Vietnam, the third largest market in Southeast Asia, provides countless opportunities to foreign investors. What are the fundamental things you need to know about company registration in Vietnam?
In this article, we are going to walk you through the process of setting up a business in Vietnam.
Overview of legal entities in Vietnam
Watch Kadri Lahi, Emerhub’s Country Manager in Vietnam, give a brief overview of different types of legal entities available to foreign investors in Vietnam:
The two most common legal entity types to set up in Vietnam are a limited liability company (LLC) and a joint-stock company (JSC).
An LLC can have 1 to 50 members who are also known as founders or owners. Take note that LLCs in Vietnam do not have any shareholders.
The alternative to an LLC is to set up a joint-stock company (JSC), also known as a shareholding company. A JSC has 3 to an unlimited number of shareholders.
This article focuses on setting up an LLC in Vietnam. If you would like to know more about JSCs, read our previous article on setting up a joint-stock company in Vietnam.
Requirements for setting up a company in Vietnam
#1 Allowed foreign ownership
The first step of your company registration in Vietnam is to decide what will be your business activities to determine the allowed foreign ownership of the company.
Some business lines such as advertising and tourism, however, require a Vietnamese joint venture partner.
After you know the activities, Emerhub can advise on which is the best business line for your company. Also, whether it is possible to set up your company as 100% foreign-owned or you need to establish a joint venture in Vietnam.
Foreign ownership regulations in Vietnam
In Vietnam, the World Trade Organization (WTO) agreements regulate the allowed foreign ownership in different business lines.
However, if there are no WTO agreements nor local laws regulating foreign ownership in that business line, you will need a Ministry-level approval to set up your company.
#2 Minimum capital requirement
In general, there is no minimum capital requirement in Vietnam. However, the capital you contribute should reflect the activities of the company.
Receiving approval from the Department of Planning and Investment depends on whether your minimum capital contribution complies with your actual planned expenses or not.
From our experience, it is possible to set up a service company with a minimum capital of USD 3,000. For manufacturing, the funds should exceed the cost of machinery.
The most common amount of minimum capital in Vietnam is USD 10,000. This amount is relatively small compared to other similar markets. In Indonesia, for example, the minimum amount of paid-up capital is ~USD 175,000.
There are also some business lines in Vietnam that have a minimum capital requirement. Some of these business lines are:
- Language centers
- Vocational schools
- Real estate companies
Find more information about the minimum capital requirement in Vietnam in our previous article.
#3 Registered address
To incorporate a company in Vietnam, you will need a registered address for your business.
Service-based businesses can use a virtual office for the registration purposes. Manufacturing companies or companies which require a retail or business space for conducting their activities, on the other hand, need a physical business location in Vietnam.
In some cases, the Department of Planning and Investment will check it before the incorporation. It is sufficient to present a memorandum of understanding (MOU) or an offer letter stating that the founder will use the premises for conducting the company’s activities once it is set up.
#4 Resident director
All companies in Vietnam require at least one resident director. The appointed director doesn’t have to have residency status at the time of incorporation. However, they need a residential address in Vietnam.
All landlords must register foreign nationals leasing their premises with the police. If the director is also a founder, he or she will not require a work permit. If the director is not a founder and is a foreign national, he or she will need a work permit in Vietnam.
The step-by-step process of company registration in Vietnam
All foreign-owned companies must follow the below procedure for incorporation.
#1 Investment license
The first step of any foreign-owned company registration in Vietnam is to obtain an Investment Registration Certificate from the Department of Planning and Investment (DPI).
In general, it takes up to one month to receive it.
However, if your business line does not fall under any WTO commitments or no local laws regulate foreign investment in that business line, the timeline will be significantly longer since the DPI will have to ask for a Ministry-level approval.
#2 Business registration certificate
The second step is to acquire a Business Registration Certificate (BRC), also known as the Enterprise Registration Certificate (ERC).
Generally, it takes up to one week to receive a BRC/ERC.
#3 Tax registration and payment of the business license tax
The next thing you need to do after obtaining the Business Registration Certificate is to complete tax registration at the local tax department.
In Vietnam, businesses also need to pay an annual business license tax which is ~USD 90.
Keep in mind that you have 30 days from receiving the BRC/ERC to complete the tax registration and pay the business license tax.
#4 Capital contribution
Once you have received the Business Registration Certificate,/Enterprise Registration Certificate you have 90 days to make the initial capital contribution.
#5 Apply for sub-licenses, if applicable
Some business lines such as manufacturing, lodging, and trading also require additional licenses which will extend the process.
#6 Follow-up activities
The last step of company registration in Vietnam after other permits are in place is to complete the follow-up activities.
For example, trading companies may need to complete product registration which can take from 10 days to 4 months.
FAQs about company registration in Vietnam
Is the company registration process different if I have a local partner?
No, unless the local owns 100% of the company. If your company has any foreign ownership, the procedure is the same as if the company were 100% foreign-owned.
How long does it take to register a company in Vietnam?
If your company does not have any special conditions, the registration process will approximately take one month.
If your company needs additional licenses, such as for trading or tourism activities, the timeline of the process can stretch to three or four months.
What does the founder need to prepare?
To start your company registration in Vietnam, you will first need to prepare founders’ documents, including the proof of finances.
Depending on whether the founder is an individual or a company, the list of documents is different.
Individual founders require a notarized passport copy and a bank statement with their name on it.
Corporate founders, on the other hand, require:
- Incorporation certificate
- Articles of association
- List of directors
- Two years of annual financial statements or a bank statement if you registered the company less than two years ago
Take note that you need to notarize and legalize all documents in the issuing country if issued abroad.
Corporate compliance in Vietnam
In addition to the standard accounting and tax reporting compliance in Vietnam, you must pay the annual business license tax which is ~USD 90. Furthermore, you also need to get your yearly accounts audited.
Read our previous article on corporate compliance in Vietnam to see the one-year compliance cycle of companies in Vietnam.
Setting up a local nominee company in Vietnam
An alternative to setting up a foreign company is to set up a local nominee company instead. One of the main reasons why investors opt for a nominee company is that their chosen business line does not allow full or any foreign ownership.
Only make sure you use a trustworthy partner as trusting an unreliable nominee is one of the seven common mistakes foreign investors make when establishing a legal entity in Vietnam.
Another reason to set up a nominee company is when you don’t want to wait for several weeks to set up a foreign company in Vietnam.
The process of setting up a local company in Vietnam takes up to one week. At the same time, you can also start the process of registering a foreign-owned company and merge the two companies once the foreign-owned company is in full compliance.
A nominee company can be an alternative to, for example, trading companies since locally-owned trading companies do not require a trading license in Vietnam which can take up to 12 weeks to obtain.
Outsourced operations model – alternative to company registration in Vietnam
If you are not confident whether to invest in Vietnam, you can also test the market first by outsourcing different services.
Outsourcing is a lean market entry strategy that enables you to have market penetration without incorporating a legal entity here.
Some of our primary services include:
What you will get
Employees who will be on Emerhub’s payroll but working for you
Import products to Vietnam using Emerhub’s licenses
Billing and collection
Invoice clients in Vietnam through Emerhub
Get in touch with our consultants via the form below to get more information about these services.
Ready to register a company in Vietnam?
Drop us a message in the form below, and our consultants will gladly assist you with your company registration in Vietnam.