Setting up a Vietnam construction company involves obtaining proper licensing, navigating legal requirements, and understanding local employment laws. In this article, we will provide you with the necessary details to help you establish and operate your construction company in Vietnam in compliance with local laws.
Overview of the Construction Industry in Vietnam
The construction industry in Vietnam is estimated to reach USD 102.20 billion by 2028 with a growing CAGR rate of 8.10% from 2024 to 2028. Currently, the construction industry in Vietnam is segmented into 5 sections, each overseeing different construction activities and projects as follows:
- Residential Construction: Building new residential projects, renovating existing housing, and developing new social housing units. These include apartments, residential houses, and social housing.
- Commercial Construction: Construction of commercial buildings like offices, retail space, hotels, and other leisure or hospitality facilities to meet growing demand from businesses and consumers.
- Industrial Construction: Construction of industrial facilities which include warehouses, manufacturing plants, and industrial parks.
- Infrastructure Construction: Development and construction of transport infrastructure like upgrading roads, highways, bridges, airports, and metro lines.
- Energy and Utilities Construction: Construction of energy-related infrastructure like building power plants, renewable energy facilities, and utilities infrastructure.
Types of Legal Entities for Setting Up A Construction Company in Vietnam
When it comes to setting up a construction company in Vietnam, there are two types of legal entities that foreign investors prefer, as they both allow for 100% foreign ownership:
Limited Liability Company
This is the most popular legal entity structure for foreign investors in Vietnam as it provides limited liability protection to its members based on their capital contribution to the company. There are two types of Limited Liability Companies:
- Single Member LLC (LLC1) for single ownership of the company.
- Multi-Member LLC (LLC2) for companies with 2 or more members, providing more flexibility in management and ownership.
Joint-Stock Company
A Joint-Stock Company (JSC) allows for a larger number of shareholders and is suitable for large-scale operations. Foreign-owned JSCs within the construction industry will usually have to employ local subcontractors or get into a joint venture with Vietnamese contractors when undertaking projects. The only exception to this is if these contractors are proven to not be qualified to execute the tasks as required.
Mandatory Licenses for Vietnamese Construction Companies
Licenses and Permits Required for a Construction Company in Vietnam
To legally operate your construction business in Vietnam, certain licenses and permits are mandatory to obtain in line with local laws and regulations regarding construction and business. These licensing requirements are as follows:
- Investment Registration Certificate (IRC): Required for construction projects that involve foreign investment, foreigners who want to establish a company in Vietnam or foreigners who want to form a joint venture with companies in Vietnam.
- Enterprise Registration Certificate (ERC): Essential for a company to be recognized as a legal entity in Vietnam.
- Construction Operation License (COL): Crucial for foreign contractors to conduct construction activities in Vietnam, issued by the Ministry of Construction.
- Construction Practicing License: Mandatory for those holding special positions within the company which includes construction investment project managers, construction planning design managers, construction survey managers, etc. There are 3 ranks for this license, depending on experience and qualifications.
- Certificate of Eligibility for Construction Activities: Allows you to participate in construction projects. This license is broken down into three tiers which affect the project classification that you can participate in as detailed below:
| Tier | Project Classification | Experience & Qualifications | Issuing Authority |
|---|---|---|---|
| Rank I | Class I, Special Class (Large-scale, complex projects) | - Must have completed at least one Rank I or two Rank II projects of the same type. - Employ qualified and certified individuals. | Ministry of Construction and its supporting authorities |
| Rank II | Class II (Moderately complex projects) | - Must have completed at least one Rank II or two Rank III projects of the same type. - Meet financial, employment, and workforce requirements. | Department of Construction or socio-professional organizations |
| Rank III | Class III (Small-scale, less complex projects) | - Can be issued to new companies without prior experience in construction projects in Vietnam. - Meet basic financial, workforce, and employment requirements. | Department of Construction or socio-professional organizations |
Legal Requirements for Vietnamese Construction Companies
To legally establish your construction company in Vietnam, you must comply with the mandatory legal requirements established by the Ministry of Construction and its supporting agencies. Non-compliance with these requirements may lead to heavy penalties, operational suspensions, and potential legal action:-
- Set Up Executive Office: After obtaining a COL, foreign contractors must set up a temporary executive office at the project location. This will only exist during the duration of the project.
- Comply with Vietnamese Law and International Treaties: Foreign contractors will have to abide by Vietnamese laws. These relate to labor, tax, environmental protection, and construction compliances.
- Meet Minimum Competency Requirements: Foreign companies and contractors must meet minimum competency requirements as outlined by their home countries. This includes having legal capacity and civil legal capacity for engaging in contractual agreements.
- Tax and Labor Obligations: Foreign contractors and companies must register and pay taxes as mandated by Vietnamese law.
- Building Information Modeling (BIM): In 2023, BIM is mandatory for all Class I or special class projects (those funded by public investments, Public-Private Partnerships, etc.). In 2025, BIM will be mandatory for projects within Class II and above. BIM is a shared digital representation of a built asset to facilitate its design, construction, and operations.
Requirements for Employers Hiring Construction Workers
Employers must obtain a work permit from a legal Vietnamese authority like The Ministry of Labor, Invalids and Social Affairs, or the Provincial/Municipal Department of Labor, Invalids and Social Affairs.
Before hiring, employers must explain their labor demands to their workers and obtain written approval from the local authorities. The labor demands should include details on the job position, necessary qualifications, skills, and employment period.
Additionally, you can only employ foreign workers for positions that Vietnamese workers cannot fulfill. This includes managerial, specialist, and technical roles among others. We have an in-depth related article if you want more information on hiring foreign workers in Vietnam.
Set Up Your Vietnam Construction Company with Emerhub
Setting up a construction company in Vietnam requires you to have a thorough understanding of local regulations and other requirements to stay compliant with laws and regulations. Therefore, it is advisable to partner with local experts such as Emerhub who will prepare necessary documents and handle the entire company registration process on your behalf.
Our local experts will assist you in obtaining the key licenses and permits as per your planned business activities. We will ensure you remain compliant with local laws and regulations, including obtaining work permits and filing taxes.
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