Setting Up Company in Vietnam: Don’t Proceed Alone

1. The 2025 Legal Architecture

The legal environment for Foreign Direct Investment (FDI) in Vietnam has historically been characterized by a tension between the government's desire to attract capital and its need to maintain strict regulatory oversight. The 2024–2025 legislative sessions have resolved much of this tension by creating a bifurcated system: a "fast track" for high-value, high-tech investments, and a rigorous "compliance track" for standard commercial operations.

1.1 The "Two-Law" Amendment: Law No. 57 and Law No. 90

The bedrock of the current investment climate is formed by two pivotal amendments that reshape the Law on Investment, Law on Bidding, and Law on Public-Private Partnerships (PPP).

1.1.1 Law No. 57/2024/QH15: The High-Tech Imperative

Passed by the National Assembly in late 2024, Law No. 57/2024/QH15 addresses the critical bottlenecks that have historically slowed down major infrastructure and technology projects. It introduces specific amendments to the Law on Investment that prioritize speed and efficiency for strategic sectors.  

• Strategic Context: Facing competition from regional peers like India and Indonesia, Vietnam recognized that its 3–6 month licensing timelines were a deterrent for fast-moving tech giants. Law No. 57 serves as the legislative counter-measure.

• Key Mechanism: The law establishes the legal basis for "Special Investment Procedures," which allow projects in industrial zones (IZs), export processing zones (EPZs), high-tech parks (HTPs), and economic zones (EZs) to bypass the traditional multi-ministry appraisal process. 

• Implication for Investors: If your project falls within the definition of "high-tech" (e.g., semiconductor manufacturing, AI research, biotechnology), the regulatory burden shifts from ex-ante (pre-approval) to ex-post (post-audit). This requires a fundamental shift in investor mindset: the state trusts you to comply with technical standards (fire safety, construction, environment) based on your commitment, but the penalties for non-compliance during operation are severe. 

1.1.2 Law No. 90/2025/QH15: Decentralization of Public Investment

Effective July 1, 2025, Law No. 90/2025/QH15 amends the Law on Bidding and the Law on PPP. This legislation is particularly relevant for foreign contractors and investors targeting Business-to-Government (B2G) projects.

• Decentralization: The law empowers local People's Committees (provincial level) with greater authority to approve projects without seeking Prime Ministerial consent for every modification.

• Streamlined Bidding: It removes the mandatory establishment of "appraisal councils" for certain project categories, reducing the administrative layer that often added months to the bidding process.

• Direct Appointment: Crucially, it allows for the direct appointment of strategic technology investors in specific innovation sectors, bypassing the protracted open bidding process where specialized technology is required. This is a game-changer for foreign tech firms with proprietary technology that Vietnam urgently needs. 

1.2 Decree 19/2025/ND-CP: The Fast-Track Implementation

While Law No. 57 provided the framework, Decree 19/2025/ND-CP (effective February 10, 2025) provides the "teeth." This decree details the implementation of the special investment procedures. 

The "15-Day" Revolution: Traditionally, obtaining an Investment Registration Certificate (IRC) took anywhere from 15 to 45 working days, with complex projects taking months. Decree 19 mandates a hard cap of 15 days for eligible projects in high-tech and economic zones.

• Process Elimination: Under this special procedure, investors are exempted from obtaining separate construction permits and environmental impact assessment approvals prior to breaking ground. Instead, these are replaced by an "Investor Commitment" mechanism.

• Capital Verification: The decree simplifies the proof of financial capacity. Instead of waiting for bank verification of funds transfers—which can be complicated by foreign exchange controls in the investor's home country—investors can now utilize bank guarantees or binding commitment agreements to satisfy capital requirements initially. 

• Conflict of Laws: Decree 19 explicitly states that if its provisions conflict with earlier regulations (issued before January 15, 2025), the new fast-track rules prevail. This "supremacy clause" is designed to cut through the legacy red tape that often clogs provincial departments.  

Strategic Insight: For investors, this creates a stark dichotomy. Establishing a factory in a designated High-Tech Park in Da Nang or Ho Chi Minh City might now be faster than opening a small consulting office in a commercial ward, due to the preferential treatment of the former.

1.3 Decree 168/2025/ND-CP: The Beneficial Ownership Mandate

If Decree 19 represents the "carrot," Decree No. 168/2025/ND-CP (and the associated Circular 68/2025/TT-BTC) represents the "stick." In alignment with global FATF (Financial Action Task Force) recommendations, Vietnam has implemented a rigorous Ultimate Beneficial Owner (UBO) disclosure regime effective July 1, 2025.  

1.3.1 Defining the Beneficial Owner

The days of hiding behind shell companies in the BVI or Cayman Islands are effectively over for Vietnam-domiciled entities. A Beneficial Owner is defined as any natural person who:

1. Ownership Threshold: Directly or indirectly owns 25% or more of the charter capital or voting shares. 

2. Control Mechanism: Has the right to control the appointment/dismissal of the Board of Directors, the Legal Representative, or strategic decisions (amendments to charter, dissolution).  

1.3.2 The Disclosure Obligations

• New Entities (Post-July 1, 2025): Must submit the "List of Beneficial Owners" (Form IV-11) as a mandatory part of the incorporation dossier. The Enterprise Registration Certificate (ERC) will not be issued without it.  

• Existing Entities: While immediate retroactive declaration is not required, the information must be "collected, updated, and retained" immediately. Furthermore, any future amendment to business registration (e.g., change of address, capital increase) will trigger the requirement to submit the full UBO declaration.  

• Transparency: This data is accessible to government agencies for AML enforcement. The decree empowers the Department of Planning and Investment (DPI) to share this data with the police and tax authorities unrestricted.  

What your setup journey will look like depends on the source of your business capital. In Vietnam, current business establishment procedures are governed by the 2020 Law on Investment and a range of other statutes and labor codes. They regulate the steps foreigners and locals are obliged to take for new company setups in Vietnam, what incentives they qualify for (if any), and how they can lawfully operate after registration.

You don’t have to hold a degree in Vietnamese Law to identify what you should do next and how to avoid violations or delays. With LHD Law Firm, you are guided every step of the way, including:

• Investment approval. This requirement is set for critical Vietnamese industries and markets. We’ll help you determine whether your investment must be pre-approved before setup procedures once you share more details on your business endeavors.
• Document collection. To set up a company in Vietnam, entrepreneurs must obtain investment and enterprise registration certificates. We’ll explain all the documents that must be submitted for these certificates and help you prepare them for application.
• Registration. Legal entity setup is always intertwined with corporate seal registration and obtaining an identification code for tax purposes. We’ll make sure you get all the essentials and possible incentives for your business.

Please note that additional requirements and restrictions may be imposed when setting up businesses in Vietnam in higher-priority sectors or when the purchase of land is involved.

2. Corporate Structuring – Choosing the Right Vehicle

Selecting the appropriate legal entity is the foundational decision of market entry. It dictates tax liability, operational flexibility, and the ability to expand.

2.1 The Limited Liability Company (LLC)

The LLC remains the dominant vehicle for Foreign Direct Investment (FDI) due to its structural simplicity and risk containment.

• Single-Member LLC: Owned by one organization or individual. The liability is limited to the contributed charter capital. Governance is streamlined, often requiring only a Company President or a simple Members' Council.

• Multi-Member LLC: Suitable for Joint Ventures (JV) with 2 to 50 members. It allows for more complex checks and balances between partners.

• 2025 Nuance: With the new UBO rules, even a Single-Member LLC owned by a foreign HoldCo must declare the individual shareholders of that HoldCo.

2.2 The Joint-Stock Company (JSC)

The JSC is the only vehicle capable of listing on the Ho Chi Minh Stock Exchange (HOSE).

• Structure: Requires a minimum of three shareholders (founding shareholders). Capital is divided into shares.

• Governance: Mandatory General Meeting of Shareholders, Board of Management, and Inspection Committee (for larger JSCs).

• Strategic Use: Preferred for projects anticipating future rounds of fundraising, Employee Stock Ownership Plans (ESOPs), or an IPO. However, the administrative burden of shareholder meetings and reporting is significantly higher than an LLC

2.3 Representative Office (RO)

The RO is a non-trading entity designed for market research and liaison.

• Limitations: Strictly prohibited from generating revenue, issuing invoices, or executing commercial contracts (except for its own operations, like rent).

• Advantages: Low cost of establishment, no corporate income tax (CIT) compliance (only Personal Income Tax for employees).

• Risk: The "shadow trading" risk—where RO staff inadvertently negotiate deals or provide services—is heavily policed. An RO found engaging in profit-generating activities faces severe fines and forced closure.²⁰

2.4 Branch Office

• Status: A dependency of the parent company. The parent is fully liable for the branch's debts.

• Sector Restrictions: Vietnam generally restricts Branch Offices to specific sectors like banking, law (such as foreign law firms), insurance, and aviation. For general trading or manufacturing, an LLC is the required path.

Comparative Table: Corporate Vehicles in Vietnam

3. Set Up Company in Vietnam: A Complete Guide 2025

Set up company in Vietnam as a foreign investor involves a multi-step process that requires careful planning and adherence to legal procedures. Here is a general guide to the key requirements and steps.

3.1. Choose Your Business Entity

For foreign investors, the two most common types of companies are:

• Limited Liability Company (LLC): This is the most popular choice.

  • Single-Member LLC: Owned by one organization or individual.

  • Multi-Member LLC: Owned by 2 to 50 members.

• Joint-Stock Company (JSC): This requires at least three shareholders and is the only type of company that can issue shares to the public.

Other less common forms include Representative Offices (which cannot conduct profit-making activities) or Branch Offices (which are extensions of a foreign parent company).

3.2. Key Requirements for Registration

Before starting the application, you must prepare several key items:

• Company Name: You must choose a name that is not already taken or confusingly similar to another registered name in Vietnam.

• Registered Address: You must have a legal physical address in Vietnam. This cannot be a virtual office for the initial registration; a valid lease agreement is required.

• Business Lines: You must clearly define the business activities your company will engage in. Some sectors are "conditional" and require special licenses or approvals.

• Legal Representative: The company must appoint at least one Legal Representative (e.g., Director or General Director). This person can be Vietnamese or foreign, but if they reside outside Vietnam, you may need to appoint a resident authorized representative.

• Proof of Financial Capacity: Investors must prove they have sufficient funds to cover the proposed charter capital. This is typically done with a bank statement from the investor's home country, which must be legalized.

3.3. Get up and running in 60 days

It doesn’t take long to break into the Vietnamese market. The company setup process for foreign-owned businesses is up to 60 days, according to local regulations. You can start planning your operations once the paperwork is prepared and submitted to the relevant agencies.

LHD Law Firm’s assistance can also benefit your business after setting up your entity. You can count on our team for everything from applying for service-specific licenses to obtaining work permits for your employees to ensuring compliance with your tax obligations.

Call today to consult English-speaking legal specialists and start your expansion into Vietnam.

4. Banking & Capital Structure – The Critical Firewalls

Vietnam’s strict foreign exchange control regime is the most common trap for inexperienced investors. Violating these rules can render capital "trapped" in Vietnam, unable to be repatriated as profit.

4.1 The Direct Investment Capital Account (DICA)

• Regulation: Circular No. 06/2019/TT-NHNN.

• Mandate: Every FDI enterprise must open one Direct Investment Capital Account (DICA) per currency (USD, EUR, VND) at one licensed bank.

• Exclusive Function:

  • Inflow: Receipt of Charter Capital contribution from shareholders; Receipt of foreign loans (medium/long term).

  • Outflow: Remittance of dividends/profits abroad; Repayment of foreign loan principal/interest; Transfer to the company’s Current Account for operational spending.

• The Cardinal Sin: If an investor transfers capital directly to the Current Account, the State Bank of Vietnam (SBV) considers it "revenue" or a "gift," not equity. It cannot be repatriated. Rectifying this requires massive accounting gymnastics and potential fines.

4.2 The Indirect Investment Account (IIA) – 2025 Update

• Regulation: Circular No. 03/2025/TT-NHNN (replacing Circular 05/2014).

• Scope: Used for foreign investors engaging in M&A (buying <51% usually, or where they don't participate in management) or portfolio investment.

• Change: The term is now "Indirect Investment Account" (IIA), dropping "Capital." It clarifies that this account must be in VND. All foreign currency must be converted to VND before entering this account for investment purposes.

4.3 Capital Contribution Deadlines

• The 90-Day Rule: Charter capital must be fully contributed within 90 days of the ERC issuance date. This is a statutory deadline, not a suggestion.

• Consequence: Failure to contribute leads to a mandatory capital reduction procedure and fines (up to 100 million VND). If not reduced, the company is technically operating illegally.

5. Taxation, Incentives & The High-Tech Advantage

Vietnam’s tax system is competitive but rigorous.

5.1 Corporate Income Tax (CIT)

• Standard Rate: 20% on net profits.

• Incentives: High-tech projects, software, and projects in difficult socio-economic areas can enjoy:

  • Preferential Rate: 10% for 15 years (or indefinite for special projects).

  • Tax Holidays: 4 years of tax exemption, followed by 9 years of 50% reduction.

5.2 Value Added Tax (VAT)

• Standard Rate: 10%.

• Reductions: Periodic reductions to 8% are often applied as fiscal stimulus (check current policy).

• Refunds: Export-processing enterprises (EPEs) can claim VAT refunds on input materials. However, the bank account used for payment must be legally registered with the tax authority.

5.3 Transfer Pricing (TP)

Decree 132/2020/ND-CP enforces strict TP rules. Transactions between related parties (e.g., Vietnam subsidiary and Singapore HQ) must be at "arm's length."

• Documentation: Companies with related party transactions must prepare TP documentation files (Master File, Local File, Country-by-Country Report) if they meet revenue thresholds.

• Cap on Interest: Interest expense deductions on loans from related parties are capped at 30% of EBITDA.

6. Location Strategy – HCMC vs. Hanoi vs. Da Nang

The choice of location dictates not just cost, but the regulatory temperament the business will face.

6.1 Ho Chi Minh City (The Commercial Hub)

• Pros: Largest consumer market, deep talent pool for sales/marketing, dynamic "Western" business culture. 

• Cons: Higher labor and rent costs. Infrastructure saturation (traffic, port congestion).

• Regulatory Vibe: The HCMC DPI is efficient but overwhelmed. Getting an appointment can be difficult. They are strict on office address verification.

6.2 Hanoi (The Administrative Center)

• Pros: Proximity to central ministries (crucial for licensed sectors like education, energy). Strong engineering/technical talent pool. Access to Northern supply chains (China border).

• Cons: More formal, relationship-based business culture. Winters can affect some industries.

• Regulatory Vibe: Strict adherence to the letter of the law. "Creative" interpretations of regulations are less tolerated than in the South. 

6.3 Da Nang (The Innovation Frontier)

Da Nang has emerged as the premier destination for high-tech and IT investment in 2025.

• Incentives: Under Resolution 136/2024/QH15, Da Nang offers specific incentives that outstrip the national average, including a Free Trade Zone (FTZ) pilot. 

• High-Tech Park Benefits:

  • Full land rent exemption for the entire project term for specific sectors.

  • CIT incentives: 10% for 15 years, 4 years exemption.

• Cost: significantly lower operational costs (rent, labor) than HCMC/Hanoi, with high livability attracting expat talent.

7. Labor, Immigration & Work Permits

Vietnam protects its labor market. Employing foreigners is an exception, regulated by Decree 152/2020/ND-CP and the updated Decree 219/2025/ND-CP. 

7.1 The Work Permit Process

1. Explanation of Demand: 30 days before hiring, the employer must submit a report explaining why a Vietnamese candidate cannot fill the role.

2. Application: Requires a legalized University Degree (relevant to the job) AND 3+ years of experience (verified by former employers).

   • 2025 Change: Decree 219 simplifies some requirements for experts and allows for broader exemptions, but the core "Labor Market Testing" remains. 

3. Validity: Max 2 years, renewable once.

7.2 Temporary Residence Card (TRC)

Once the Work Permit is issued, the expat applies for a TRC (valid for the length of the Work Permit). This replaces the need for a visa and allows for multiple entries.

• Investor TRC: Investors contributing significant capital (e.g., >$3M USD) can get longer-term TRCs (up to 5 or 10 years) without a Work Permit (DT Visa). Small investors (<$130k USD) usually get only 1-year visas.

8. Intellectual Property – First to File

Vietnam follows the "First-to-File" principle. Prior use in other countries (even famous marks) does not guarantee protection if a squatter files first in Vietnam.

• The "Nice" Classification Trap: The National Office of Intellectual Property (NOIP) is notoriously strict on product descriptions. Broad terms like "clothing" are rejected; you must specify "shirts, pants, ties" according to the Nice Classification system.

• Strategy: File for trademark protection before entering the market. The process takes 12–18 months, so early filing is crucial defense

9. Legal Advice | LHD Law Firm

9.1: Legal advice

• Review the documents to be prepared, including LEGAL CONSULTATIONS (LAW, POLICY, TAXES, human resources...)
• After receiving the investment certificate, advice on how to obtain the business registration certificate.
• Advice and application for the Enterprise Certificate (ERC) and the Investment Certificate (IRC), in addition to the Business License issued by the Ministry of Industry and Trade (Business License)
• Consultation and production of a seal engraving and report using seal samples
• Regular legal advice after the opening of the business
• Legal advice about taxes, work permit, temporary residence card and child permit (if applicable)
• Support for the registration of trademarks, designs and inventions when required by businesses (LHD Law Firm is a representative of IP No. 146 the National Office of Intellectual Property NOIP)
• Advice on CIT, PIT, and monthly, quarterly and annual tax returns
• Social insurance consultation, salary calculation (payroll)
• Consulting for personnel selection in Vietnam
• Trademark, Design, and Invention Protection Consulting
• Consultation on labour law, taxation, and contracts in Vietnam
• Virtual office rental for companies with foreign capital to provide invoice redemption.

9.2 Co.op with us

Step 1: Get Legal Advice in English - Vietnamese

Meet with an attorney. We get legal advice on the type of business best suited to your situation.

Step 2: Find office space and legal representation for your business (if there is no available LHD office)

Then find an office space so that your business not only has a place of business but also a specific office address required by the government to apply for a business license. If you are not the legal representative for your business, you need to find a trusted partner.

Step 3: Apply for a business license (IRC, ERC or BL)

Prepare all the necessary documents and make sure that you meet all the requirements before applying for a business license. Expect a 15-day waiting period for a Vietnamese-owned company and a 60-day waiting period for a foreign company.

Step 4: Legal and tax advice for foreign companies after establishment

Running your Vietnamese business now can hire employees and enter into business contracts. There are several things you need to do, such as obtaining your company seal, applying for a tax identification number, opening a company bank account, and publicly announcing your incorporation. Periodic duties include employee tax, accounting report and insurance payments.

(In addition to legal advice, we also provide accounting services for companies with foreign capital for these companies)

9.3 Why Choose LHD Law Firm

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 avoid 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.

• What we can do ...

To seek further advice or request service to Set up a company in Vietnam, Contact us at: ☑: all@lhdfirm.com