Vietnam offers a variety of business types and corporate structures to accommodate overseas companies formation in Vietnam. The following are the most commonly chosen options for foreign investors when registering a business in Vietnam.
Wholly foreign-owned limited liability company (LLC)
The preferred choice for most foreign investors in Vietnam is to establish a Limited Liability Company (LLC). The process of forming an LLC is known for its simplicity and minimal paperwork. Vietnam allows 100% foreign ownership of LLCs in various industries, including consulting, trading, manufacturing, IT, F&B, FMCG, and education.
In certain sectors like logistics, transportation, media, and advertising, foreign ownership is restricted to between 51% and 99%. However, it is still possible to establish an LLC in these industries by entering into a joint venture with a local company operating in the same sector. This joint venture can be facilitated through nominee ownership arrangements.
Requirements for setting up a limited liability company in Vietnam
In Vietnam, a Limited Liability Company (LLC) can be established with a single owner or multiple shareholders of any nationality, with a maximum of 50 shareholders. The fundamental requirements for forming an LLC include:
1. Business Address: During the business setup phase in Vietnam, many businesses allow the use of a virtual office as their primary business address. However, some conditional businesses with specific location requirements may not permit this. Using a residential address, such as a house or apartment, is not allowed as a business address.
2. Resident Director: An LLC can have multiple directors (legal representatives), and these director positions may or may not be held by the owners of the company. The owner of the company can also serve as its legal representative or appoint someone else to fulfill this role. However, there is one essential condition: at least one director must reside in Vietnam. This requirement has caused issues for some foreign-owned companies during the registration process, but it is achievable.
3. Capital Investment: Investors are not obligated to contribute any funds upfront during the initial registration process. Capital can be injected once the company registration is completed, and there is a 90-day timeline for this capital commitment. Failing to meet this deadline may result in penalties, and in the worst-case scenario, the company may be forced to close.
Apart from these basic requirements applicable to all businesses, specific industries or business lines may have additional registration prerequisites. If you are unsure whether your intended business is subject to any extra requirements, please contact Iris International for guidance.
Joint venture
A joint venture company in Vietnam is a limited liability company that involves partial ownership by a foreign entity. It is a business arrangement formed between a Vietnamese company and a foreign investor, often due to government requirements in specific industries. Joint ventures are mandated in certain sectors, including:
- Advertising
- Agriculture and forestry
- Electronic games businesses
- Storage services
- Tourism
- Transportation services
- Advertising, Media, and Digital Marketing
Foreign investment in these sectors is subject to government regulations, and ownership percentages may range from a maximum of 49% to 99%. Some investors opt for joint ventures to leverage the expertise of a local partner or to access their partner’s resources, connections, or distribution channels. If you need assistance in finding a suitable local partner for your venture, please contact us, and we can help facilitate the arrangement.
Requirements for setting up a joint venture in Vietnam
Joint venture companies in Vietnam must adhere to several requirements and procedures, including:
- Appointing a resident legal representative.
- Opening a capital account with a bank in Vietnam.
- Obtaining approval for a foreign investment certificate.
- Providing a bank certificate of deposit equivalent to the share capital within three months of incorporation.
Additionally, joint venture companies may be subject to higher share capital requirements and longer processing times for license issuance. They are also required to maintain a registered address in Vietnam and submit annual audited financial statements and an annual return as part of the license renewal process. These obligations ensure compliance with Vietnamese regulations for overseas joint venture businesses.
Free zone company
Typically, a free zone company could be a suitable choice for businesses intending to mainly manufacture and export their goods. This type of company is established in collaboration with an industrial park or a special economic zone following government approval. Eligible projects often come with tax advantages. The criteria for establishing a free zone company in Vietnam vary depending on the particular project and often include a minimum capital investment of at least USD 200,000 and the creation of a specified number of jobs within Vietnam.
Public limited company
Indeed, a public limited company can be a more suitable choice if a foreigner intends to establish a business with multiple partners or intends to finance the business through equity issuance. To form this type of business, a minimum of three shareholders of any nationality is required. Moreover, the company established in Vietnam must appoint at least one resident director to serve as its legal representative.
Furthermore, this category of company needs to fulfill the same requirements as the other types of limited companies mentioned earlier. This includes opening a capital bank account in Vietnam, obtaining a bank certificate confirming the availability of funds for investment in Vietnam, acquiring a foreign investment certificate, and submitting annual financial statements and an annual return for license renewal. If a public limited company plans to go public, it must have a share capital exceeding USD 475,000, provided that the company has been profitable in the preceding year.
Nominee company
To put it succinctly, a nominee company in Vietnam is a local limited liability company where a local nominee is appointed as the sole shareholder. This business structure is usually set up to lower capital requirements or to offer services and products in sectors that are not accessible to foreign ownership.
Branch office
Alternatively, Vietnamese law permits foreign companies operating in specific sectors to establish branch offices in the country, provided they have engaged in business activities abroad for at least five years.
These branch offices must designate a resident representative and submit annual financial statements. This approach may be advisable to facilitate licensing procedures in particular industries, such as banking, finance, and insurance.
Representative office
A representative office can be found in Vietnam to establish a local presence without being subject to local tax regulations. Representative offices have minimal reporting requirements.
However, they are not permitted to engage in trading or manufacturing activities. Instead, they can conduct market research and promote the parent company’s business. This option is available to businesses that have been conducting activities for at least one year.
Company setup with Iris International
At Iris International, we offer professional incorporation services in Vietnam to help you choose the most suitable type of entity for your business model. We can assist with all the essential steps in establishing your company and oversee the registration process until your legal entity is officially approved. Our services provide numerous benefits to our clients, including:
Expertise: Our consultants are well-versed in various types of businesses in Vietnam and the relevant rules and regulations. We help you identify and mitigate potential risks.
Strategy: Iris International assists you in identifying the most cost-effective approach to establish and manage your business.
Knowledge: Our expert team possesses in-depth knowledge of minimum capital requirements, labor contract regulations, immigration laws, and other legal and financial aspects that may impact your business. We provide you with crucial information to make informed decisions about your business’s future.
Once your company is established, we offer additional business services to support your operations in Vietnam. These services include HR and recruitment, EOR and payroll services, administrative assistance, tax compliance, and more. With our assistance, your company can seamlessly transition into the Vietnamese market.
Contact us for more information.
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