Southeast Asia Company

Vietnam Company Registration

 

Vietnam Company Registration

 

Since Vietnam joined the WTO in 2007, the market has gradually opened up. Now, Vietnamese companies can invest 100% of foreign capital in general projects. Vietnam's economy is growing steadily. Due to the abundant labor force, with the expansion of a large number of middle classes, Vietnam, with a population of nearly 100 million, has increasing consumption power has created a huge domestic demand market, making Vietnam the location of a fast-growing consumer goods market. The demand for infrastructure, healthcare, and agriculture also attracts foreign investors to invest directly in Vietnam.
At a time when China's economy is slowing down and labor costs are getting more expensive, Vietnam is gradually becoming a "must- choose" for various industries. In 2019, Vietnam's economic growth rate was as high as 7.02%, with a GDP of US$266.5 billion and an unemployment rate of only 2.05%.

I.Vietnam company registration type

When conducting investment activities in Vietnam, choosing the right type of business will greatly affect the company’s future existence and development. According to the provisions of the 2020 Investment Law, there is no distinction between domestic and foreign investors in the choice of enterprise types. The types of enterprises that foreign investors can choose are as follows:

  • Representative office
    A representative office is a suitable solution for foreigners who want to observe the local market and gain market share before expanding. A representative office may not engage in business activities that generate income. Only conduct related business on behalf of the foreign parent company. Through a representative office in Vietnam, it is possible to do the following:
    > Conduct market research.
    >Find an investment partner.
    >Find investment opportunities.
    > Promote parent company.
    >Supervise the contract signing process with Vietnamese partners.
    The representative office license is valid for 5 years (except as stipulated on the expiry date of the parent company’s business license or registration certificate), and an application for extension is required one month before the expiration date.
  • Joint Stock Company (JSC)
    Applicable for medium to large companies and allows their owners to issue shares and list on public stock exchanges, as their corporate structure is complex and requires at least three founders. Its registration process is also more lengthy and delayed.
  • Limited Liability Company (LLC)
    The limited liability company is the most common type of legal entity in Vietnam and is an excellent choice for SMEs. A single investor can take advantage of its simple corporate structure, which requires only one founder and a maximum of 50 members. LLCs do not issue stock. Allows members to set different capital contributions and gives members de facto similar rights and responsibilities as shareholders. Shareholders’ liability is limited to the amount of capital recorded in the company’s articles of association. The following is a further explanation of the application procedures and conditions for a limited liability company.

II.Basic requirements for registration of foreign companies in Vietnam

  1. Foreign Shareholding Regulations in Vietnam
    Vietnam allows 100% foreign investment in most industries. These include trade, IT, manufacturing, and education. However, there are limited equity ratios for certain activities/services, such as:
    .Fully restricted: military, related printing, etc.
    .Partial restrictions: need to have joint ventures with Vietnamese partners, such as tourism, advertising, logistics, etc.
    .Special requirements and restrictions: Additional personnel certification conditions such as licenses: real estate brokerage, accounting services, etc.
    World Trade Organization (WTO) agreements govern foreign ownership of most businesses. However, some projects are not regulated by WTO agreements or local laws. In this case, approval from the relevant authorities of the industry is still required.
  2. Minimum Capital Requirements
    Most projects in Vietnam have no minimum capital requirements. However, the amount of capital must be sufficient to cover the initial expenses of the company. The Department of Planning and Investment will assess whether your contribution is in line with your business. Generally speaking, it is recommended to register the capital of foreign service or trading companies at least 80,000 US dollars, and if it is a production factory, it is recommended to register at least 100,000 to 150,000 US dollars. Also, some franchises have minimum capital requirements. For example language centers, real estate companies, finance, fintech, etc.
  3. Registered Address
    You must have a business address to set up a company in Vietnam. Service-based businesses such as consulting or trading companies can use the Business Center anchor address. However, certain businesses must have physical offices, such as manufacturing, restaurants, and retail trade.
  4. Legal Representative
    All companies in Vietnam must have at least one legal representative (director). It can be held by foreigners and does not need to have resident status.

III.Documents required for company registration in Vietnam

For foreign investors to register a company in Vietnam, the required registration documents, procedures, conditions, and regulations for business projects are mainly handled in accordance with the provisions of the Vietnam Investment Law. The documents to be prepared for the Vietnam company registration application are as follows:

  1. Legal documents of foreign investors. (subject to local verification).
  2. Bank letter from the foreign investor.(the balance must be equal to or greater than the charter capital value of the new company).
  3. The English name of the company registered in Vietnam.
  4. The address, telephone number, fax number, and e-mail address of the company’s head office.
  5. Register the specific business items of the Vietnamese company.
  6. The legal capital of an enterprise operating an industry that requires legal capital design.
  7. The share capital and shareholding ratio of each shareholder member of the company.
  8. Name, signature, household registration address, nationality, national ID number or passport number, or other legal personal documents of the person in charge of the company.
  9. Contents of Articles of Association.
  10. Office lease agreement.

IV.Basic process of setting up a company in Vietnam

  1. Confirm the investment information
    Including company name, registered capital of Vietnam company, business items, shareholder
    certification documents….

  2. Apply for Investment Registration Certificate (IRC)
    To register a foreign company in Vietnam, you need to apply for an investment license from the Department of Planning and Investment (DPI). It takes about 25 working days to get it.
  3. Apply for Enterprise Registration Certificate (ERC)
    Vietnamese companies must also apply for a Business Registration Certificate (BRC) from the Investment Planning Department. BRC is also known as Enterprise Registration Certificate (ERC). It takes about 7 working days to apply for a business license.
  4. Tax registration
    After receiving your license, you can apply for tax registration. Remember, you must submit this application within 30 days or penalties will apply.
  5. Bank account opening
    Choose a suitable bank to open VND and foreign currency capital accounts.
  6. Capital investment
    The registered capital must be remitted within 90 days of obtaining the license. If the remittance cannot be made in time, a separate application for extension is required, and the capital injection must be completed within one year at the latest.

Vietnamese laws and regulations change from time to time, and the gap between words and languages often results in unnecessary waste of time and information gaps. It is recommended to find a professional agency for the details of practical establishment.

V.Taxes and tax rates in Vietnam

Foreign investors doing business in Vietnam, regardless of the business structure they choose, must bear the relevant tax obligations. After obtaining a Vietnam company business license, monthly, quarterly, and annual returns will be required, such as Value Added Tax (VAT), Personal Income Tax (PIT), and annual corporate income tax returns, as well as foreign contractor withholding tax returns.

越南公司註冊
  • Corporate income tax CIT 20% (Corporate income tax)
    The taxable object is any organization that conducts business in Vietnam and obtains taxable income, and a 20% tax rate is levied on the net profit; exemptions are provided, and some expenses can be deducted from the taxable income.
  • VAT 10% (Value-added tax)
    VAT is levied on value-added at all stages of the production and distribution supply chain.
    The amount levied depends on the type of goods, 10% for general goods and services, 0% for export goods and services related to agriculture, water, food, etc., and the tax is deductible.
  • Personal income tax 5% to 35%
    Tax residents levied personal income tax according to their global income, and personal income tax rates range from 5% to 35%; non-residents tax 20% according to their income from Vietnam.
  • Foreign contractor tax FCT (Foreign Contractor TAX)
    Revenue from Vietnam from foreign companies, individuals, and foreign organizations. When Vietnamese companies buy certain commodities and services from foreign suppliers; according to relevant services or procurement contracts, the buyer is obliged to declare the seller to declare, deduct and pay foreign contractors tax in the local tax authority. Foreign contractors include VAT and corporate income tax, which may be 2% to 15% of tax revenue.

Annual Audit:
The Company also needs to submit annual audit financial statements to relevant national institutions, including:

  1. Tax authority.
  2. Planning Department.
  3. Market management agency.
  4. Finance department.

Tax application forms and audited financial statements need to be submitted in time to avoid any penalties. Therefore, before the audit, you will need an accountant to prepare account books and financial statements for the company.

VI.Notes for Vietnam company establishment

  • The investment document certification acceptable to the Vietnamese government is valid for half a year.
  • The registered capital in Vietnam must be transferred from the overseas shareholder’s account to the special capital account. In addition, investors must pay the registered charter capital within 90 days from the date of issuance of the business license.
  • After obtaining the business license, you need to start tax registration and declaration.
  • After opening a bank account, it needs to be filed with the Planning and Investment Department within 10 days.

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