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Vietnam Company Registration
Vietnam Company Registration
After Vietnam's accession to the WTO, its market gradually opened up. Now, foreign investors can generally invest 100% in various projects of Vietnamese companies. The economy is steadily growing, fueled by abundant labor resources. With the expansion of the middle class and a population of nearly 100 million, Vietnam's purchasing power is increasing, creating a huge domestic demand market. This has made Vietnam a rapidly growing consumer goods market. There are also business opportunities in infrastructure, healthcare, and agriculture, attracting foreign investors to set up companies and invest directly in Vietnam. As China's economy slows down and labor costs continue to rise, Vietnam is gradually becoming a "must-visit" destination for various industries.
I.Vietnam's Investment Environment Introduction and Advantages
Vietnam is one of the most promising and dynamic economies in Southeast Asia. Its stable political environment, open market economy, and abundant natural resources have attracted numerous global investors. The Vietnamese government has implemented a series of laws, regulations, and policies to encourage foreign investment, ensuring the rights of investors and providing tax incentives.
| Location | located in Southeast Asia, is a vital hub for regional trade and investment due to its proximity to China, Cambodia, the Philippines, and major shipping routes. |
| Economic Growth | Strong economic GDP growth, including sustained annual GDP growth consistently outperforming the average. |
FTA Network | Signed over 18 free trade agreements, providing trade advantages to countries in the Asia-Pacific region, ASEAN, Europe, and other parts of the world. | |
International law | Member of the World Trade Organization and signatory to most major global intellectual property protection conventions, protocols, and agreements. |
Brief Introduction of Major Cities in Vietnam
Hanoi:
Hanoi is the capital of Vietnam and the country’s second-largest city. It is also the largest economic entity in the Key Economic Region (KER) of the northern part of Vietnam. Hanoi continues to experience comprehensive and in-depth development in various sectors. Its economy is growing rapidly, while its spatial planning, infrastructure systems, and urban architecture are progressing towards a civilized and modern direction.
Ho Chi Minh City:
Ho Chi Minh City, formerly known as Saigon, is the largest city in Vietnam and one of the country’s five centrally governed cities. It serves as Vietnam’s economic, trade, transportation, and cultural center. When multinational and technology companies enter Vietnam, they often choose Ho Chi Minh City. The city boasts the country’s top research institutions and the largest international airport. As the most developed city in the country, Ho Chi Minh City has always been the economic hub of Vietnam.
II.Main Types of Foreign Investment Companies in Vietnam
During the investment process in Vietnam, one of the key considerations for investors is choosing the appropriate business entity. According to the regulations of the 2020 Investment Law, there is no distinction between domestic and foreign investors in the choice of company types. Foreign investors can choose from the following company types:
- Limited Liability Company (LLC)
Limited Liability Company (LLC) is most suitable for small and medium-sized enterprises (SMEs) and is the most common legal entity type in Vietnam. It is an excellent choice for small and medium-sized businesses. With its simple company structure, a single investor can establish an LLC with only one founder, and the maximum number of members is 50. Different contribution amounts can be allocated to members, and members have rights and responsibilities similar to shareholders in practice. Unlike Joint Stock Companies in Vietnam, whether it is an LLC with one member or an LLC with two or more members, the issuance of shares is not allowed, and the liability of members is limited to the capital amount stated in the company’s charter.
- 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.
III.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.
IV.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:
- Legal documents of foreign investors. (subject to local verification).
- Bank letter from the foreign investor.(the balance must be equal to or greater than the charter capital value of the new company).
- The English name of the company registered in Vietnam.
- The address, telephone number, fax number, and e-mail address of the company’s head office.
- Register the specific business items of the Vietnamese company.
- The legal capital of an enterprise operating an industry that requires legal capital design.
- The share capital and shareholding ratio of each shareholder member of the company.
- 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.
- Contents of Articles of Association.
- Office lease agreement.
V.Basic process of setting up a company in Vietnam
- Confirm the investment information
Including company name, registered capital of Vietnam company, business items, shareholder
certification documents…. - 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. - 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. - 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. - Bank account opening
Choose a suitable bank to open VND and foreign currency capital accounts. - 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.
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.
VI.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.
- 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) 2%-15%
What is Foreign Contractor Tax (FCT) in Vietnam?
Foreign Contractor Tax (FCT) in Vietnam refers to the requirement under Vietnamese tax law for foreign enterprises conducting engineering or business activities in Vietnam to withhold a certain percentage of tax from their income payments. This tax measure aims to ensure that foreign contractors comply with Vietnamese legal provisions and pay the corresponding taxes.When is Foreign Contractor Tax (FCT) applicable in Vietnam?
Foreign Contractor Tax (FCT) applies to foreign contractors engaged in engineering or business activities in Vietnam and transactions with Vietnamese companies or individuals. It is also applicable when Vietnamese entities purchase goods and services from foreign suppliers. Based on the relevant service or procurement contracts, the buyer is obligated to declare, withhold, and remit the foreign contractor tax on behalf of the seller to the local tax authorities.
Foreign enterprises conducting engineering or business activities in Vietnam are required to withhold a certain percentage of tax from their income payments. The specific tax rates and applicable regulations are determined by Vietnamese tax laws. The Foreign Contractor Tax includes value-added tax (VAT) and corporate income tax (CIT) and can range from 2% to 15% of taxable income. This tax measure aims to ensure that foreign contractors comply with Vietnamese legal provisions and pay the corresponding taxes.
- Employee Social Insurance
The Social Insurance Agency (SIA) in Vietnam is responsible for managing the government’s social security policies. Social security for Vietnamese citizens is based on three funds: the Social Insurance Fund (SI), the Health Insurance Fund (HI), and the Unemployment Insurance Fund (UI).
Employers contribute 17.5% to the Social Insurance Fund, 3% to Health Insurance and Maternity Insurance, and 1% to Unemployment Insurance. Employees contribute 8% to the Social Insurance Fund, 1.5% to Health Insurance, and 1% to Unemployment Insurance. Please note that the translation provided is for informational purposes only and may not be an exact representation of Vietnamese legislation.
Annual Audit:
The Company also needs to submit annual audit financial statements to relevant national institutions, including:
- Tax authority.
- Planning Department.
- Market management agency.
- 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.
VII.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.