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Viettonkin Consulting is proud to announce three new strategic partnerships with Robert Yam Co., Oborseana, and CorpelServe, further strengthening our commitment to delivering seamless cross-border business expansion services to clients across Asia. Robert Yam Co. (Singapore) Established in Singapore, Robert Yam Co. is a reputable firm offering audit, tax, and accounting services, led by Executive […]
Conditions for set up business in Vietnam for providing secretarial services
Foreign entrepreneurs who want to set up business in Vietnam for providing secretarial services need to settle down and live. If an entrepreneur is living in a foreign country, he/she must have nationality from countries that are members of the WTO.
Foreign entrepreneurs need to pay attention to the following requirements when setting up a business in providing secretarial services:
Carry out business registration according to the regulations on setting up business.
Business license recognizes an enterprise providing secretarial services.
Type of business: an enterprise providing secretarial services may choose one of the following types of business: joint-stock company, single-member limited liability company, partnership, private company or private enterprises, etc.
Conditions for charter capital: Enterprises may register their own charter capital because the Enterprise Law does not stipulate a minimum capital level to set up business in Vietnam.
Conditions for company name: The company name is written in capital letters in Vietnamese and must not be duplicated or confused with those already present in the market. The company name is displayed at the head office, branch, representative office and printed on the papers, transaction records, publications and documents issued by the enterprise as well.
Sequence and procedures to set up business in Vietnam for providing secretarial services:
To set up business in providing secretarial services, it is necessary to prepare and submit documents at the Business Registration Office in the place where the head office is located, including:
A valid enterprise registration application according to the prescribed form.
Company’s Articles of Association.
Copies of documents of the owner or legal representative: copy of identity card or citizen’s identity card, passport, copy of certificate of establishment of the company, decision to establish the company or other similar documents.
Especially, foreign investors need to obtain an investment registration certificate as prescribed in the Investment Law and accompanying documents.
An enterprise is eligible to set up business in providing secretarial services when the following documents are presented: Secretarial service practice certificates or related certificates of personnel. Copies of the labor contracts between the enterprise and its employees who are working for the enterprise providing secretarial services. Certificate of eligibility to set up business in providing secretarial services.
Some notes for foreign employees:
Foreign employees need to have a labor contract with the enterprise and have a work permit in Vietnam issued by a competent authority according to regulations.
Employees must have good health and professional qualifications in the field of secretarial services.
Foreign employees must ensure compliance with Vietnamese labor laws, international treaties and other provisions of Labor Law.
Foreign employees are entitled to participate in compulsory social insurance according to state regulations.
To save time, avoid repeated travel for foreign entrepreneurs, Viettokin will support and accompany them throughout the process of solving arising problems about documents and procedures to set up a business Vietnam for providing secretarial services, thereby enterprises feel secure to build and develop their own business. Owning staff of many years of experience in Vietnam, Viettokin offers quality services worthy of the trust of partners.
The Representative Office (RO) has no function of profit generating, but functions such as researching, approaching market expansion, promoting brands, products, contacting customers … So, it can be fairly essential to get one. Thus, how is the procedure and compliance how to establish representative office in Vietnam as well as dissolution? The following article of Viettonkin Consulting will share useful information about the RO establishment and termination procedures and related issues. Let us find out with us for useful information for doing business in Vietnam.
Procedures and Compliances how to establish representative office in Vietnam
Setting up a Representative office (ROs) is one of the simplest and fastest ways to establish a legal entity in Vietnam. Their report requirements are also more simple compared to FOCs.
READ MORE: Legal Service to find out more about how we can help tackling your problems and protecting your rights
Because ROs are forbidden from directly conducting profit-generating activities and are limited to market research, developing trade contacts, and gathering information on regulations and laws, their compliance requirements are also more simple than FOCs.
Procedure requirements check - list (2021 update)
Tax and accounting procedures
Mandatory:
PIT finalization
PIT finalization for individuals with multiple sources of income or have direct income from abroad
Tasks to note:
Complete cash book and petty card with appropriate invoices and vouchers for tax inspection
Re-audit the tax return - payment and tax receipts
Cross-check the balance - tax status with the tax agency
Annual activity Report
Prepare and submit the Report on the operation of the office during the year to the Department of Industry and Trade
Procedures for wage labor
Mandatory:
Signing a labor contract, an employment contract appendix for the new salary and income for the year for each employee in the country.
Provide appointment letter, confirmation letter of annual income for foreign workers.
Registering and adjusting the salary scale system, labor regulations, labor agreements ... to update regulations and welfare policies.
Complete information about the employee management book with content that needs updating such as days off, overtime hours, discipline, salary increases, …
Tasks to note:
Performing income verification procedures, issuing PIT withholding vouchers for seasonal employees, employees earning direct income from abroad.
Determine a list of personnel subject to PIT self-finalization with the tax office.
Procedures and Compliances for Dissolution
In order to carry out the procedures for dissolution of a representative office in accordance with the promulgated law, the enterprise needs to fully perform the following steps:
Step 1: Deactivate tax identification numbers with tax authorities.
Step 2: Procedures to return seal, confirm not to use seal (in case there is no seal).
Step 3: Prepare documents on dissolution of representative office.
Step 4: Submit the application
Step 5: Get results
Procedures for Tax Identification Number (TIN) deactivation
In order to be able to validate the Tax Identification Number of the representative office, you need to submit the application to the administrative tax office. Types of papers and documents include:
Official letter on TIN deactivation.
The decision to close the representative office of the board of members (LLC) / the board of directors (shares) / owner / business owner (private).
Meeting minutes of the Board of Directors / Board of Members on the dissolution of the Representative Office.
Power of attorney for the company's filers.
Instructions to return the seal, confirm not to use the seal of the representative office
According to the Enterprise Law 2014, effective on July 1, 2015. In case representative offices have been established before this time, when completing the procedures to close the representative office, it is necessary to submit a dossier to return the seal or confirm the seal is not used with the police. We would like to advise a set of documents for customers as follows:
Official letter confirming no use / return seal.
Decision to dissolve Representative Office.
Meeting minutes of the Board of Directors / Board of Directors on the closure of Representative Office
Power of attorney, a referral for the company submitter.
Original seal registration certificate, seal in case you pay the seal.
Profile dissolution representative office
After completing the procedures for the code and the seal, the next job that the enterprise needs to do is to prepare papers and documents in the dossier set to close the representative office.
RO's profile that will include the following categories:
Notice of dissolution of RO (Download the form in Appendix II - Circular 20/2019 / TT-BKHDT HERE).
Decision of the Owner / Board of Directors / Business Owner / Board of Members on the closure of Representative Office. Or revocation decision of the competent state agency.
Minutes of the meeting of the Board of Directors / Shareholders' Council (if any).
Original certificate of representative office operation registration (can use a notarized copy).
Seal (if any) or Certificate of unused seal of the police agency.
Notice of tax termination.
Request for supplementing and updating operation registration information for representative offices issued with investment certificates (Download the form in Appendix II-19 of Circular No. 20/2019 / TT-BKHDT HERE).
Power of attorney / company referral for the applicant (FORM)
List of number of employees or their benefits in RO (if any).
List of debt amounts (including tax debt and social insurance debt) the business has not paid, a list of creditors (if any).
Submitting for closing representative office
When conducting the dissolution of a representative office, the enterprise needs to send a notice to the Business Registration Office where the representative office is located.
Next, businesses can apply through the following 2 ways:
Go directly to the business registration office where the representative office is located.
From the time the registration office receives a valid application, it will take about 05 working days including: Examining the application => changing the status in the Database from registration of Representative Office to termination => out Notice of termination of Representative Office operation (if the application is valid).
In the event that the Registration Office checks the file and finds that there are errors or omissions, it will issue a Notice of amendment and supplementation of the file to the enterprise.
Notably
- Responsibilities for the employees: when wishing to dissolve representative offices, domestic or foreign traders need to give advance notice, fulfill the obligation to pay wages, terminate rental contracts, labor contracts ...
- With tax authorities: need to fulfill all tax-related obligations and procedures.
- If the RO has been suspended for more than 1 year but the business owner does not notify the Business Registration Office or the tax authority, then the certificate of operation registration will be revoked. To avoid the situation of being revoked, enterprises need to do temporary business suspension procedures for the representative office if they intend to suspend the business.
- In case the RO location is not in the territory of Vietnam, the enterprise should dissolve in accordance with the regulations of that country. Then, within 30 days, to notify dissolution of the representative office to the Business Registration Office where the head office is located.
A Limited Liability Company (LLC) according Enterprise Law Vietnam can be set up with only one shareholder who can be of any nationality other than Vietnam. Normally, setting up LLC is believed to be simpler compared to large corporations thanks to smaller scale (up to 50 members), so that investors usually consider this as a worthy choice. Therefore, in this following article we will provide you with a checklist to establish a LLC according Enterprise Law Vietnam in this article.
Overview of Limited Liability Company in Vietnam
Is one of the four types of enterprises in which domestic and foreign investors are allowed to do business in Vietnam under Vietnam's Enterprise Law.
Can be totally or partially foreign-invested.
Is simpler to set up as compared to a large corporation in Vietnam.
Is a legal entity formed from the capital contribution of each member to the company. The number of members must not be over 50.
Especially, an LLC member's liability for the company's financial obligations will depend on his/ her share of the equity, not their personal property.
Investors must do their due diligence to work out the acceptable market entry option suitable to their appropriate business lines and specific requirements.
So, a Limited Liability Company in Vietnam is formed based on the capital contributions of its members. Capital contribution refers to the entire assets contributed to constituting the charter capital of the corporate .
Therefore, a Limited Liability Company’s shareholder can take part in the whole growth of the corporation while their liability and financial obligations are restricted to the quantity of investment they contributed to the company’s charter. (Related article: Limited Liability)
Similarly, just in case of a one-member or single-member indebtedness company, this structure has just one member who is additionally the corporate owner. For this reason, this person must be responsible for all relevant debts and obligations of the corporate to the extent of his/her capital contribution to the corporate .
In 2021, Enterprise Law Vietnam has a lot of preferential investment policies in various economic sectors in Vietnam for foreign investors.
Accordingly, Enterprise Law Vietnam, when conducting investment to establish a company in Vietnam, foreign investors need to learn and grasp the provisions of the current law to ensure the most optimal conditions when investing and doing business in Vietnam.
With the desire to best support legal procedures, tax for foreign investors to set up foreign invested companies in Vietnam, Viettonkin Consultant provide the process details to establish a foreign-invested LLC as follows:
Corporate structure
Member’s council: This is often the body with the very best position for creating decisions of the corporate. It is mandatory that the Member’s council must hold a minimum of one meeting per annum .
The chairman of the Member’s council: An LLC has the duty to select a member to become the council’s chairperson who can be the director or general direct of the company. Note that the applicable tenure of the chairperson is within a period of 5 years.
Director/Director General: Main responsibilities of director/director general is to manage daily business operations of the indebtedness company, also as hold the liability for his/her exercise of rights to the Members’ Council.
Supervisory Board: If your multi-member LLC in Vietnam is a state enterprise or a subsidiary of a state enterprise in Vietnam, then you must establish a Supervisory Board as stipulated by Article 54, Law on Enterprise 2020. Other circumstances on whether this Board should be formed or not is at the discretion of the LLC itself.
Registration Process
In general, you are required to go through the following procedures to set up your Limited Liability Company:
Location of the investment project; area of land used.
Investment capital of the project (including investor's contributed capital and raised capital), capital contribution and mobilization schedule.
Duration of the project.
Investment project execution schedule: capital construction progress and work put into operation (if any); The progress of implementing the main objectives and main items of the project, if the project is implemented in phases, must specify the objectives, duration and contents of each stage.
Investment incentives and supports and bases and conditions for application (if any).
Regulations for investors implementing projects.
Conditions for investors to implement the project (if any).
Business sectors that need sub-licenses are travel (international/domestic business license), printing (printing operation license) and security (certificate of social security), among others.
List of company members, for limited liability companies with 2 or more members;
ID card or passport of a limited liability company member;
Certificate of Business Registration / Business Registration Certificate for members who are organizations and accompanied by personal identification papers, the authorization decision of the authorized representative organization's.
Capital contribution decisions.
List of authorized representatives (for members who are organizations);
An investment registration certificate for the investor has been issued.
After a business is legally registered, an ERC is going to be issued by a business registration agency. An ERC may be a document, often softcopy or hardcopy, that contains information on enterprise registration.
Documents and payments submission for post license requirements
Opening a checking account , paying for business taxes, contributing to charter capital, ordering e-invoice, providing e-signature and company stamp, etc.
What’s next?
Arring staff, tax, and annual reporting . You need to register hired employees with the social insurance department.
Foreign employees also will get to have the specified work permits to figure in Vietnam. This may take longer as Vietnam’s borders remain closed, however, this is still possible and we Viettonkin can assist you in acquiring the needed documents and entry permits.
You have to pay the business license tax. They are also subject to corporate tax (CIT), VAT (VAT), and private tax (PIT). Depending on the line the corporate could also be eligible for CIT reductions within the first years of operation.
Limited liability companies are required to undertake tax audits that checks all revenues and expenses during the tax term to determine payable taxes.
How long does it take?
The whole registration process can take 2 - 3 months in total. However, the time may slightly vary depending on the business activities or sectors and completeness of documents. We recommend finding support from a consulting agency to assist you in the whole process.
To sum up, setting up a foreign-owned limited liability company in Vietnam requires some procedure a bit more complicated than a company with local capital and takes some time to prepare. However, everything will become easier if you understand the whole process of establishing a new business in this promising country. Viettonkin hopes that this information will assist you in any cases. Do not hesitate to contact us if there are any difficulties, Viettonkin is here to help!
Whether you are eyeing Vietnam as your next FDI destination or in the process of market research, choosing a location to set up business in Vietnam is no simple task in this vast country. Luckily for investors having Vietnam on their list of business locations, there are various industrial zones in key economic regions designated by the government to encourage FDI inflow into the country. This article will provide a broad picture of strategic business locations and major FDI hubs in Vietnam to help ease the process of choosing a business as well as set up business in Vietnam location for foreign investors.
Choosing locations in Vietnam Industrial Zones
Industrial zones are specific areas earmarked by the government for the production of goods and services. Industries are usually concentrated in certain industrial zones, which provide incentives for businesses that set up there. Industrial zones are popular investment locations for FDI into Vietnam. As of 2018, according to Vietnam briefing reports, there are 328 industrial zones countrywide, 249 of which are in operation. By the end of 2018, industrial and economic zones had attracted 7,500 domestic projects worth US$41.75 billion and around 8,000 foreign projects with a total capital over US$145 billion.
While industrial zones are convenient go-to locations for foreign businesses to set up business in Vietnam, investors should take time to narrow down their list of potential places to visit. Below is an overview of the characteristics of Vietnam’s key economic regions.
Vietnam's key economic regions in the North include the provinces of Hanoi, Hai Phong, Quang Ninh, Hung Yen, Hai Duong, Bac Ninh and Vinh Phuc. These provinces together account for 16.2 percent of Vietnam’s population and 4.7 percent of its landmass.
Vietnam’s Northern key economic regions are the hub for enterprises looking to supplement its existing manufacturing in China with lower labor costs while maintaining a strategic location of close proximity to China.
Advantage
The influx of investment in heavy manufacturing and petrochemicals into the northern regions lead to concentrated talent and infrastructure suited to this business-line. The resulting talent pool can be one of the considerations for investors assessing business locations in this region.Cities such as Hanoi and Hai Phong have ample supplies of qualified workers and institutions that provide for specialized labor.
Disadvantage
Due to the area’s primary focus on heavy manufacturing, investors in heavy manufacturing will find the concentration of infrastructure and talent work to their advantage while investors in other sectors, such as IT, do not benefit from these networks. Land availability is also a growing concern in Northern Vietnam compared to other locations within the country. It is important for investors to explore rent or purchase options before setting up operations in the North.
The Central
Vietnam’s central key economic regions include Da Nang, Thua Thien Hue, Quang Nam, Quang Ngai, and Binh Dinh.The region accounts for 7 percent of the national population
Advantage
Investment environment is less competitive than the fully explored hubs in the north and the south. In recent years, the city of Da Nang emerges as a hub of seafood, food processing, and manufacturing. In addition to production, Da Nang also benefits from a greater degree of urban planning and development due to private partnerships between governmental authorities and investors. This may create downstream benefits for FDI in the region. See more below: Top cities to start your business in Vietnam
Disadvantage
Talent pool in the Central is more limited than in other regions. Workers in technical fields often find greater opportunities in North or South Vietnam and are likely to leave the region. However, many Vietnamese appreciate the quality of life in Da Nang and are likely to relocate if offered an attractive opportunity.
The South
The Southern economic regions encompass the provinces of Binh Duong, Binh Phuc, Long An, Ho Chi Minh City, Tay Ninh, Dong Nai. Vietnam southern regions attract the most FDI projects according to Vietnam Briefing, with 793 projects listed in 2017.
Advantage
The region is economically diversified, suitable for small and medium sized enterprises. Businesses from more niche sectors are likely to find the South a more suitable investing location than other regions. Given the availability of various institutions that provide for the workforce, in recent years Ho Chi Minh city has emerged as a major hub for startups.
Its large population also makes consumption another advantage of the region. Investors seeking to establish brand identity with Vietnamese consumers are likely to find opportunities in the South.
Disadvantage
Vietnam Southern economic regions lack the strategic proximity to China. Thus, investors ith time sensitive production chains would find the Northern region more suitable. Although the talent pool is available and diverse in Southern Vietnam, competition is high between employers.
Narrowing down your list of potential business locations in Vietnam
In considering where to locate operations of a foreign invested enterprise, investors should take into account: industry specialization, labor, infrastructure, and tax incentives.
Industry specialization
Finding an industrial zone specializing in similar or parallel industries is important for foreign investors seeking to utilize the benefits available in the zone. Infrastructure and other facilities are often tailored to the needs of the industries. Investors in these industries are likely to benefit from these specialized facilities and infrastructure networks.
Labor
The clustering of talent is also influenced by the concentration of industries in specific zones. Jobseekers often relocate to industrial izones due to the concentration of employment opportunities. Certain large industrial zones also include institutions to provide a steady stream of talent. Choosing a zone that specializes in the industry will better guarantee the supply of talent in the field. This is especially true of the Central industrial zones, where talent pool is limited and finding skilled labor for niche industries poses a challenge.
Infrastructure
Infrastructure remains a constraint on FDI in Vietnam, which can suffer from lagging access to utilities, inputs, and transport networks necessary for operations. Infrastructure deficits can delay global value chains. Tax incentives and the availability of infrastructure offered by industrial zones provide a solution, assisting companies in a range of operational areas.
Proximity to ports, key road networks, and rail systems offers another significant asset to businesses. Industrial zones are usually located adjacent to a port or attached to an existing port complex. Some zones are directly linked to key roads and railway networks that reduce the time of transporting goods in and out of the country.
Incentives
Preferential tax rates are available to investors located in industrial zones in Vietnam. Other indirect taxes, such as Value Added or Special Consumption Tax, may also be reduced on a good-by-good basis. These tax incentives can help offset the higher wages and rental fees in these areas.
Top cities to start your business
Ho Chi Minh City
Being the central economic hub of Vietnam, it is no surprise that Ho Chi Minh City is first on the list of FDI attractions. One of Ho Chi Minh City’s competitive advantages is its available infrastructure and transportation networks. Tan Son Nhat International Airport is the biggest airport in Vietnam, accommodating up to 17 million passengers per annum. Saigot port network is also one of the major commercial ports in Vietnam. Ho Chi Minh City has 11 industrial zones with a total area of more 1,700 hectares, and more than half of them have land available for rent. The city also houses many institutions, research centers, and think tanks, guaranteeing a constant supply of high-skilled labour
Hanoi
Hanoi is an appealing FDI location for its extensive transportation network and investment incentives from the government. Hoa Lac Hi-tech Park in Hanoi is the first Hi-tech Park in Vietnam to receive special mechanisms and incentive policies, allowing investors and companies investing in Hoa Lac Hi-tech Park to enjoy preferential tax rates and other support, and Noi Bai International Airport is the second biggest airport in VIetnam. Regarding FDI inflows, Hanoi ranked fourth among cities and provinces in Vietnam with more than 4,489 projects in force and $27 billion in registered capital.
Phu Quoc
Foreign investors benefit from the favourable real estate market, liberalised foreign policies, international airport, seaport system, road traffic and good infrastructure in Phu Quoc.
As of April 2017, Prime Minister Nguyen Xuan Phuc has officially approved the plan to set up a Special Economic Zone. The new development model will allow 100% foreign ownership of properties and rights to conduct trading activities related to tourism. Investors can also mortgage real estate at international banks that have local branches for a loan. It is expected that Phu Quoc Special economic zone will catch up with Singapore and Hong Kong as a knowledge-based economy in 20 years.
Bac Ninh
Bac Ninh province has grown from an agricultural community to a major industrial center with multinational companies in the Northern Key Economic Zone.
Thanks to its proximity to Hanoi and China, Bac Ninh has become the second most attractive option for FDI in Vietnam. Its total GRDP (Gross Regional Domestic Product) in 2017 increased by 19% compared to the previous year – becoming the second highest per capita income of the country.
Binh Duong
Binh Duong province, located in the southern key economic region, has become a rising investing zone in recent years. Its close proximity to Ho Chi Minh City has attracted large foreign companies that seek to expand their production as part of their supply chain while taking advantage of the available land. On top of that, Binh Duong focuses on attracting investments in hi-tech, less labour-intensive, and environmentally friendly industries.
Da Nang
The city is only hours away from big domestic and foreign markets such as Hanoi, Ho Chi Minh, China, India, etc. The East-West Economic Corridor passing through Danang links the city with other neighboring countries such as Laos, Cambodia, Thailand, and Myanmar with Danang Port acting as the access point to the Pacific Ocean, facilitating the transportation of goods and people through the area. As a rising modern city Da Nang also boasts high-standard infrastructure. The city has 06 industrial zones in operation and 03 more under planning. Danang Hi-tech Park also has more than 300 hectares of land available for rent with attractive rental rates and other supports.
Hai Phong
Being the biggest port and one of the major industrial hubs in the country, Hai Phong is an excellent place to start your business. In 2016, Hai Phong was leading the foreign direct investment in the country with a total investment capital of US$2.8 billion.
Above are the key insights that help you map out potential business locations in Vietnam. Indeed, their are many other factors individual to the business that should go into the decision of location. Our Viettonkin experts team with their long-established experience in FDI in Vietnam are ready to assist.
Whether you have an eye on foreign business in Vietnam or are all armed-up ready to set up your business foothold in the country, the elaborate procedure of incorporating a foreign company can be foot-dragging to some. In fact, the Vietnamese company registration process has been simplified and streamlined in recent years through the attempt of the government to stimulate foreign investment into the market. This article will walk you through the process of Vietnam company incorporation for foreign investors, from the broad legal regulations concerning foreign-ownership to the step-by-step procedures of incorporation.
Pre-conditions for establishing foreign companies in Vietnam
Before getting to the process of setting up a foreign business in vietnam , it is necessary to understand the larger legal framework regulating foreign-invested companies in Vietnam in preparation of incorporation.
According to the Investment Law and Business Law, a foreign-owned company is an enterprise with a legal status in Vietnam established by foreign investors. Enterprises with 100% foreign investment capital may also cooperate with one another and with foreign investors in establishing new 100%-foreign-investment enterprises. Domestic as well as foreign investors may invest in the form of limited liability companies, joint-stock companies, representative offices, or branches. (See more below: What types of legal entities should investors choose?)
Foreign ownership
According to Vietnam Law on Investment and Vietnam WTO’s Commitments, it is allowed to set up entirely foreign-invested businesses in Vietnam in most sectors. For example, trading, IT, and manufacturing welcome FDI. Some business lines such as tourism and advertising, however, require a Vietnamese joint venture partner. Thus, it helps to first determine what would be the best business line and activities for your company when investing in Vietnam.
In Vietnam, the World Trade Organization (WTO) agreements in tandem with Vietnamese Law on Investment regulate the allowed foreign ownership in businesses. However, sometimes Ministry approval is needed for business-lines that are not under the regulation of either the WTO or domestic laws.
Minimum capital requirement
Vietnam law does not explicitly require a minimum amount of investment capital in setting up a company. However, the Department of Planning and Investment will assess the amount of capital contribution and see whether it corresponds to the planned expenses of the company. For example, for manufacturing businesses, the funds should exceed the cost of machinery. Thus, it is advisable that your planned capital be realistic and align with your planned business activities.
The most common amount of minimum capital in Vietnam is USD 10,000 - 150,000. However, depending on your business line, the amount could be higher or lower. For instance, the bar for real estate is approximately USD 250,000 worth of capital.
Some business lines in Vietnam have a minimum capital requirement. These include language centers, vocational schools,and real estate companies.
Registered address
To incorporate a company in Vietnam, you need a registered physical address.
Serviced-based businesses can use a virtual office for registration purposes. Manufacturing companies or companies that require a retail or operating space, however, need a physical location in Vietnam.
In some cases, the Department of Planning and Investment can require investors to provide proof such as a contract lease and related document after incorporation.
What types of legal entities should investors choose?
For the most part, choosing the type of legal entity for foreign business in Vietnam is an individualized process that depends on many circumstantial factors. There’s definitely no right answer. But with a basic understanding of the advantages and disadvantages of some of the most common types of legal entities for foreign-owned companies, hopefully, you can have some raw materials to form your own opinions and decisions.
Limited Liability Company (LLC) is the most common type of legal entity in Vietnam and an excellent choice for medium and small enterprises with a limited number of associates. It offers the advantage of a simple structure, which requires only one founder who is liable for the debt of the company to the extent of the charter capital.
The company owner can decrease or increase its charter capital and appoint a representative or Board of Manager to exercise the rights of the owners. With its simple governing structure and concentrated authority, it offers great stability. An LLC is also authorized to establish independent units like branches and representative offices.
An common alternative to LLC is a Joint stock company (JSC), formed by the subscription for shares. This type of legal entity is suitable for medium and large businesses as its corporate structure is complicated and requires a minimum of 3 founders (shareholders). However, this is the only type of business entity that can issue shares under Vietnamese legislation.
Shareholders are responsible for the debts and liabilities of the enterprise to the extent of the amount of their contributed capital. JSC thus has the advantage of acquiring large capital compared to LLC by issuing shares and bonds. However, this can create instability because of the relative ease of share buying. The complex management structure and required transparency can also delay decision-making and make the internal workings of the company vulnerable.
A company can also establish its Representative office in Vietnam provided that the company has been operating overseas for at least one year. A representative of foreign companies is not allowed to perform profit-making activities, and their activities are limited to market research and other non-profit activities. This option is suitable when a decision to invest in Vietnam is not yet certain and the investors want to observe the local market and gain market presence before setting up a subsidiary. A representative office can support the business of the parent company, save cost, and avoid risks of local compliance procedures.
Foreign companies that have been operating for five years or more can establish Branches in Vietnam. According to Decree 72/2006/ND-CP branches in Vietnam are allowed to perform trading business and other commercial activities in accordance with their establishment licenses, open accounts in Vietnam, and transfer their profits abroad.
This article focuses on the incorporation procedure of a foreign-owned LLC, whose process once understood can be applied to other forms of legal entities.
Incorporation process
Preparation
The preparation checklist pre-incorporation includes:
Clarify your business lines and activities: some restricted business fields may require additional licenses, higher share capital injection, a local shareholder, etc.;
Check the capital and proposed scale;
Get a company address: present a memorandum of understanding stating that founders will use the premises for conducting the company’s activities;
Confirm the management structure: nominate the owners of the business and verify their credentials.
Check and reserve a Vietnamese company name (See more: Regulations of company name in Vietnam)
Once you are ready to advance into the next step of incorporation, you can prepare the necessary documents. Documents required of a foreign company or individual may vary according to the planned business activities. A standard set of documents generally include:
Personal identification, proof of address and bank statement of all shareholders and owners of the business.
Incorporation documents
A Vietnamese legal representative’s passport and recent address proof if authorized to act on behalf of the company.
The first step of any foreign-owned company registration in Vietnam is to obtain an Investment Registration Certificate from the Foreign Investment Agency of the Ministry of Planning and Investment.
Overall, the process takes up to one month. In the event that the business line does not fall under WTO commitments or additional licenses are required, the processing time will be significantly longer.
Business Registration Certificate
The next step is to obtain a Business Registration Certificate, or the Enterprise Registration Certificate. Documents to prepare include:
Application form for business registration
Outline of company rules
Owners list
Passport or other personal identification of individual members
Incorporation Certificate and equivalent documents if the founder is a foreign corporate.
Once the Business registration and Foreign Investment Certificate are approved, a company seal can be attained at the Administrative Department for Social Order under the Municipal Police Department. Without a seal, a Vietnamese company cannot register with the tax department, open a bank account, or proceed with further procedures. Processing time is 3 working days.
Issue announcement
Company can then publish an announcement making public the name and type of company, the number and issuances date of the Business Registration Certificate, the headquarters and business objectives, charter capital, etc.
What comes after incorporation
Tax registration
The next thing you need to do is to complete tax registration at the local tax department, which includes enterprise Income tax, value-added tax, foreign contractor tax, special consumption tax, import, export duties, tax incentives, and personal income tax.
You have 30 days from receiving the Business Registration Certificate to complete the tax registration and pay the annual business license tax which is approximately $90.
Capital account and Corporate bank account opening
The next step is to secure a capital account for capital injection and repatriation of profits overseas. The initial capital contribution must be made within 90 days of receiving the Business Registration Certificate. A corporate bank account can also be opened at this point, as well as merchant accounts.
Before the company can hire employees, it needs to register with the Ministry of Labour and the Vietnam general confederation of Labour
Other additional licenses and permits
To wrap up the process of company registration, check if other permits are required (for example, trading companies may need to complete product registration which can take up to several months). Some business lines such as manufacturing, lodging, and trading may also require additional sub-licenses which will extend the process.
In short, the process of setting up Vietnam company incorporation for foreigner investors can be a trouble-free process once you follow the basic steps of Vietnamese company registration outlined above. While some steps may vary depending on the different business lines and legal entity, getting a broad view of the process will put you in control of the endeavor. Our Viettonkin FDI specialists are ready to assist you all the way through the process of company incorporation in Vietnam.
When setting up a manufacturing business in Vietnam, investors need to consider a lot of factors and conduct profound researches on locations in which the factory will establish. No matter who you are, what your nationality is, understanding clearly about regulations and procedures of setting up a manufacturing business in Vietnam is certainly important.
This article today will provide you with must-know regulations and procedures for establishing a manufacturing business in Vietnam.
Regulations of setting up a manufacturing business in Vietnam
Four fundamental regulations mentioned in this sub-part are minimal capital requirements, special requirements, tax reporting, and resident director.
There are many types of land usage rights; nevertheless, under current law, foreigners are entitled to retain a land-use certificate for only 50 years, while locals can have one indefinitely.
Third, tax reporting. When you own a business, you need to have a tax report. The tax report of a business should include the following types of tax: corporate income tax, business license tax, value-added tax, foreign contractors without holding tax, and some other taxes namely specific sales tax, export and import duties, natural resources tax, property tax, and registration fee.
3. Other forms of investment such as participating in contractual business forms of buying stakes of an existing enterprise.
These options are available for several corporate forms such as Limited-Liability company; Joint-stock company; Partnership; Business cooperation contract; and Public-Private Partnership Contract.
Registration process
As Vietnam requires multiple layers of restriction, the verification and review procedure to form a business in Vietnam might be more complex than the US or Singapore.
-The first step is applying for licensing to establish a foreign company
-Then, foreign investors must register their investment with licensing authorities through two steps: obtain the Investment Registration Certificate (IRC) and obtain Enterprise Registration Certificate (ERC)
Required documents
Business owners should prepare the following documents:
- A request for implementation of the investment project;
- A copy of ID card,
- Passport or business certificate of registration;
- A proposal of the project's investment;
- Demand for land use,
- Explanation of technology application
Engrave the seal
After receiving IRC and ERC, the company needs to engrave the seal and apply for the company's seal specimen.
Publicize the company establishment on a national information portal
Investors are required to provide the authorities with fundamental information regarding the company's profile. Such information is essential for validations and verifications. Investors have to provide the registered name of the company, business address of the company, charter capital or investment capital of the intended company as well as the registered business lines.
Furthermore, investors are also obliged to justify the company business location by providing the following documents:
Factors to be considered in deciding the ideal location for manufacturing
When considering the best location to set up a manufacturing business, the following factors are important aspects that can signify the long-term business plan. Four factors that should be considered are infrastructure development, labor, incentives, and types of industries.
Infrastructure development
When it comes to infrastructure development, business owners can reckon whether the location is suitable for supply chain infrastructure, logistics, and access to customer markets. The location of the manufacturing business has connectivity with the global supply chain.
The business owner should also consider the labor force when choosing a location. Each region in Vietnam has different minimum wage range. Vietnam's key attraction to foreign investors is the low cost of labor. The minimum wage is ranged from US$125 to US$180 per month, varied by regions. Major cities such as Hanoi or HCMC demand higher minimum wage compared to Vinh Phuc, Phu Tho or Bac Giang. In addition, industrial workers and managers are expected to earn from $US500 to $US 180 on a monthly basis.
According to a report published by Vietnam Briefing about “Vietnam’s key regions and economic zone”, the Northern labor force also has a competitive advantage in terms of qualification. Cities in the North such as Hai Phong or Ha Noi have an abundant supply of qualified workers. As the talent pools are more focused on heavy industry and natural resources than other regions in the Central and South Vietnam.
Whereas regions in the Central such as Da Nang, Quang Nam, Quang Binh have more scared talent resources compared to the North and the South, since workers in technical fields often find greater opportunities in the other two regions, making it challenging to find the right workers in the Central.
While Ho Chi Minh City (HCMC) has an ample talent pool, the environment between employers for talent is highly competitive. As such, the Turnover rate might result in significant delays for companies that seek to initiate production.
Incentives
Preferential tax rates are also available in several industrial zones in Vietnam, which are determined on a zone-by-zone basis and can be extended to both personal and corporate rates. This enables investors to offset the higher wages and rental fees that are often found in these areas. The Vietnamese emerging market has been quietly undergoing one of the most competitive tax regimes throughout Southeast Asia, a standout feature of Vietnam's tax regime. Specifically, there are three forms of incentives that are available to operate companies:
1. Reduction or exemption of import tax on goods imported as fixed assets on raw materials
2. Application of lower rate of corporate income tax, which is currently levied at a rate of 20 percent on locally sourced profits
3. Exemption of land rents.
Notably, Land Rental Incentives are also applied depends on the scale on condition of one's project. According to the Land Law 2013, the government allows up to the whole rental period for the project that invests in especially encouraged investment sectors. Moreover, mega-projects that having total capital of at least VND 6,000 billion in especially encouraged investment sector also benefited from the exemption.
Types of industry
Foreign Investment Enterprises (FIEs) should compare if the geographic location's elements are aligned with the company's purpose and distinct features. This process requires careful weighing the advantages and disadvantages of different locations.
Options can be narrowed down by geographical concentration of industries as some regions host more enterprises from a specific industry than others do (see infographic above). Representing some of Vietnam’s main export sectors, garment and textile manufacturing are concentrated in both north and south Vietnam, while footwear and furniture manufacturing are both concentrated in south Vietnam.
The north is arguably the better choice for an enterprise importing input goods from China, while the south has the advantage of being near the largest commercial port in Vietnam. Proximity to key destinations such as airports, seaports, major cities, main highways, and borders are also important. As some regions are specialized in a specific industry than others do, the options can be narrowed down by geographical concentration of industries.
While the garment and textile manufacturing are populated in both the North and the South, footwear and furniture manufacturing are concentrated in South Vietnam. On the other hand, the North is evidently a wiser choice for firms that import goods from China as input as the region is consistently in need of machinery and capital to facilitate the heavy industry and natural resources.
In conclusion, the three most significant points to open a manufacturing business are fundamental regulations of setting up a manufacturing business, steps to set up a manufacturing business and categories to be considered to set up a manufacturing business. Vietnam is trying to become an ASEAN hub to attract more foreign investors to create more projects in Việt Nam.
Hope that the article provides you helpful insights so that you can make a wise decision when setting up a manufacturing business in Vietnam. If you need any help for incorporating a company, we're ready to help you.
Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.
Download the eBook now to gain expert insights into successfully navigating Vietnam’s dynamic investment landscape!
Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.
Download the eBook now to gain expert insights into successfully navigating Vietnam’s dynamic investment landscape!
Founded in 2009, Viettonkin Consulting is a multi-disciplinary group of consulting firms headquartered in Hanoi, Vietnam with offices in Ho Chi Minh City, Jakarta, Bangkok, Singapore, and Hong Kong and a strong presence through strategic alliances throughout Southeast Asia. Our firm’s guiding mission is aimed towards facilitating intra-ASEAN investments and connecting investors in Southeast Asia with the rest of the world, thus promoting international business relationships and strengthening inter-nation connections.
