When to Set Up a Local Company in Vietnam Instead of a Foreign Company
Table of contents What is considered a local company in Vietnam?Foreign ownership regulations in VietnamWhy set up a local company in Vietnam?Requirements for local companies in VietnamReady to set up a local company in Vietnam?Vietnam allows full foreign ownership in most business lines. However, in some cases, it would be a strategic decision to set […]
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Vietnam allows full foreign ownership in most business lines. However, in some cases, it would be a strategic decision to set up a local company in Vietnam instead of opting for 100% foreign ownership.
What is a local company in Vietnam, and why consider setting one up? This article will explain the key things you need to know.
In Vietnam, companies that have less than 51% of foreign ownership are considered local companies.
The allowed foreign ownership in most business lines in Vietnam is regulated by the World Trade Organization (WTO) agreements and international treaties. Local laws govern other business lines.
However, some industries are in the grey area, meaning that there are no commitments under international treaties nor local regulations to govern those business lines.
If your business activities fall in the grey area, you will have to gain approval from the relevant Ministry, which can lengthen your company registration process significantly.
Some business lines that don’t have any foreign ownership regulations in place are, for example:
- online teaching
The main benefit of registering a local company in Vietnam is that your business will be registered in Vietnam faster.
All foreign companies must first receive an Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI) before their foreign company can be registered in Vietnam. In general, it takes up to 20 business days to obtain it.
However, if your desired industry falls under the grey area, the process will be notably longer as you will need Ministry-level approval before the IRC is granted. The approval may take several months, if not years.
Companies with less than 51% of foreign ownership, on the other hand, don’t have to obtain the IRC.
Therefore, if you set up a local company in Vietnam, you can apply straight for the Business Registration Certificate (BRC), also known as the Enterprise Registration Certificate (ERC). It will reduce the incorporation time in Vietnam to one week.
Not sure whether Vietnam has any international agreements in place for your business line? Book a complimentary consultation with Emerhub at [email protected] to find it out.
Process of registering a local company in Vietnam
#1 Not more than 51% of foreign ownership
As already mentioned above, local companies in Vietnam cannot have more than 51% of foreign ownership.
Limited liability companies in Vietnam don’t have shares nor shareholders but members. Each member’s liability is limited to the capital contributed, and founders can be individuals as well as companies.
If you don’t have a local partner in Vietnam yet, Emerhub can help you out and provide a nominee. Contact us at [email protected] for more information.
#2 Sublicenses for conditional business lines
As the company still has foreign ownership, it must comply with the conditions set for foreign direct investment (FDI) operation.
In industries that don’t have any special requirements, the company can start operating as soon as it has received the Business Registration Certificate.
It includes industries such as:
- wholesale trading
- software development
However, if the activities of your company fall under a conditional business line, such as retail or education, you must obtain the sublicense that foreign investors must have in that industry.
For example, to operate a retail sales business in Vietnam, fully locally-owned companies don’t need to get a sublicense from the Ministry of Industry and Trade. However, if the company has any foreign investment, it needs to obtain a trading license for retail activities.
#3 No minimum capital requirement
There is no general minimum capital requirement in Vietnam in most industries. However, keep in mind that the capital you inject must comply with your planned business activities.
For example, if you want to open a gym business and plan to build or renovate a building for that, your capital should include the expenses.
#4 Registered address
You will also need a registered address to set up a company in Vietnam. If you have a service-based company, you can use a virtual office.
However, if you’re operating a business that requires a physical location, such as a manufacturing company or retail outlets, you also need to provide a physical address when registering your company.
Emerhub can help you find a business location in Vietnam. Contact us at [email protected] to learn more.
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