Sources: Booklet Doing business in Vietnam and Thomson Reuters
Beginning an investment initiative in a foreign country requires a thorough understanding of its regulatory framework. In Vietnam, a comprehensive grasp of the regulatory landscape is necessary for prosperous endeavors.
This section provides a succinct overview, revealing the fundamental aspects that foreign investors must acknowledge for company registration in Vietnam. While it may not be overly complex, there are guidelines that investors must be aware of. Let’s delve deeper into these regulations within this article.
Establishment of a Foreign-Invested Company in Vietnam
Foreign investors have the option conduct business activities in Vietnam by establishing and operating a corporate entity within the country. The choice of corporate structure will vary based on factors such as the number of investors involved, project scale, industry sector, desired level of governance complexity, and other relevant considerations.
How does the incorporation process look like?
Form of a foreign-invested company (FIC): which types of entities are recommended?
1. Limited Liability Company – LLC
a. Single – SLLC
A SLLC is a company owned by a single organization or a single individual, considered as a separate legal entity from its owner. Details include:
- The company owner is liable for all debts and other property obligations of the SLLC to the extent of the amount of charter capital of the SLLC.
- A SLLC can’t issue shares, except for a process called equitization. Plus, it does have the ability to issue corporate bonds.
b) Multiple – MLLC
A MLLC is a company with two or more members being an organization or an individual. It cannot have more than 50 members. Details include:
- A member is liable for the debts and other property obligations of the MLLC to the extent of the amount of capital contributed to the MLLC.
- Similar to the SLLC, the MLLC cannot issue shares. It cannot issue corporate bonds, except for equitization.
2. Joint Stock Company – JSC
The JSC is a Vietnamese structure in where the initial capital is equally distributed into units known as shares. Details include:
- Shareholders from a JSC can be entities or individuals, with a minimum requirement of three shareholders and no limit on the maximum number allowed.
- A shareholder is liable for the debts and other property obligations of the JSC to the extent of the amount of capital contributed to the JSC.
- Unlike the SLLC and MLLC, a JSC can issue corporate bonds and can be listed on stock exchanges within Vietnam.
There are two other possible entities, but they present a higher risk for foreign businesses. They include the two following ones:
Partnership
Establishing a partnership in Vietnam is a favored choice among foreign investors and business proprietors as a business structure. A partnership, requiring at least two co-owners, allows both parties to engage in business operations under a unified business identity. There are two types of partnerships in Vietnam: general and limited. General partners must be individuals and cannot hold similar roles in other companies without mutual consent. Partners in both types of partnerships are financially liable for the partnership’s debts and contributions.
Private Enterprise
Vietnam allows 100% foreign ownership of a business for most sectors.
Which requirements to set up your company?
Despite being an attractive investment destination for foreign investors, Vietnam’s company establishment process entails complexity. Professional assistance is recommended to effectively navigate the numerous steps, laws, and procedures involved. In order to set up your business in Vietnam, make sure you tick the following boxes:
- Clarify your business lines and activities
- Check the capital and proposed scale
- Get a company address
- Confirm the management structure
- Check and reserve a Vietnamese company name
Procedures and key conditions for establishment of the FIC
What are the different stages for establishing a FIC?
1. Pre-investment approval
- For some types of investment, companies need to get approval on investment policy (the “Investment Policy Approval”) for their Investment Project.
- An Investment Policy Approval would be typically issued by the provincial People’s Committee where the location for implementation of the Investment Project is located.
2. Application for Investment Registration Certificate (the “IRC”)
- The IRC is issued by the Department of Planning and Investment (the “DPI”) or the management board of the industrial zone, export processing zone, or economic zone of the province where the location for implementation of the Investment Project is located.
- The regulatory time frame to obtain an IRC is 15 days by the date of receiving a valid application dossier by the licensing authority.
3. Application for Enterprise Registration Certificate (the “ERC”)
- The ERC is issued by the Business Registration Office under the DPI.
- The regulatory time frame to obtain an ERC is 3 working days from the date of receipt of a valid application dossier by the licensing authority.
4. Post-Licensing Procedures
- Once the IRC and ERC have been issued, additional steps must be taken to complete the procedure and start business operations. This includes:
- Making corporate seal;
- Bank account opening (including direct investment capital account);
- Payment of the charter capital within 90 days from the issuance date of the ERC;
- Annual business license tax payment (around 90 USD);
- Etc.
General tax regime applicable to FICs & foreign contractors in Vietnam
Vietnam has established active Double Tax Agreements with 80 countries and territories. In February 2022, Vietnam signed the Multilateral Convention aiming at implementing measures related to tax treaties, designed to prevent base erosion and profit shifting.
To conclude, registering your company in Vietnam requires to be aware of the specificities of the Vietnamese regulations. Whether you want to set up an LLC (Single or Multiple), a JSC or want to enter the market through a partnership or private company, you must be able to answer different requirements.
Now that you know the process and specificities to setting up your company in Vietnam, what are you waiting for? Reach us out at hello@sourceofasia and we will support you on every step of your journey.