;
• various taxes on commissions and services;
• conformance and maintenance fees may apply;
• accounting services may also be subject to charges.

Tax rates and regulations can vary, so it's essential to consistently consult experts in setting up businesses in Vietnam. This jurisdiction offers diverse tax perks for new enterprises, and multinational entrepreneurs should thoroughly research and capitalize on these opportunities to reduce their tax responsibilities.

Final actions in the process of registering and commencing a business

Ordering printing and its role in business

Registering the company seal is a compulsory step in setting up and operating a business in Vietnam. The seal holds significant importance in formal paperwork, covering essential aspects of business operations.

• Vietnamese legislation mandates that a business have its own seal. This is essential to the business's ability to operate legally. The seal has to be authorized and registered in compliance with national legislation.
• The corporate seal functions as a crucial method for authenticating and verifying papers issued or signed by the corporation. It contains details about the business name and enrollment specifics, rendering the documents legally enforceable.
• A distinct seal serves to deter document falsification and minimizes the potential for fraudulent activity. It stands as an authoritative indication of the legality and genuineness of documents.
• Printing is also used in accounting and taxation. For example, tax reports and financial documents may require an official company seal to confirm their legality.

Vietnamese legal standards should be rigorously adhered to in both the printing sequence and its usage. The use of the seal without authorization or its fabrication might have major legal repercussions. Consequently, it is essential to follow Vietnam's laws and regulations pertaining to corporate seals.

Steps and requirements for establishing a bank account

In order to properly open a bank account in Vietnam, you must get in touch with a bank that is authorized by local law. It is essential to prepare paperwork carefully and to follow all guidelines set forth by the financial institution.

Key tips for business implementation

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