Vietnam is located in South-Eastern Asia. Agriculture is the primary activity and the cultivation of rice is the main source of income for most Vietnamese.
Many investors choose Vietnam for their company registration because it offers technological incentives for companies to establish. In this country, there is cheap labour in comparison to other countries. In Vietnam, investors also get benefit from double taxation.
Legal entities in Vietnam: an overview
The most common types of entities in Vietnam are:
- Limited liability company (LLC):
In this type of entity, there are 1 to 50 members which are also known as owners or founders. These companies do not have shareholders.
- Joint-stock company (JSC):
In this type of company, there are 3 minimum shareholders holders and there is no maximum limit.
Requirements/eligibilities for registration of a company in Vietnam
- Foreign ownership regulations in Vietnam:
Vietnam allows 100 percent foreign ownership to most of the businesses related to trading, IT, manufacturing, education. But it sometimes disallows foreign ownerships to some businesses. Most of the foreign ownerships are regulated by World Trade Organizations (WTO) agreements but some of them are neither regulated by WTO nor by local laws. In this case, one needs to take the approval of the ministry involved in work related to industries.
- Minimum capital requirements:
There are no minimum capital requirements for any business line except business related to language centres, vocational schools, real estate companies, banking, insurance, and finance.
The business certificate will show the amount of capital. Change in the capital will lead to a change in documents.
- Registered address:
In Vietnam, servicing companies can provide virtual addresses but businesses related to manufacturing, restaurants, retail trading, etc. One must have to submit a document as proof of address that will show the place where one will incorporate business after registration.
- Resident director:
All companies incorporated in Vietnam must have at least one resident director who is having a residential place whether having residential status or not.
Documents required for registration of a company in Vietnam
- Investment certificate
- Enterprise certificate
- Memorandum of association
- Articles of association
- Business license
- Passport and visa
- Residency information
Steps to the registration of a company in Vietnam
The procedure below shows the process of registration of an LLC company in Vietnam.
- Step1 – investment registration certificate
If a foreign company wants to be incorporated in Vietnam then it requires an investment registration certificate. It is issued by the department of planning and investments. It generally takes a month to issue this certificate but when foreign ownership is neither regulated by WTO nor by the local government then issuance of this certificate will take a longer time. It will take 3 weeks as a statutory time limit.
- Step2 – Business registration certificate-
A business registration certificate is also known as an enterprise registration certificate. This certificate is also issued by the department of planning and investments. Its statutory time limit is 1 week.
- Step3 – Tax registration and payment of the business license tax-
All the companies are required to pay tax online through an online portal and also submit tax declarations and reports. The company’s Tax number is the business license certificate number.
- Step4 – Capital contribution-
After receiving a business registration certificate, one must have to contribute capital within 90 days otherwise he is liable to pay a fine.
- Step5 – Apply for sublicenses or permits, if applicable-
It takes approximately one month to the registration of a company in Vietnam. But in some cases where the company needs to apply for sublicenses can take a longer period.
Compliances for companies in Vietnam
- Board meetings- In the case of a public limited company, it is required to conduct board meetings quarterly.
- Annual general meeting- LLC companies are not required to conduct an annual general meeting but JSC and public limited companies are required to conduct this meeting.
- Tax returns- In Vietnam, corporate tax is 20% whereas the personal tax rate is 35%.
- Foreign investments and business registration have to be notified with relevant authorities. Changes have to be informed to the Department of Planning & Investments.
- Minutes of a board meeting and annual general meeting are kept with the registered office.
- At least one resident legal representative must reside in Vietnam.
- Foreign investment report – These reports include profits, losses, and expenses throughout the year.
- Compliance with employees law – This includes registering employees with social insurance and also making sure that foreign employees must have a permit in Vietnam.
Benefits of company registration in Vietnam
- Cheap labor – The cost of local labor is less as compared to other counties such as China and Indonesia.
- Low rent – In Vietnam, rent rates are lower as compared to other countries. Cost of living and warehouse are at lower cost in Vietnam.
- Supply chain – As Vietnam shares, its boundaries with China. It gains an advantage by establishing a supply chain with China. And also there is easy access to raw materials and capital goods in Vietnam.
- Double taxation agreement – Investors who invest in Vietnam can get advantages of double taxation agreements treaties which Vietnam has with some other countries. So that income of the investor would not be taxed twice.
- World-class infrastructure facilities – In Vietnam, there are more than three economic zones. There are more than 300 industrial parks and three hi-tech parks in Vietnam. This offers world-class infrastructure facilities for companies in Vietnam.
- Trade relations – Vietnam is the largest exporter of goods to the USA. It has developed good relations with the USA and the European Union. It exports locally manufactured goods to these countries.
- Liberalized investments – The government of Vietnam is constantly developing investments policies to liberalize foreign investments in the country. This makes it easy to carry out business in Vietnam by foreign owners. Foreign ownership can also have an ownership percentage in the entity.
Introducing special purpose vehicles to the Vietnamese
In some cases, foreign investors can not invest in business due to foreign ownership restrictions. The Vietnamese government is doubling down on the nominee companies. The government of Vietnam is cracking down on nominee companies. The government will impose heavier sanctions on nominee companies with the new investment law effected from January 2021.
Conducting a business through a special purpose vehicle is a safer alternative. It allows one to protect and control its investment in Vietnam without setting up a company
Representative office in Vietnam
A representative office can act on behalf of a parent company. It can not generate income directly but it can perform activities on behalf of parent companies to support them. It is a way to enter in Vietnam market without incorporating a company.
IRC stands for an investment registration certificate that is issued to foreign investors by the government of Vietnam. It is an electronic document that shows the information related to registered investment projects that foreign investors are involved in through FDI.
No, the registration process of the company in Vietnam is the same for any number of foreign ownerships.
In Vietnam, the government provides many incentives for setting up a company. Foreign ownership is allowed and also LLC is the most prominent business in Vietnam.
Textiles and garments are some of the most popular businesses in Vietnam. Most of the foreign investors make huge profits from this business.
To import goods to Vietnam, one must need an investment license and business registration certificate. There is no other special document required.
Vietnam provides a businessman with many benefits such as cheap labor, low rent, good infrastructure facilities, and other government incentives. It also has good trade relations with many countries. So, it is beneficial to carry on business in Vietnam.