Company registration in Vietnam

Registering a company in Vietnam opens avenues for future growth and expansion into other rapidly developing economic hubs in the Asian area. With its dynamic economy, progressive business environment, and strategic location in Southeast Asia, Vietnam has developed into a favored hub for global investments. The country provides seamless access to major regional markets like China, India, and other ASEAN countries, which is crucial for the development of sectors such as trade and logistics.

Registering companies in Asia opens up unparalleled opportunities for innovative projects and mutually beneficial partnerships. The Asian region is home to a vast pool of potential collaborators, with over 4.5 billion inhabitants. This region is distinguished by its significant purchasing power.

Vietnam stands as the third-largest market in Southeast Asia and is among the fastest-growing economies globally. Establishing a company in Vietnam necessitates a comprehensive understanding of legal formalities. It is essential to consider linguistic nuances and cultural particularities, which can fortify a company’s position in this promising region.

This material delves into the legislative formalities governing the incorporation of an enterprise in Vietnam, outlining procedural steps and nuances pertinent to overseas entrepreneurs conducting business.

Upsides of establishing an entity in Vietnam

The robust economic expansion of this country is attracting more international investors to establish businesses in Vietnam. This nation has consistently shown GDP growth, which helps to foster an atmosphere that is conducive to investment. This year is not an exception.

According to expert estimates, Vietnam's GDP growth in 2024 could range from 6.13% to 6.48%. Economists point to several key factors that are driving this projected growth. First, the progress of the production industry persists, supported by foreign contributions and strengthening export opportunities. Secondly, the growth of domestic consumption, related to an enhancement in the welfare of the populace and a rise in earnings, performs a noteworthy function in fortifying the economy.

In addition, the Vietnamese government is introducing a number of structural reforms and incentive measures aimed at increasing economic efficiency and improving the business environment. These measures encompass simplification of administrative procedures for registering Vietnamese companies, obtaining licenses, reducing the tax burden, improving infrastructure and logistics. As a result of such initiatives, registration of companies in Vietnam by non-residents is becoming more accessible.

Vietnam serves as a commercially vital "connecting bridge." Its strategic location at the crossroads of key maritime trade routes in Southeast Asia positions it as an indispensable link in the global supply chain. Vietnam's coastline, extending over 3,000 kilometers, provides access to significant ports and facilitates the enlargement of international commerce.

Vietnam, thanks to its strategic ports like Hai Phong, Ho Chi Minh City and Da Nang, is a pivotal conduit for the transportation of goods between Asia, Europe, and the Americas. The state administration is channeling substantial contributions into modernizing Vietnam's port infrastructure and enhancing logistics capabilities, thereby fortifying the nation's status as a critical participant in world trade.

The availability of an educated, multifaceted, and relatively affordable workforce is another great advantage for those planning to establish a company in Vietnam. These characteristics of the corporate ambiance stimulate prerequisites conducive to the successful management of enterprises.

Establishing an enterprise in Vietnam facilitates market access and provides access to other rapidly growing economic hubs in the region. Launching an entity in Vietnam can become a pivotal component of a successful global expansion strategy.

Opening an enterprise in Vietnam for non-natives - restrictions

In 2021, legislative amendments regarding contributions were enacted, impacting the regulatory framework for investment activities in Vietnam. One notable change was the introduction of a new category termed “Conditional Business Investments.” This endeavor aims to enhance the investment atmosphere by stimulating both overseas and national investments, presenting explicit and transparent regulations and processes.

When registering an entity in Vietnam, it is important to understand that intercontinental entrepreneurs are generally permitted to own 100% equity in their businesses within the country. However, specific sectors, such as banking, impose restrictions where foreign ownership is capped at 30%. These limitations are governed by government policies aimed at maintaining the stability and security of the nation's financial system.

Conditional business investments denote investment projects requiring specific permissions or approvals from governmental bodies due to their significance, environmental impact, social aspects, or other factors affecting public interests. Such projects are subject to regulatory oversight and monitoring, fostering sustainable business environment development and safeguarding the interests of all stakeholders involved.

Registration of a company in Vietnam by a non-resident – choice of form of organization

The regulation of business activities in Vietnam is governed by the provisions of the 2020 Law on Enterprises. This law regulates and establishes fundamental rules governing the registration, operation, and dissolution of corporations in Vietnam. It delineates the privileges and obligations of founders and participants, establishes rules for business governance, and resolves corporate disputes.

Under this law, firms are required to enroll with relevant authorities, submit reports on their operations, adhere to requirements regarding authorized capitals, and other regulatory norms. Foreign entrepreneurs typically favor companies where shareholders' liability is limited to their contribution.

Other corporate structures available for non-residents wishing to establish an entity in Vietnam include joint ventures, full or contractual partnerships, branches, and representative offices.

A joint venture in Vietnam entails an international corporation collaborating with Vietnamese partners to start a new legal entity. This allows for the division of risks and investments among partners, particularly beneficial for entering new markets or industries requiring local expertise.

Full partnership is a form in which a minimum of two partners jointly manage a business and bear joint and several liabilities for its debts. Each partner personally answers with their assets in the event of the partnership's debts or obligations. Partners share profits among themselves and jointly manage the business, making key strategic and operational decisions.

Contractual partnership is a temporary agreement between a foreign and Vietnamese company to achieve a specific project or objective. Such corporate structures are typically utilized for collaboration in construction, consulting, or technical services.

Registration of a branch in Vietnam enables multinational organizations to expand into the Asian market. The branch, fully controlled by the head company, is entitled to conduct commercial activities in this jurisdiction in accordance with the purposes specified in the articles of incorporation of the head organization.

Opening a branch in Vietnam allows a company to enhance entry to local resources, reduce production costs, and gain taxation and other benefits provided by the government to stimulate foreign capital inflows. Additionally, establishing a subsidiary in Vietnam facilitates the adaptation of an international firm to local market conditions.

Representation of a foreign company in Vietnam constitutes another form of market presence. Representation does not possess legal entity status and is utilized for conducting representative and ancillary functions such as marketing, sales, or market research.

Registration of a corporation in Vietnam in 2024

The procedure of founding an entity in Vietnam is a methodical process that involves several crucial steps:

1. Acquiring a Foreign Investment Certificate from the Vietnamese authority.
2. Determining the type of organization.
3. Drawing up a business plan.
4. Verification and enrollment of a unique company name.
5. Preparation of corporate papers, documentation proving the professional qualifications of managers.
6. Payment of registration fees.
7. Submitting an application and documents to the competent authority.

The new company should register with the regional tax body, obtain all necessary licenses and certificates for its specific business activities, and open a bank account in Vietnam under the company's name.

Registration of an enterprise in Vietnam and conducting commercial operations by non-residents will become available after obtaining a business visa. A business visa in Vietnam allows citizens of other countries to officially reside in Vietnam and engage in entrepreneurship on lawful grounds. In this jurisdiction, foreigners may apply for one of two types of visas.

• DN1 - for foreigners cooperating with companies already registered locally.
• DN2 - for non-residents who want to open their own business in Vietnam.

The comprehensive support in business registration in Vietnam holds particular significance. Engaging with consultants specializing in this field offers a range of significant advantages. Professional assistance at every stage of registration helps avoid numerous potential issues and errors that could delay or even halt the business opening process.

They are well-versed in the conditions for enrolling an entity in Vietnam, from choosing the appropriate legal form to processing visas. Consultants are able to offer strategies to protect the client’s commercial interests, which is important in the context of changing regulation.

Registration of a Vietnamese company: what documents are required?

Certain documentation is needed in order to establish a business in Vietnam with foreign investment. This entails filing an application for registration along with the necessary founding documents, scanned copies of the founders' or partners' passports and visas, proof of the company's registered address and invested capital, and a Foreign Investment Certificate from the National Ministry of Planning and Investment for all types of businesses.

Priority areas for investment

Foreigners wishing to register an entity in Vietnam should consider several key factors when choosing an industry. Firstly, the country's developing industrial base makes sectors like textiles and electronics particularly attractive. Attention should also be given to agriculture and food production, given the growing domestic demand and export opportunities. Establishing a mining enterprise in Vietnam could prove beneficial, considering the nation's plentiful natural reserves.

The second significant aspect is regulation and taxation. Vietnam offers initiatives and tax stimuli for investors, especially in specific sectors such as information technology and high-tech production. These factors can significantly influence industry selection, considering potential economic benefits and levels of administrative barriers.

The third aspect is market competition and growth potential. It is important to first analyze current market trends, competitive position, and industry growth forecasts. For example, the services sector, including tourism and education, has shown rapid growth in recent years due to increased living standards and changes in consumer behavior. Below are priority areas of activity.

ITAt the regional level, Vietnam holds a leading position in the development of the information technology sector, driven notably by high demand for professional experts. This sector may attract those considering launching an IT startup in Vietnam with the purpose of future scalability into other Asian markets. For IT startups, the Vietnamese authority provides up to 4-year period of tax holidays, exemption from individual revenue taxation, and VAT during the project development period.

Services sectorThe Vietnamese service market continues to expand against the backdrop of increasing tourist numbers, retail trade volumes, and the advancement of other sectors. This positive trend creates prospects for entrepreneurship growth in sectors such as tourism, healthcare, and education.

E-commerce The e-commerce company in Vietnam is experiencing rapid growth, projected to reach a market size of USD 20 billion by 2025. This growth is fueled by an increasing number of Internet users, enhancements in payment mechanisms, and the expansion of mobile networks, making the Internet more accessible to a wide audience, including rural areas. The B2B segment has demonstrated impressive growth in recent years, with expectations to reach USD 70.3 billion by 2025.

Fintech In 2022, Vietnam's fintech market reached USD 10 billion, with expectations to double by 2025. This sector's growth stems from increasing demand for digital financial solutions, expanded internet access, and enhanced financial literacy. Launching a fintech startup in Vietnam presents promising opportunities in online banking, online payments, and lending.

LogisticsThe significant geographical position of Vietnam in Southeast Asia is underscored by a developed infrastructure of automotive, railway, maritime, and air routes, ensuring efficient transport connections both domestically and internationally. This network attracts investors, particularly in the logistics sector, where route accessibility is crucial.

Alternative energy Vietnam is advancing its alternative energy sector in response to challenges of energy security and environmental sustainability. The government has set ambitious goals for expanding renewable energy. Alternative energy sources such as solar and wind present a sustainable solution to meet this demand, particularly in remote areas of the country. Authorities are offering fiscal incentives and levy breaks to entrepreneurs registering energy sector companies in Vietnam.

Agribusiness The agricultural sector in Vietnam is vital to the nation's economic framework. Country authorities prioritize funding for agribusiness, the food sector, and agricultural production to advance economic growth. The government provides access to low-cost loans and financial support to enhance the agricultural sector and food industry. This assists in offsetting high investment costs and improving enterprises' financial stability. Moreover, entrepreneurs are granted opportunities to implement modern technologies and management methods.

Registration of an entity in the free zones of Vietnam

Vietnam has more than 250 industrial domains focused on exports to offer foreign businesses. The Mekong Delta Economic Zone, the Northern, Southern, and Central Economic Regions are significant trade zones. Each zone focuses on different industries.

Launching a corporation in a Vietnamese unconstrained domain has significant tax advantages. First and foremost, businesses that are registered in free zones might win from a temporary reduction in revenue tax payments.

• 10% for all initiatives, for a maximum of 15 years.
• By 10% for up to 30 years for high-tech companies.
• 10% for projects in the fields of healthcare and education.
• Full exemption for up to 4 years for approved projects, further tax will be reduced by 50% for up to 9 years.
• Employees, whether domestic and international, are free from 50% levy.

Additionally, exemption from VAT and import duties (for 5 years) on raw materials, equipment, and materials contributes to reducing production costs and operational activities.

Taxes in Vietnam

For legitimate companies, the core corporate tax tariff stands at 20%. In the petroleum sector, percentages range between 25% and 50%. Enterprises engaged in the exploration, exploitation, and development of specific natural resources face taxes ranging from 32% to 50%. Vietnamese law mandates that corporations pay taxes on both local and international earnings.

Subject to specific requirements, preferred profit tax tariffs of 10%, 15%, and 17% are offered. As per the Investment Law, special tax benefits are offered for R&D as well as major investment projects in Vietnam.

Foreigners may find it advantageous to establish businesses in Vietnam in sectors supported by governmental initiatives such as education, healthcare, advanced technologies, ecological protection, technological innovations, agricultural and aquatic product processing, and sustainable energy.

Doing business in Vietnam entails compliance with national accounting standards and tax prerequisites. Entities are mandated to submit annual and quarterly tax declarations, and timely provide annual audit reports. Therefore, it is advisable to engage professionals with experience in accounting services in Vietnam.

Upsides for new business projects in Vietnam

Depending on the specifics of the situation, new investment directions or the expansion of existing ones in Vietnam with an emphasis on industrial production may qualify for corporation tax perks. Tax benefits for large industrial businesses, except those dealing with items taxed upon purchase. These ventures must involve a minimum investment of 6 trillion dong (approximately 236,733,000 USD) and must be finalized within 3 years from the issuance of the permit.

Also, large projects must meet certain criteria (one of them):

• The minimum annual income of such projects should be 10 trillion VND ($394,555,000) by the 4th year of activity;
• The number of personnel exceeded 3,000 people by the 4th year of the project’s operation.

Projects categorized as large-scale are those planned to be implemented with a total investment volume of at least 12 trillion dong (473,466,000 dollars) within 5 years of receiving the license, using technologies assessed in accordance with relevant laws.

If you're considering setting up or acquiring a company in Vietnam, it's important to be aware of the unique incentives provided for certain research and development and major investment initiatives as outlined in the Investment Law. Amidst these benefits are a 37-year advantageous corporation revenue tax tariff of 5%, commencing with a six-year taxation respite and concluding with a 13-year tax abatement of 50%. Moreover, short-term discounts or exemptions of land and water lease payments.

Opening a corporate bank account in Vietnam

When determining which financial institution to establish an account for a Vietnamese entity, it is recommended to evaluate numerous considerations. Primarily, evaluating the classification and specialization of the bank is critical. Vietnam hosts over 40 financial institutions (public, commercial, and foreign), which can complicate the selection process for opening an account for a Vietnamese company.

Each bank offers various solutions and conditions. Public banks such as Vietcombank possess substantial experience and an extensive branch network nationwide, ensuring high reliability and accessibility. Commercial banks like Techcombank may offer more competitive terms and innovative banking products, making them particularly attractive to small businesses. Foreign banks provide access to international financial markets, a significant factor for enterprises engaged in import-export activities.

Another significant aspect is the location of the bank and its branches, ATMs. Convenient access to banking services is crucial for both company employees and clients. The presence of an extensive network of bank branches both domestically and internationally can reduce the time spent on servicing and resolving financial matters. Convenience in accessing banking services, such as cash withdrawal or depositing funds, plays a key role in the company's daily operational activities.

In addition, it is necessary to study the bank's offered services and the conditions for their provision. This includes internet banking, opportunities for obtaining loans and financial backing, account servicing tariffs, commissions, and terms for international operations. An experienced specialist is capable of competently assessing aspects of cooperation with a specific bank and assisting in selecting the optimal solution for your business.

• Vietcombank
• Vietinbank
• Sacombank
• BIDV
• Techcombank
• VP Bank
• HSBC
• ANZ Bank
• Standard Chartered
• UOB

By the way, Vietcombank topped the list of the 10 most prestigious banks in Vietnam for several years in a row.

Vietnamese banks' internet banking has seen significant progress in recent years, driven by the country's economic growth and digital technology adoption. Banks in Vietnam are investing in upgrading their digital platforms, offering a wide range of solutions such as online transfers, bill payments, account management, and investment products over the internet. State support plays a crucial role, promoting the cashless society concept and encouraging banks to innovate. As a result, internet banking in Vietnam is rapidly advancing, providing users with convenient and secure access to financial services.

Conclusion

Registration of a Vietnamese company is a potentially advantageous strategy for business development or international expansion. The process itself involves a series of complex legal procedures. To ensure legal protection and compliance with all legislative norms, consult professionals. YB Case business consultants can offer our clients comprehensive support in registering companies in Vietnam.