Company registration in Vietnam

Why invest in Vietnam?

Vietnam boasts one of the world's most rapidly growing economies. According to many forecasts, the country could become Asia's largest economy by 2050. There are several compelling reasons why investors are flocking to Vietnam:

1. Strategic location and infrastructure: Vietnam is strategically located in Southeast Asia, offering robust infrastructure for international trade.
2. Political and economic stability: the country's socio-political environment is stable, providing a conducive backdrop for business growth.
3. Favourable investment policies: Vietnam's government has implemented liberal policies that encourage foreign investment, making it easier to conduct business in the country.
4. Flexible corporate structures: investors can choose between wholly foreign-owned entities or joint ventures with local partners, allowing for greater flexibility.
5. Access to industrial parks: Vietnam has over 300 industrial parks and three high-tech zones, providing a variety of options for businesses to establish operations.
6. Minimal capital requirements: most businesses are not subject to initial capital requirements, and declared capital must be paid within 90 days of incorporation.
7. Vibrant domestic market: Vietnam's domestic market is growing rapidly, with a burgeoning middle class and dynamic workforce.
8. Competitive labour costs: labour costs in Vietnam are lower than in other regional economies like China and Indonesia.
9. Transformation to a market economy: Vietnam is transitioning from a centrally controlled economy to a market-driven one, offering numerous incentives for foreign investors.
10. Favourable trade agreements: Vietnam is a signatory to 15 FTAs, including AFTA with ASEAN countries and EVFTA with European Union member states. Additionally, Vietnam has entered into double tax treaties with several countries, offering tax advantages to foreign businesses.

Options for establishing a business in Vietnam

A brief guide to establishing a business in Vietnam

To establish a business in Vietnam, foreign investors must follow a series of legal and regulatory steps to ensure compliance with local laws. This guide outlines the key steps for setting up a company in Vietnam, offering a clear and professional roadmap for your business venture.

Step 1: Preparation and Investment Certification

Before registering a business in Vietnam, foreign investors must secure an investment certificate. This document validates the investment project and serves as a permit for business registration. The investment certificate includes crucial details such as the approved scope of business activities, the designated investment capital, the location of operations, and any incentives granted by the government.

Investment certificates are typically issued for a term not exceeding 50 years, with the possibility of extension to 70 years upon government approval. The issuance process may vary depending on the project’s nature, scale, and compliance with applicable investment sectors.

Procedures for obtaining an Investment Certificate

The licensing authority issues investment certificates based on the following criteria:

• Registration process: applied to foreign investment projects with an investment capital below 300 billion Vietnamese dong, provided the project does not fall within a conditional business sector.
• Assessment process: required for projects with capital exceeding 300 billion Vietnamese dong or projects in conditional business sectors. This process evaluates the project's compliance with existing infrastructure, land use plans, and other relevant requirements.

The registration process generally takes up to 15 working days, while the assessment process may take up to 30 working days from the date of receiving a complete application.

Licensing authorities

Licensing responsibilities are largely decentralised to provincial authorities. The provincial People's Committee or industrial zone boards handle the issuance of investment certificates. However, specific projects, such as those involving national seaports or casino businesses, require approval from the Prime Minister.

Step 2: Company details and services

Once the investment certificate is obtained, the following details must be provided to complete the registration process:

• Company structure: information on the company's director, shareholders, and share distribution.
• Tax compliance: select corporate tax services to ensure compliance with local tax regulations.
• Bank account setup: establish a corporate bank account in Vietnam. International banks such as HSBC, OCBC, and Standard Chartered offer services in Vietnam.
• Legal representative services: appoint a legal representative or use a nominee service for company registration.
• Serviced office and e-commerce account: choose a serviced office in a preferred jurisdiction and set up an e-commerce account after bank account activation.

The processing time for company setup varies depending on urgency. A typical setup requires around 30 working days, while expedited services can reduce the time to 15 or 10 working days.

Step 3: Payment methods

Payments for company setup in Vietnam can be made using a variety of methods:

• Credit/debit cards: Visa, MasterCard, and American Express are accepted.
• PayPal: payments can be made through your PayPal account.
• Bank transfers: international bank transfers to the designated accounts. Transfers within Europe can be done via IBAN/SEPA, while SWIFT is accepted globally (with a processing time of 3 to 5 days).

Step 4: Company kit delivery

After completing the registration process, the company's original documents will be sent to the specified address through a courier service such as DHL, TNT, or FedEx. The company kit typically arrives within 2 to 5 business days after the registration certificate is issued. At this point, the company in Vietnam is ready to commence business operations.

By following these steps, foreign investors can navigate the process of establishing a business in Vietnam with confidence and clarity.

Leading industries in Vietnam: opportunities for foreign investment

Vietnam's economy has transformed significantly in recent years, shifting from an agrarian focus to a dynamic mix of industries and services. This transformation presents a wealth of opportunities for foreign investors. Here are the key industries driving Vietnam's growth and the reasons why they offer significant potential for investment:

Information technology

Vietnam's information technology (IT) sector has experienced rapid growth over the past decade, emerging as a leading industry. The country's ICT (Information and Communications Technology) market was valued at USD 7.7 billion in 2021, and is expected to grow at an annual rate of 8% from 2022 to 2026. This sector is a primary focus for the government, with a strategic plan to boost ICT adoption across public and private sectors.

Key drivers of the IT industry include:

• Government support: the Vietnamese government recognises ICT as a critical driver of socio-economic growth and has approved the National Digital Transformation Program through 2025, with a vision extending to 2030.
• Telecommunications and smart cities: the push for smart technology in urban areas aligns with Vietnam's rapid urbanisation and economic growth, creating opportunities for technology companies.
• Information security: with the World Bank projecting Vietnam's digital economy to exceed USD 43 billion by 2025, demand for information security solutions is rising.

Manufacturing and service sectors

Vietnam's manufacturing sector is a key pillar of its economy, contributing significantly to its industrial growth. The service sector has also seen considerable expansion, playing a crucial role in sustaining productivity and achieving the country's goal of becoming a high-income nation by 2045.

The manufacturing industry benefits from:

• Industry 4.0: the adoption of advanced technologies under the Industry 4.0 framework has boosted manufacturing efficiency and competitiveness.
• Diverse sub-sectors: high-value industries such as automobiles, electronics, and computer technology attract large investments. The manufacturing of pharmaceuticals, oil products, and electrical goods also contributes to the sector's growth.

The service sector, on the other hand, has emerged as one of the largest sectors in Vietnam, providing a broad base for economic growth.

Logistics and e-commerce

Vietnam's logistics industry is experiencing significant expansion. The e-commerce boom has further boosted the logistics sector, creating opportunities for new businesses.

Investors in the logistics sector can benefit from:

• FDI: the continuous increase in foreign direct investment fuels the demand for logistics services.
• E-commerce growth: projections indicate that Vietnam's e-commerce market could grow at 30% per year from 2021 to 2025, driven by a burgeoning middle class and a rapidly growing internet economy.

Fintech

Fintech is another area offering significant investment potential. In 2019, Vietnam ranked second in ASEAN in terms of fintech funding, attracting 36% of investments, second only to Singapore. Nearly half of Vietnam's fintech startups focus on digital payments, with P2P lending also gaining traction.

Fintech investment opportunities include:

• Digital payments: the high concentration of fintech startups focusing on digital payments presents a significant investment opportunity.
• P2P lending: this emerging segment has gained popularity for fintech projects.

Supporting industries

The key focus areas for supporting industries include:

• Electronics and mechanical engineering
• High-tech production
• Automated industry

With these diverse industry opportunities and robust government support, Vietnam presents an attractive destination for foreign investors looking to establish a business or expand their existing operations.

Additional financial incentives for investors

Investors launching projects in Vietnam can take advantage of various financial incentives to support their ventures, including:

• R&D incentives: compensation for up to 50% of trial production costs during the research and development phase.
• Investment loans: the Development Promotion Fund offers investment loans, and other lending institutions, including branches of foreign banks, offer short-term loans at competitive rates.
• Environmental protection schemes: the Vietnam Environmental Protection Fund provides concessional loans for environmental protection projects.
• Exemption from land rent: Projects related to ancillary industries receive an exemption from ground rent for 7 years. For investment projects in technical infrastructure within support industry zones, the exemption extends to 11 years.

For small and medium-sized enterprises, additional incentives and investment loans are available to further encourage growth and participation in the global value chain. The Vietnamese government continues to promote these incentives to attract foreign direct investment and foster industry growth.

Activities requiring special permits for foreign businesses

When planning to start a business in Vietnam, it's crucial to understand that certain activities require additional permits, especially for foreign investors. The Foreign Investment Law outlines the specific business activities that foreign investors can engage in, provided they obtain the necessary approvals from relevant government agencies. Before diving into these activities, it's advisable to consider your start-up capital, business structure, and industry focus. This guide outlines the business activities that require special permits and additional considerations for foreign investors.

Planning your business in Vietnam

To choose the most suitable business area, evaluate your skills and resources against the capital required for your business idea. It's best to draft a few potential options, then analyse each one in detail. Consider factors such as design, choice of premises, necessary equipment, and other logistical elements. Once you've outlined your business structure and determined your capital needs, you can select the most appropriate business option.

Activities requiring special permits

According to the Foreign Investment Law, the following business activities in Vietnam require special permits or additional approval for foreign investors:

• Real estate transactions: involves the sale, purchase, and leasing of property.
• Consulting services: including legal, accounting, tax, architectural, engineering, and other specialised audits.
• Computer and related services: software development, IT support, and related fields.
• Research and development: involves innovation and technological advancements.
• Real estate rental and leasing services: providing rental properties and leasing services to clients.
• Other service sector activities: encompassing various service-oriented businesses.
• Information services: data management, analytics, and communication services.
• Broadcasting services: includes film production, television, and other media services.
• Construction services: construction and related engineering services.
• Trade: import-export businesses and general trading.
• Training, education, and related services: educational institutions, training programs, and related services.
• Environmental protection: businesses focused on sustainability and environmental conservation.
• Medical and social services: health care, social work, and related fields.
• Tourism: travel agencies, tour operations, and hospitality.
• Entertainment, culture, and sports: sports complexes, cultural events, and entertainment venues.
• Transport: transportation services, including logistics and shipping.
• Production and sale of goods: manufacturing and retail.
• Agriculture: farming, agribusiness, and related activities.

Key considerations

Many of the listed activities are eligible for preferential tax treatment, offering incentives for foreign businesses. However, each activity has its unique set of requirements and regulations. Foreign investors must ensure compliance with local laws and obtain all necessary permits before commencing business operations.

It's recommended to work with legal experts or business consultants in Vietnam to navigate the complexities of obtaining permits and ensure that your business meets all regulatory requirements. By doing so, you can establish a successful business while adhering to the legal framework governing foreign investment in Vietnam.Vietnam has seen a significant surge in FDI since its government amended investment laws to permit foreign individuals and legal entities to own 100% of a company in Vietnam. If you are considering establishing a business in Vietnam, it is crucial to understand the various registration options and choose the one best suited to your business objectives. Here, we address some frequently asked questions about foreign investment in Vietnam.

How long does it take to set up a company in Vietnam?

The timeline for company registration can vary, but it typically takes 15 to 30 working days. Factors affecting the timeline include the business structure, sector, and completeness of documentation. Expedited services may be available for additional fees.

Are there any specific industries that offer additional incentives for foreign investors?

Yes. Certain industries provide special incentives, including:

• Fintech and IT
• Manufacturing
• Renewables

Do I need a local partner to open a company in Vietnam?

Generally, you don't need a local partner to open a company in Vietnam. However, certain sectors or specific activities might require a local representative or a certain percentage of local ownership. Consulting with legal experts is advisable to understand the requirements for your business.