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Get the inside scoop on how to successfully enter the Vietnamese market.
Vietnam, a Southeast Asian country with a population of over 96 million people, is one of the world’s fastest-growing economies. In the last 30 years, the country has made significant progress in terms of economic development, thanks to a series of economic and political reforms that began in 1986.
In the 16 years from 2002 to 2018, Vietnam’s GDP per capita increased significantly, from less than US$1,000 to over US$2,700. This economic growth helped to lift more than 45 million people out of poverty, reducing the poverty rate from over 70% to less than 6% (US$3.2/day PPP). However, ethnic minorities remain disproportionately affected by poverty, making up 86% of Vietnam’s remaining poor.
Vietnam’s accession to the World Trade Organization (WTO) in 2007, becoming its 150th member, opened up the country to foreign investment and trade, and the thriving economy has made company formation in Vietnam an attractive option for foreign businesses.
Investors and entrepreneurs who want to enter the Vietnamese market should be prepared for some challenges, especially when it comes to regulations and licensing. However, these challenges can be overcome by educating yourself about the process of incorporating offshore companies in Vietnam. Iris International is here to help you with this by providing information and guidance.
Here are the topics that investors should check before starting a business formation process in Vietnam:
- Conditions for the intended business.
- Company type and corporate structure.
- Business location.
- Capital investment.
- Timeline of incorporation.
- Taxation and business compliance.
- Laws for business operation.
- Permits for non-Vietnamese employee(s) if any.
Let’s discuss each of these topics in more detail.
Conditions For The Intended Business
The first step in offshore company registration in Vietnam is to check if your intended business is allowed to operate in the country. You also need to check if foreign investment is allowed in that particular business.
Vietnam has a Negative List that clearly specifies which businesses are permitted and not permitted for private investment. You can easily check this. If the business description is mentioned in Vietnam’s WTO commitment, it means that it is also open to foreign ownership.
In addition to checking the Negative List, investors should also check the specific conditions for the establishment of each business they wish to start. A new decree that went into effect in 2021 imposes additional requirements on a few conditional businesses, such as minimum capital, maximum foreign ownership allowed, the qualifications and credentials of the business founder or manager, and so on.
Iris International can help you understand the specific requirements for your desired business. Our consultants are happy to provide a free consultation to help you get started.
Company Type And Corporate Structure
There are a number of entity forms available, including Limited Liability Companies (LLCs), Joint Stock Companies, etc. However, the most popular company type in Vietnam is the LLC.
An LLC can be a single-member or multiple-member company, with a maximum of 50 shareholders. Some conditional businesses, such as advertising, digital marketing, logistics, etc., require a joint venture with a local partner.
Iris International can advise you on the most appropriate business structure for your business plan and local regulations.
Business Location
Most new businesses choose to set up in Ho Chi Minh City, Vietnam’s largest city and economic center. Hanoi (the capital city) and Da Nang are also popular business destinations.
Even within Ho Chi Minh City, it is important to decide where to set your business address. Do you prefer the convenience of the city center? Or would you rather be located in a high-tech park or industrial zone?
Our experienced consultants can explain the differences between each location and help you find the perfect spot for your business.
Capital Investment
The minimum capital required to establish a company in Vietnam is subject to the approval of the Department of Planning and Investment (DPI). The DPI will consider the business plan and financial projections to determine whether the proposed capital is sufficient.
For most businesses, there is no law that specifies a minimum capital requirement (unless a few of conditional ones). However, foreign-owned companies are generally advised to have a minimum capital of USD10,000. If the business plan is not financially feasible, the DPI will reject the application.
Iris International can help you assess the minimum capital requirements for your business and prepare a business plan that is likely to be approved by the DPI.
Timeline Of Incorporation
The timeline for company formation in Vietnam can vary depending on the type and scale of the business. For less complicated businesses, the process can take around 45 working days. For more complicated businesses, such as headhunting and education, the process can take 90 working days or longer. The timeline can also be longer if there are multiple government authorities involved in the approval process.
Iris International’s legal team is familiar with the company formation process in Vietnam and can help you navigate the process and ensure that your company is formed as quickly as possible.
Taxation And Business Compliance
The most common business taxes in Vietnam are corporate income tax (CIT), import and export tax, value-added tax (VAT), and personal income tax (PIT). The current CIT rate is 20%, export tax is 0% (except in rare cases), import tax varies depending on the duty charge, VAT is mostly 10%, and personal income tax varies depending on income level (from 5% to 35%).
Our tax/accounting team is ready to help you understand and navigate the taxation process in Vietnam. Contact us today to place your inquiry today.
Laws For Business Operation
Once a company is established in Vietnam, it needs to comply with the country’s business laws and regulations. This includes filing periodic tax reports and meeting deadlines, as well as complying with labor laws, the specific laws and regulations that a company must follow will vary depending on the industry in which it operates. For example, construction companies must comply with different laws than education companies.
By understanding the relevant laws and regulations, companies can avoid penalties and ensure that they are operating in a compliant manner.
Permits For Non-Vietnamese Employee(s) If Any
If a company in Vietnam hires a non-Vietnamese citizen, regardless of their position, including the CEO or Legal Representative, the company must obtain a work permit for the employee.
The work permit application process can take up to 2-3 months and requires some paperwork. However, Iris International can help make this process as easy and simple as possible.
Easy Company Setup In Vietnam With Iris International
Iris International offers comprehensive business consulting services to help you succeed in Vietnam.
Our team of experienced consultants can help you with everything from accounting and human resources to offshore business setup in Vietnam and PEO outsourcing. We also offer free initial advice on setting up your business or company in Vietnam.
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