The rapid development of the economy and competitive business costs have made Vietnam an attractive location for foreign investors interested in doing business in Southeast Asia. Manufacturing and technology businesses, even service-based businesses, are viewed positively when choosing Vietnam for business expansion purposes.
The set of rules that govern how a foreign business may operate in Vietnam is quite broad, and the registration of a business, will require, among many other things, an understanding of various pathways a business may take in terms of its ownership structure in Vietnam, business licenses, capital, and regulatory frameworks that govern various business sectors. The earlier investors familiarize themselves with these items, the more likely they are to mitigate operational delays.
The objectives of this guide are to help foreign investors understand the processes that govern the incorporation of a business in Vietnam, different business structures, the time and costs associated with the incorporation of a business, the different investment capital requirements of various business structures, and the key considerations an investor should take into account before entering the Vietnam market.
Can Foreign Investors Register a Company in Vietnam?
For the majority of foreign investors, the answer is yes. The Vietnamese market is one of the most economically accessible markets for foreign investors in Southeast Asia, as foreign businesses and individuals are allowed to establish enterprises in most business sectors.
Incorporating a business in Vietnam is, however, a complex process, and the degree of ownership will often dictate the business sector.
For many of the service sector businesses, the software development and manufacturing businesses, as well as sourcing businesses, foreign investors are often allowed to establish businesses that are 100% foreign owned, thereby enabling such foreign investors to have control over the management and day to day operations of the business, as well as control over the strategic direction of the business, without the assistance of a local partner.
There is a lot to unpack regarding conditional or restricted industries in Vietnam regarding foreign investment. Note that education, some financial services, certain retail operations, and some parts of the logistics sector may require special licenses, limit foreign ownership, or limit access to the market. Foreign investors may need to restructure their investment, or more commonly, enter into a joint venture agreement to access the market.
This information is consequential because the ownership structure determines far more than the incorporation of the business. It determines governance, the distribution of profits, future fundraising, and the eventual growth of the business. For many investors, the first important decision is not how to register the business but how to structure the business.
The laws that govern foreign investment in Vietnam are primarily the Law on Investment 2020 and Law on Enterprises 2020. These laws establish which sectors are accessible for foreign investment and the conditions that govern the formation of foreign-invested enterprises.
Most of the difficulties foreign investors experience when registering their business in Vietnam are not because foreign investors are not allowed to enter the market. Most difficulties stem from a lack of understanding of the requirements and choosing an inappropriate business structure for the intended business activities. Knowing the requirements prior to incorporation normally prevents the need to restructure the business after the costly exercise of business registration.
Available Business Structures for Foreign Investors
After confirming their intended business activities are not restricted, foreign investors must then decide on the business structure that will allow them to establish their venture in Vietnam.
The answer depends on the objective of the business. Some businesses are willing to start hiring, signing, and cashing in contracts the moment they establish. Others prefer to test the waters and are more cautious about utilizing resources. Vietnam offers legal structures that cater to varying stages in terms of market entry and growth.
For the majority of foreign investors, the Limited Liability Company (LLC) is the preferred option and for good reason. The LLC strikes a good compromise for the majority of foreign investors, including, manufacturing, sourcing, investors, tech and other service professionals, by being relatively easy to govern and flexible. Besides, an LLC can hire employees, enter contracts, conduct business, and enjoy revenues from business while ensuring that shareholders’ liability is limited to the extent of their contributions.
For more ambitious plans to raise capital, a Joint Stock Company (JSC) may be the preferred option. While a JSC provides limited liability and flexible governance, similar to an LLC, the design of a JSC focuses on accommodating a larger base of shareholders. For companies that intend to pursue expansion and raise capital, the more complex governance structures may be a sufficient trade-off.
There are also other ways of entering the Vietnamese market that may be sufficient for the purpose of many businesses. For example, some companies may start with a representative office. Although a representative office does not allow a company to directly engage in the business and earn income, it enables the company to conduct business and market surveys, establish and promote business contacts and relations, supervise business and work personnel, and get a foothold and presence in the country. For many businesses that are still assessing the feasibility and opportunity in Vietnam, it is a way to enter the market at a lower level of commitment.
While branch offices are similar to rep offices, they are only permitted in certain industries and under certain regulations. Some businesses may not be able to open a branch at all based on the parent company’s business scope. However, unlike a rep office, branches may be able to conduct business.
Instead of determining which option is the best, investors should determine which option most closely aligns with their goals. For example, an investor who wants to set up a manufacturing plant in Vietnam will have a drastically different answer than a consulting company who wants to offer regional consulting services in Southeast Asia or a large corporate company who is there to conduct a short-term study trip.
The choice of business structure also impacts licensing and tax policies, labor hire, and business expansion. Although changes can be made to the structure later on, this will result in added time and cost. This is why choosing the right structure from the beginning is critical in the business registration process.
How to Register a Company in Vietnam
Two primary approvals are involved in setting up a foreign-invested company in Vietnam: Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC). Statutory requirements vary by sector and investment structure, but a common registration process is followed by most foreign investors.
Step 1: Apply for Investment Registration Certificate (IRC)
The first step is applying for the Investment Registration Certificate, or IRC. This certificate formally registers the investment project and provides information on the investor, the project’s business activities, the investment funds, and the project’s location.
During this process, authorities determine if the proposed business activity is open to foreign investors and if any market-access restrictions would apply.
This step is where most of the business decisions are made. Foreign investors must decide the intended ownership structure, business activities, amount of capital to invest, and the operational plans for the investment prior to submitting the application. There is the option to make changes to the business plans after the application has been submitted; however, this will likely prolong the process and create unnecessary additional work for the authorities.
Step 2: Apply for Enterprise Registration Certificate (ERC)
Following the approval of the IRC, an application for the Enterprise Registration Certificate (ERC) may be submitted.
The ERC is the company’s legal birth certificate; it formally registers the company in Vietnam and provides information on the company’s name, address, its legal representative, its ownership structure, and its registration.
Submitting applications via Vietnam’s National Business Registration Portal is the first step in company formation in Vietnam. Following the approval of applications, companies may commence business operations.
For many investors, the ERC symbolizes the transition of business planning into the execution phase. With the issuance of the ERC, the business is now a legal entity and the investment may be further advanced with the establishment of business operations.
Step 3: Satisfy the Post-Registration Obligations
The issuance of the ERC by the Vietnam government is not the final step in the establishment of a business by foreign investors in Vietnam. There are a number of post-registration obligations that also need to be satisfied.
The post-registration obligations generally consist of opening the company’s capital account, depositing the registered charter capital, completing the company’s tax obligations, obtaining digital signatures, and setting up the company’s accounting and invoicing service. Depending on the business model, this phase may also include the company’s trademark registration and employment-related registrations.
While these activities are administrative, they are of utmost importance in allowing the company to begin operation and conduct business.
Step 4: Obtain Sector-Specific Licenses
Companies that are interested in operating businesses in the education, logistics, financial services, healthcare, and retail sectors would require more licenses than the IRC and ERC.
Investors should not consider the completion of the company registration process as the final step in entering a new market.
In Vietnam, there is no standardized minimum capital requirement for most ventures. Instead, the amount of capital needed is determined by the type of business, how it will operate, and any relevant regulations that may apply.
In many service industries, the expected capital is that which is necessary to carry out the intended business activities. In contrast, business lines such as banking, insurance, education, fintech, real estate, and some logistics businesses have capital demands that are set by different regulations.
Capital also needs to be contributed on time. The timeline for contribution is specified in the business registration documents and is considered a legal obligation that needs to be fulfilled.
Vietnam also provides a market for business after registration. Typically, foreign invested enterprises in Vietnam will pay corporate income tax and value added tax, among other taxes based on the business activities of the enterprise. In some cases, registered enterprises will have to pay taxes on remitted profits.
From a business point of view, the primary implication of capital is that it is a necessary element for carrying out a business. The availability of capital will affect the number of employees, business operations, and other plans for the business. For this reason, capital should be considered an integral part of market entry.
Documents Needed to Register a Foreign Investor Company
After determining the capital structure, the foreign investor will need to prepare the necessary documentation to support their company registration application.
Exact requirements differ by applicant type, individual or corporate, but most have common elements.
First, applicants must submit identification and ownership documents. Individual investors almost always submit their passports, while corporate investors submit documents of incorporation along with the incorporation certificate(s) and evidence of their authorized representatives. Depending on the corporate investors’ country of origin, the documents may need to be notarized, legalized, or apostilled before being admitted in Vietnam.
Authorities will also require documents related to the investment project. This usually consists of a business plan or project description and outlines the activities and investment objectives as well as the proposed project’s scope and the structure of the investment.
Firms also need to provide proof that the firm has a business address in Vietnam. This is usually evidenced by a lease or proof of entitlement to use the address. Many investors do not understand the importance of selecting a business address. Depending on the nature of business activities, locations or types of business addresses may be ineligible for business registration.
Lastly, all other foreign documents submitted as part of the application must be translated into Vietnamese. The translation must be done by a certified professional. Document may also need to be notarized or apostilled prior to the translation.
Generally, the requirements are straightforward. However, the preparatory work may take longer than expected, especially if documents have to be obtained from several countries. To mitigate delays document requirements should be confirmed prior to starting the incorporation.
Typical Documents Required
- Passport (for individual investors)
- Corporate registration documents (for corporate shareholders)
- Investment project or business plan
- Office lease agreement or address confirmation
- Authorization documents (if applicable)
- Notarized, legalized, or apostilled supporting documents
- Certified Vietnamese translations
Timeline and Costs
Vietnam’s company registration will take how long, and how much will it cost?
Four to eight weeks is the standard timeline for incorporation of most foreign invested companies in Vietnam. Many aspects come into play to affect this timeline such as business sector, ownership, types of licenses, and the application documents.
For instance, the time it takes to issue an Investment Registration Certificate may take about 15 days. After approval of the Investment Registration Certificate, the Enterprise Registration Certificate may take about 3 days. However, these time constraints only take into account the certificate issuance and not document preparation, translation, and related clarifications.
Costs associated with registration vary widely. Government filing fees are low, however, the investor must budget for the legal advisory costs, document costs, and office set up costs.
First time investors and most SMEs can expect set up costs to be in the range of $1,500 to $5,000. More difficult and larger scoped systems may be out of this range.
Registration timelines should be seen as a best case estimate and not a guarantee. Companies in conditional sectors and projects with additional licenses will take longer than standard registrations.
Preparation is the best way to save time and money when it comes to business planning. Extensive documentation, clear business scopes, and clear investment objectives impact project timelines even more than the lengths of formal processing periods.
Conclusion
For foreign investors, the first step of entering the Vietnamese market is the registration of a company. Although the process is user friendly, investing in Vietnam means a foreign investor needs to take the correct approach according to the business sector, the structure of company ownership, the foreign investor’s objectives of investments, and the foreign investor’s plans for the growth of the company.
Early preparation and planning means the right business entity and structure can be chosen, registration documents can be submitted, and the investor can meet the requirements of capital and licensing. This means the structur of the business can be chosen to meet the objectives of the foreign investor and the plans for the growth of the company, while the plans and the objectives of the foreign investor are integrated.
For foreign investors who want to take advantage of the business opportunities in the rapidly growing economy of Vietnam, registering a company to do business in Vietnam is more than a legal requirement.