If you are a foreign investor interested in setting up a business in Vietnam, there are several options available.
Here’s an overview of the entity types, requirements, and processes involved in establishing a business in Vietnam, as well as some key considerations to help ensure success.
Choosing the right corporate structure for you
Vietnam permits 100% foreign ownership of a business for most sectors. Before choosing which type of company to open in Vietnam, it is important to consider different aspects of the target entity types, such as differences in structure, legal liability, statutory compliance requirements, time required to establish it, what types of activities it can engage in, and more. These considerations help to identify the appropriate business constraints, costs, requirements, and risks necessary to enable the company’s future targeted capabilities, developments, and growth.
According to Sophie Dao, Senior Partner at GBS – a business registration services firm in Vietnam, there are several types of foreign-invested corporate vehicles in Vietnam, the 3 more common of these are:
- Representative Office: For only market research and coordination, no business activities that yield profit.
- Branch Office: For commercial activity within the parent company’s scope.
- 100% Foreign-Owned Enterprise: For any scope of business, which can be the same or different from the parent company.
Company Set-Up Process
An LLC, or 100% Foreign-Owned Enterprise, generally requires 3 to 4 months to establish in Vietnam. A Representative office can generally be set up in half that time. For LLCs, while some sectors may require a ‘Pre-Investment Approval’, most skip to their service provider directly applying for the required Investment Registration Certificate (IRC), which requires 15 working days unless the sector of intended operation is not governed by the WTO, in which case it may take longer.
With the IRC in hand, an organization may pursue the subsequent steps, including securing a physical business address, applying for an Enterprise Registration Certificate (sometimes referred to as a Business Registration Certificate).
Requirements
Photo: Olivier Ochanine
Minimum Capital Requirements: For most sectors and business lines, Vietnam requires no minimum capital requirements. However, the registered capital will be assessed by The Department of Planning and Investment for whether it is adequate to cover the expenses of the business until it generates enough revenue to cover its costs, usually for the first year or two of operation, based on the calculation of the investors. It is possible to set up a basic business services company with less than USD 10,000 in some cases, but in most cases, it would be at or above this threshold, depending on the nature of the business.
Charter Capital and Total Investment Capital: The total investment capital of the company can combine both charter capital and loan capital. Loan capital, or mobilized capital, covers shareholders’ loans or third-party finance. Charter capital, or contributed capital, together with loan capital must be registered with the license issuing authority of Vietnam. Once approved, investors cannot increase or decrease the charter capital amount without prior approval to make amendments from the local licensing authority.
Capital Contribution Schedules: Capital contribution schedules are set out in foreign-invested enterprise (FIE) charters (articles of association), joint venture contracts and/or business cooperation contracts, in addition to the FIE’s investment certificate. Members and owners of a limited liability company (LLC) must contribute charter capital within the capital contribution schedules set out in these documents and within the contribution timeframes established by the Law on Enterprises.
Post Company Set-Up, What’s Next?
After setting up the FIE, foreign investors need to transfer capital into Vietnam by opening a direct investment capital account (DICA) in a legally licensed bank.
Additionally, a registered address is required for the business to incorporate a company in Vietnam. This address should be a physical location, such as an office or building that is either leased or acquired.
Furthermore, a company is required to have at least one resident director in Vietnam, although it may have more. The resident director must have a residential address in Vietnam, and while residency status is preferable, it is not necessarily a qualifying requirement during the incorporation process and may be addressed separately.
In summary, setting up a business in Vietnam can be a rewarding endeavor, but it requires careful planning and consideration. By understanding the various options for market entry, choosing the structure…
If any support needed to to Set-Up a Business in Vietnam as a Foreign Investor, you may contact GBS – Global Business Services LLC at info@gbs.com.vn | Call, SMS, Viber, WhatsApp, iMessage: +84903189033 or visit GBS’s website: https://gbs.com.vn