Vietnam is one of the fastest-growing economies in the world. The low cost of living and highly qualified population make it an ideal location for foreign companies who are looking to branch out and invest. However, expanding internationally has its disadvantages as well. Not knowing the local laws and regulations makes it a thousand times harder to open a company overseas.
Discover how to setting up a business in Vietnam [New 2024: Step by step guide (requires attention to changes in investment and business laws]. At the same time, the economic recession context also forces investors to consider promising business areas.
Setting up a business in Vietnam in 2024 requires attention to changes in investment and business laws. At the same time, the economic recession context also forces investors to consider promising business areas.
Although Vietnam is a very attractive investment destination for foreign investors, establishing a company still requires complex legal procedures. This section describes the procedures for establishing a company that wants to start operations in the country.
According to data from the Ministry of Planning & Investment, as of September 20, 2023, the total FDI capital registered in Vietnam includes new registered capital, adjusted registered capital, value of capital contribution and share purchases. of foreign investors, reaching nearly 20.21 billion USD, an increase of 7.7% over the same period in 2020.
In 9 months, there were 2,254 new investment projects granted certificates (an increase of 66.3% over the same period), with a total registered capital of more than 10.23 billion USD (up 43.6% over the same period), and also carried out 2,539 capital contribution transactions to buy shares from investors foreign countries, with a total capital contribution value of more than 4.82 billion USD (up 47% over the same period).
Besides, the capital adjustment of projects also continues to increase over the same period, this number proves that Vietnam is always a potential market for foreign investors. To make business operations in Vietnam more convenient, foreign investors can purchase shares, purchase capital contributions or contribute capital to establish a company.
Vietnam allows 100% foreign ownership of companies in most industries. However, before choosing the type of company to set up in Vietnam, understand the different types of companies to consider, including their structure, legal responsibilities, compliance requirements, time required to set up a company, and differences in business types. It is important to consider the aspects. These considerations help determine the appropriate business constraints, costs, requirements, and risks necessary to achieve the company's future target capabilities, development, and growth. The following links explain these factors for each of the main types of business entities that can be established in Vietnam.
Representative offices (ROs) provide low-cost access to companies wanting to better understand the Vietnamese market. Therefore, this choice is one of the most popular among those entering the Vietnamese market for the first time, often preferring a greater presence in the country.
RO is established in approximately 6 to 8 weeks. To deal with the myriad of laws and procedures, it is best to hire professional services.
Due to the lack of domestic revenue and associated licensing requirements, the setup process for this option is less bureaucratic than other options.
A foreign representative office in Vietnam is a related department that supports the business activities of the parent company and is responsible for basic business activities such as opening a permanent office, hiring employees, managing and promoting local business contracts, and market research. I'll be in charge. Please do so. This office tends to be used by foreign investors in areas such as product sourcing, quality control, and general liaison activities between headquarters and overseas representative offices.
Representative offices are generally easier to set up than branches or subsidiaries, since they are not used for actual "business" activities (such as sales), so there is less incentive to manage the office. Representative offices are very simple and cost-effective, require no investment capital, no value added tax, no corporate tax, no accounting, no financial reporting, no independent auditing, are easily accessible, and can be easily extended if necessary. It can be terminated and disbanded. . .
Foreign investors are established and registered for business according to the laws of countries and territories that are members of international treaties to which Vietnam is a member or recognized by the above countries and territories.
Foreign investors have been in business for at least one year from the date of establishment or registration.
Business registration certificate or equivalent document valid for at least one year from the date of application.
The scope of work of the Representative Office is consistent with the scope of work committed by Vietnam in international treaties to which Vietnam is a member. In cases where the scope of operation of the Representative Office is not consistent with Vietnam's commitments or the foreign investor does not reside in a country or region that is a member of an international treaty to which Vietnam is a member, only the Representative Office was established. with the permission of the Minister. The head of a Government agency is approved by a ministerial-level agency to establish a representative office.
Branches in Vietnam are affiliated units of foreign traders. The head office is responsible before the law for all activities of the branch in Vietnam. Branches are not a popular choice for foreign investors in Vietnam due to more complicated entry procedures compared to representative offices and subsidiaries. Furthermore, although the compliance processes of branches are equivalent to those of subsidiaries, the operating functions of branches are less convenient.
This branch represents foreign companies in the Vietnamese market through various departments belonging to the parent company. Branches may have their own accounting, marketing, and human resources departments that represent the parent company to local authorities.
Compared to other types of companies, branches in Vietnam are registered with the Ministry of Industry and Trade, not the Ministry of Planning and Investment. The branch must have the same name as the parent company and must have the same seal.
To establish a branch, the foreign company must appoint a domestic representative who can complete the registration and licensing procedures. It is important to know that branches in Vietnam require a special license called an establishment license.
Domestic and foreign investors are allowed to invest 100% of their own capital to establish limited liability companies, joint stock companies, partnerships and private enterprises in accordance with the provisions of the Enterprise Law and other relevant laws.
100% foreign-owned enterprises established in Vietnam are allowed to cooperate with each other and with foreign investors to establish new 100% foreign-owned enterprises.
A 100% foreign invested company has legal status under Vietnamese law and is established and operated from the date of issuance of the investment certificate.
A joint stock company (JSC) is a type of business structure in Vietnam that combines elements of a partnership and a joint stock company. In JSC, owners (shareholders) invest in the company in exchange for shares, and profits are distributed to shareholders according to their ownership percentage.
Setting up a joint stock company in Vietnam is generally suitable for large-scale businesses. Large companies often establish joint stock companies in Vietnam because the owners can issue shares and list them on the Vietnam Stock Exchange. Depending on the industry, this type of structure may even allow for 100% foreign ownership.
Vietnam allows joint ventures between foreign and domestic investors through joint stock companies. This type of legal entity requires at least his three shareholders. The maximum number of shareholders is unlimited. In addition, shareholders are solely responsible for the debts and other liabilities of the stock company to the extent of the amount they have invested in the stock company.
To establish a JSC in Vietnam, companies must meet certain legal requirements, such as minimum registered capital and completion of various legal and regulatory formalities. In addition, JSCs are subject to annual reporting and auditing obligations as well as tax obligations.
LLCs, or 100% foreign-owned companies, usually take 3 to 4 months to set up in Vietnam. Typically, a representative office can be set up in half that time.
For LLCs, "pre-investment approval" may be required in some jurisdictions, but in most cases you apply directly to the company for the required Investment Registration Certificate (IRC). provide that service. This will take 15 business days unless the business in question is regulated.
In recent years, with the continuous development of economic society in Vietnam, the number of foreign investors investing and building businesses in Vietnam is increasing. Establishing a 100% foreign-owned company has become a popular business. Establishing a company with 100% foreign capital has its own unique characteristics, and requires very strict adjustments such as investment laws and commercial laws.
Register an investment project to establish a company in Vietnam: Investors submit investment project registration documents to the Provincial or City Business Registration Office or the Management Board of industrial parks, export processing zones, and high-tech zones to approve the investment project within 10 days. minute. for clarity).
Vietnam offers an attractive environment for foreign investors who want to set up a company in Vietnam. There are several reasons why investors should consider Vietnam as a business destination.
First, Vietnam boasts rapid economic growth due to strong GDP growth and a favorable business environment. The country has implemented many market-oriented reforms, attracted foreign investment, and fostered a dynamic startup ecosystem.
Additionally, Vietnam also benefits from its strategic geographical location, which is the gateway to the vibrant markets of Southeast Asia. Vietnam's participation in regional trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the ASEAN Economic Community (AEC) allows Vietnam to reach a large consumer base and attract investment. Sometimes favorable commercial terms are available.
Additionally, Vietnam has a young, highly skilled workforce and competitive labor costs, making it an attractive destination for manufacturing and service industries. The government is also taking steps to improve transparency, simplify administrative procedures and strengthen investor protection, demonstrating its commitment to boosting economic activity.
Overall, Vietnam has a promising investment environment, market potential, strategic advantages, and a supportive business and legal environment for investors who want to set up a company in Vietnam.
Vietnam has no minimum capital requirements for most sectors and business areas. However, the registered capital is assessed by the Ministry of Planning and Investment as to whether it is sufficient to cover the costs of the business. It usually takes one to two years from the start of a business until it generates enough revenue to cover its costs. will be evaluated. Investor Calculation. In some cases, he may be able to set up a basic business services company for less than US$10,000, but in most cases, depending on the nature of the business, this threshold will be exceeded.
A company's total investment capital can include both charter capital and loan capital. Borrowed capital or mobilized capital includes loans from shareholders or loans from third parties. The charter capital or contributed capital must be registered with the Vietnamese licensing authority along with the loan capital.
Once approved, the investor may not increase or decrease charter capital without prior approval of the amendment by the local licensing authority.
The capital contribution schedule is specified in the FIE's investment certificate, foreign invested enterprise (FIE) charter (founding charter), joint venture agreement and/or business cooperation agreement.
The members and owners of a limited liability company (LLC) must contribute charter capital within the capital contribution period provided by the Corporation Law, according to the capital contribution schedule specified in these documents.
To transfer capital to Vietnam, after establishing an FIE, foreign investors must open a Direct Capital Investment Account (DICA) at a legally licensed bank.
To set up a company in Vietnam, you need a legal address in Vietnam. Most businesses require their own physical location, such as leased or acquired offices or buildings.
Companies are required to have a resident director and may have multiple directors. Eligible resident directors must have an address within Vietnam. Although resident director status is desirable, it should not be a qualification requirement in the incorporation process. Their immigration status may be treated separately.
Foreign investment subjects can be individuals over 18 years old, organizations, businesses holding the nationality of WTO members or having signed bilateral treaties related to investment with Vietnam.
However, in some industries Only foreign investors who are legal entities are allowed to invest in Vietnam. Individual investors holding passports with the "cow tongue line" content will not be able to contribute investment capital in Vietnam or take on the role of representative to manage investment capital for established organizations or companies. established in Vietnam according to the provisions of law.
There are no specific regulations on the nationality of foreign investors. Foreign investors from any country can invest in Vietnam, as long as they comply with the laws and international agreements that Vietnam has signed.
However, it should be noted that foreign investors' investments in Vietnam need to be approved and comply with regulations related to national security, competition, and business approvals. Specific provisions regulating the subject and nationality of foreign investors can be found in laws such as the Enterprise Law, Investment Law and other legal documents related to foreign investment in Viet Nam.
Foreign investors must have sufficient financial capacity to invest and need to prove their financial capacity to invest in Vietnam depending on the chosen industry. However, specific financial requirements may vary depending on specific Vietnamese government regulations and policies.
Foreign investors must conduct due diligence and become familiar with the relevant laws and regulations governing their chosen sector to ensure they meet all necessary financial requirements before proceeding with their plans to invest. Additionally, foreign investors should consult with legal and financial advisors with expertise in Vietnamese investment laws to ensure compliance.
Vietnam has become a utopia for foreign investors thanks to trade agreements, extensive government support, a growing middle class and changing consumer attitudes. use. The country's promising economic opportunities act as a catalyst for foreign investors to set up companies in the country.
The small Southeast Asian country was one of the few to record GDP growth in 2020 and 2021, while much more developed countries suffered from the economic downturn caused by the coronavirus.
Vietnam's IT industry is developing thanks to the power of young, tech-savvy people and supportive government policies. Software development and BPO sectors also grew. E-commerce is growing rapidly and the compound annual growth rate over the next four years is expected to be 12.75%.
One of Vietnam's largest industries is the textile and garment industry, creating millions of jobs and contributing significantly to exports. Demand for Vietnamese clothing is increasing worldwide and the industry's annual growth rate is expected to reach 15% by 2021.
Agriculture is essential to Vietnam's economy, employing more than half of the population. Rice, coffee and aquaculture production are the main sectors of this industry. The food processing industry is also growing at more than 7% per year.
Vietnam's tourism industry has seen significant growth in recent years, with 18 million foreign tourists visiting Vietnam in 2019. The tourism industry's revenue growth rate could reach 23.3 % by 2023, becoming one of the fastest growing industries in Vietnam.
Foreigners or foreign companies wanting to establish a business in Vietnam can choose from several operating options. Options include registered companies, representative offices, branches, desired offices and even virtual offices.
However, before deciding to establish a business presence in Vietnam, it is important that you have a thorough knowledge of the options and their requirements. A wrong choice can hinder the long-term development of your company in Vietnam.
Everything we do at LHD Law Firm is focused on assisting your business through our investment law expertise and local business experience in Vietnam.
So that your enterprise can grow and expand quickly and avoiding the costly traps that many start-up investors fall into at the hands of unscrupulous lawyers and agents.
How we accomplish this.
We offer the best investment legal service in Vietnam, as well as a wide choice of INDIVIDUAL AND ECONOMIC EFFECTIVE SOLUTIONS for starting a business in Vietnam or managing an existing one.
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