Doing Business

Doing Business in Vietnam and Thailand: A Comparative Guide

Trường Lăng

November 23, 2023

Doing Business

Doing Business in Vietnam and Thailand: A Comparative Guide

Trường Lăng

November 23, 2023

In the dynamic realm of international trade, making wise decisions is crucial for investors. Whether you are an experienced entrepreneur or a new business owner, selecting the ideal location to do business holds significant importance. This article embarks on a comparative analysis of doing business in Vietnam and Thailand, examining their distinct regulatory environments, company registration processes, and the unique aspects that shape these two Southeast Asian nations. Whether you are considering setting up a company or exploring new markets, gaining insights into the intricacies of these countries will empower you to make well-informed decisions, regardless of the stage of your entrepreneurial journey.

Ease of Doing Business in Vietnam: Regulatory Environment and Company Setup

Unpacking the Company Registration Process in Vietnam

When delving into the process of company registration in Vietnam, investors often face various options for foreign-invested corporate vehicles. However, three of the most common structures are the Representative Office, Branch Office, and 100% Foreign-Owned Limited Liability Company (LLC). Understanding the distinctions between these vehicles is essential, as they each come with unique benefits and regulations.

  • A Representative Office serves as an extension of the foreign parent company, focusing on market research and liaison activities. It is limited in its ability to engage in commercial activities.
  • A Branch Office, on the other hand, can partake in some revenue-generating activities but operates under certain restrictions defined by the parent company’s business scope.
  • LLC is a separate legal entity that can conduct various commercial activities. This structure offers more control and flexibility to foreign investors in running their operations in Vietnam.

Navigating these options is a crucial first step when considering doing business in Vietnam, as it lays the foundation for the regulatory processes that follow.

Timing Matters: How Long Does It Take to Set Up a Company in Vietnam?

The timeline for setting up a company in Vietnam varies depending on the type of business structure. For instance, an LLC typically requires 3 to 4 months to establish. Representative Offices can often be set up in half the time, around 2 months. Meanwhile, Branch Offices generally require 3 months for setup.

It’s important to note that some businesses might need to secure pre-investment approval from Vietnamese authorities. Furthermore, acquiring the essential Investment Registration Certificate (IRC), a prerequisite for establishing new companies, typically takes 15 working days, unless the business sector falls outside the scope of the World Trade Organization (WTO). In such cases, the process might take longer.

Once the IRC is obtained, companies can progress to subsequent steps, including securing a physical business address and obtaining an Enterprise Registration Certificate (ERC). The latter usually takes 3 working days. While many sectors and business lines have no specific minimum capital requirements in Vietnam, some, such as finance, banking, insurance, fin-tech, language centers, vocational schools, and real estate companies, do have particular mandates.

The timeline for setting up a company in Vietnam
Samples of ERC (left) and IRC (right). Source: Vietnam Insider

Post-licensing procedures, which typically require 30 working days, encompass the public announcement of company establishment, seal registration, bank account registration, tax token acquisition, online declaration, business license tax payment, and labor registration. These timelines reflect Vietnam’s commitment to offering a streamlined and efficient process for investors looking to do business in the country.

Ease of Doing Business in Thailand: Regulatory Framework and Company Formation Procedures

The Steps to Starting a Business in Thailand: From Concept to Company

Commencing a business venture in Thailand begins with thoughtful planning. Before delving into the business setup process, it’s essential to determine the type of business you want to establish. It’s noteworthy that, unless your company falls under a Board of Investment (BOI) program, the majority of shareholders must be Thai citizens, while foreigners can own a maximum of 49% of the company. This stipulation may be exempted if your business secures a Foreign Business License (FBL), typically granted to foreign-owned businesses that don’t compete with Thai enterprises. Acquiring the FBL may take a few months, and the application can be submitted to the Foreign Licensing Department of the Ministry of Commerce.

When it comes to business structures, the private limited company is a popular choice among entrepreneurs. In this structure, shareholders enjoy limited liability, while directors assume unlimited liability. Understanding these initial steps is crucial for a smooth setup process.

Time Is Money: How Efficient Is the Business Setup Process in Thailand?

Efficiency is the hallmark of business setup in Thailand. The process typically commences with reserving a company name, a task that can be efficiently completed by registering an account with the Department of Business Development online. The subsequent step involves preparing the necessary documents, a process that varies depending on your business type. Required documents may include the Memorandum of Association, application forms, shareholder lists, director forms signed by each director, the Declaration of Business Operation form, and details regarding your business’s offices and branches. Additionally, obtaining a company stamp is crucial as it will serve as your company’s signature in various business transactions.

The final stage involves registering the company at the Business Registration office located in your company’s area. During this step, you’ll also receive a taxpayer identification number for your business. Typically, the registration of a private company takes approximately one week, while public companies may require up to one month. Thailand’s efficient setup process highlights the country’s commitment to attracting foreign investment and fostering a conducive business environment for investors.

The Steps to Starting a Business in Thailand
Efficiency is the hallmark of business setup in Thailand. Source: Internet

Comparative Analysis: Vietnam vs. Thailand for Business Setup – Pros and Cons

Weighing the Pros and Cons of Doing Business in Vietnam and Thailand

When choosing a location to set up a business, it’s essential to weigh the pros and cons. Both Vietnam and Thailand offer compelling advantages and exhibit distinct challenges. Vietnam boasts a burgeoning market with over half of its population under the age of 35, promising a youthful and productive workforce.  The country’s geographical location, as part of Southeast Asia, provides strategic access to regional markets. However, navigating Vietnam’s complex regulatory landscape can be daunting. The limited transparency and occasional bureaucratic inefficiencies may pose challenges for newcomers.

On the other hand, Thailand offers remarkable strengths, including robust digital connectivity and a highly skilled workforce. These factors, combined with the Thai government’s comprehensive policies and investment incentives, position Thailand as the preferred investment destination in the region. Nonetheless, Thailand may present more competition in some sectors, and the business environment can be somewhat more costly due to stringent regulations.

Comparing Business Opportunities: Vietnam vs. Thailand

In terms of business opportunities, Vietnam’s rapid economic growth and evolving middle class offer promising markets for a wide range of industries. While its regulatory environment can be challenging, it’s worth noting that Vietnam has been actively making improvements to facilitate business setup. This commitment is showcased through its various Free Trade Agreements (FTAs), such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA).

Vietnam’s rapid economic growth and evolving middle class offer promising markets for a wide range of industries.
Source: nhandan.vn

Thailand, on the other hand, beckons with a well-structured framework of investment policies that actively endorse liberalization and open trade. The government actively encourages foreign investments that contribute to skills, technology, and innovation, fostering a welcoming environment for innovative enterprises.

The choice between Vietnam and Thailand ultimately hinges on an investor’s unique business objectives. For those seeking high-growth markets and willing to navigate a learning curve, Vietnam may be an ideal choice. On the other hand, Thailand offers stability, a strong legal framework, and established business networks.

Final Thoughts

In this comprehensive analysis of the business setup landscape in Vietnam and Thailand, we’ve explored the unique opportunities and challenges each country presents to investors. The decision to establish your business hinges on a careful evaluation of the pros and cons, and aligning these with your specific objectives. Whether you’re drawn to Vietnam’s dynamic growth or Thailand’s well-established market, Viettonkin is your trusted partner in navigating the complexities of both regions. Our expertise and guidance are your keys to a successful business setup. Unlock new horizons, explore more with Viettonkin, and embark on a seamless journey to establish and thrive in either Vietnam or Thailand.

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