How to Open a Business in Vietnam

Vietnam’s booming economy, with a young population exceeding 87 million, makes it an attractive destination for expat entrepreneurs. The country has transitioned from a centrally planned economy to a market-oriented one, boasting strong foreign direct investment (FDI) and a focus on export-oriented manufacturing.

Types of Business Entities to Choose

When entering the Vietnamese market, you can choose from several business structures, each with its own advantages and limitations:

  • Limited Liability Company (LLC): The most popular option for foreign investors, offering limited liability protection for its members. Requires at least one member (can be foreign) and a minimum charter capital of VND 10 million (around $430 USD).
  • Joint Stock Company (JSC): Similar to an LLC but with transferable shares, allowing for easier fundraising. Requires at least three shareholders and a minimum charter capital of VND 3 billion (around $130,000 USD).
  • Representative Office: Not a separate legal entity, but a liaison office for a foreign company. Cannot engage in commercial activities but can conduct market research and promote the parent company’s products or services.
  • Branch Office: A full legal entity established by a foreign company, engaging in commercial activities similar to the parent company. Requires a higher level of investment and operational complexity.
  • Joint Venture (JV): A partnership between a foreign and Vietnamese company, allowing for shared resources and local market knowledge. Profit sharing and management structure are determined by the JV agreement.

Major Legal Requirements for Company Establishment

The legal setup process in Vietnam involves several steps:

  • Investment Registration Certificate (IRC): This initial application requires a business proposal and feasibility study, approved by the Department of Planning and Investment. Processing times can range from 15-45 days.
  • Enterprise Registration Certificate (ERC): Once the IRC is obtained, you can apply for the ERC, officially registering your company. This typically takes around 5-7 business days.
  • Licenses and Permits: Depending on your industry, additional licenses and permits may be required to operate legally. Your legal team can advise you on these specifics.

Tax Payment and Compliance

Vietnam has a corporate income tax rate of 20%, with various tax deductions and incentives available depending on your industry and location. You’ll need to establish tax registration and partner with a Vietnamese accountant to ensure proper tax filing and compliance.

Human Resources and Payroll

Vietnam boasts a large and skilled workforce with competitive labor costs. However, these costs are steadily increasing. You’ll need to comply with Vietnamese labor laws, including minimum wage requirements, social security contributions, and paid leave allowances. Working with a local HR professional can help ensure you navigate these regulations effectively.

Tips for Expats Opening a Business in Vietnam

  • Market Research is Key: Before diving in, ensure your business idea aligns with Vietnamese consumer needs and complies with regulations. Research industry trends and competitor landscapes to identify a niche and avoid surprises.
  • Choose the Right Business Structure: Select the legal entity that best suits your needs. Consider seeking legal advice to understand the pros and cons of each structure.
  • Secure a Physical Location: Having a Vietnamese address is crucial for registration and obtaining licenses. Rental rates can vary by city and size, but expect to pay $20-40 USD per square meter per month in major cities.
  • Understand Tax Obligations: Vietnam has a 20% corporate income tax rate, but tax breaks and incentives may apply. Partner with a Vietnamese accountant to ensure proper tax registration, filing, and compliance.
  • Build a Local Team: Hiring Vietnamese staff provides valuable market knowledge and cultural understanding. Look for local HR professionals to navigate labor laws, minimum wage requirements, and social security contributions.
  • Stay Updated on Regulations: Laws and regulations can change, so stay informed through reputable sources

 

Protect Your Business & Your Team:

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This guide serves as a general starting point. Legal and regulatory details can change, so consulting a qualified lawyer is an essential step in setting up your business in Vietnam.

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