HOW TO START A BUSINESS IN VIETNAM?
How to start a business in Vietnam as a foreigner is a matter may concern to much international company or foreign investors. Unlike many other offshore countries, the licensing process of operating a business in Vietnam may be quite troublesome due to Vietnam’s regulatory framework, especially for foreigners. Being well-prepared with a sophisticated plan before investing in Vietnam is therefore significantly essential. This article will make an attempt to shed more light on a practical guide to starting a business in Vietnam with our latest update.
I. Legal basis
- Law on Enterprise 2020;
- Law on Investment 2020.
II. Can foreigners start a business in Vietnam?
The answer is yes. Foreigners are allowed to start a business in Vietnam, regardless of indirect or direct investment.
The first option is to choose a direct investment. Direct foreign investment indicates a 100% foreign-owned company or a joint venture company in which the foreign investor and a Vietnamese partner work together.
If choosing the form of direct investment, the foreigner must proceed with legal procedures to obtain the investment as well as enterprise licenses as stipulated in respective laws in Vietnam.
On the other hand, indirect foreign investment is the investment made through the purchase of shares in Vietnamese companies, capital contribution, stocks, investments fund, or other similar financial vehicles.
III. How to start a business in Vietnam as a foreigner?
1. Restricted business sectors for foreigners to set up a business in Vietnam
Pursuant to Article 6, Law on Investment 2020, there are some business sectors and trades that are prohibited for foreign investors to start a business in Vietnam:
- Carry out business or trading in narcotic substances (stipulated in Appendix 1, Law on Investment 2020);
- Carry out business or trading in toxic chemicals, precursors, and minerals (stipulated in Appendix 2, Law on Investment 2020);
- Carry out business or trading in natural specimens of endangered, rare, and precious wild fauna and flora species (stipulated in Appendix I, CITES and Appendix 3, Law on Investment 2020);
- Carrying out prostitution, human trafficking, or clone of human-related businesses;
- Carrying out firecracker related business;
- Carrying out business or services on debt collection.
A recently amended Law on Investment which is effective from early 2021 has supplemented several new conditional business lines:
- Accounting and Auditing services;
- Tax agency service;
- Customs related business: Customs agency services, Trading duty-free goods, bonded warehouse or container freights stations;
- Securities-related business;
- Insurance/Reinsurance/Insurance brokerage/Insurance agency/Insurance auxiliary services;
- Price valuation service;
- Other financial businesses: Lotteries business, Debt collection services, Credit rating services, Prize-winning electronic games for foreigners, Casino business
2. Tax matters
There are many tax reliefs that foreign investors can look for to reduce their tax liabilities when starting a business in Vietnam. Below are some typical tax reliefs in Vietnam for eligible investors:
CIT: Preferential tax rate and tax holidays;
PIT: Allowable deductions from compulsory insurance contributions, charity purposes, family related deductive relief;
VAT: VAT exemptions on specific businesses;
FCT: No withholding tax is levied on dividends of overseas corporate shareholders.
3. Appropriate business structure
Law on Investment and Law on Enterprise are key legislation governing the incorporation and operation of both local and foreign enterprises doing business in Vietnam.
A 100% foreign-owned company is allowed in Vietnam, and foreign investors can choose either a limited liability company (LLC) or a joint-stock company (JSC) to set up their company under this form.
In addition to the above-mentioned structures, foreign investors can also consider registering a business in Vietnam through a Business Cooperation Contract (BBC). This acts as an agreement between the foreign investor and the Vietnamese partner to conduct business in Vietnam. Note that BBC’s participants have unlimited liability for any debts or financial obligations to the company.
4. Documents required
Below are fundamental documents for registering a company in Vietnam:
- Application for enterprise registration: Information provided should include the enterprise name, the head office address, business line, charter capital of the owners, types of shares, number of employees, particulars of relevant partners/representatives, and tax registration information.
- List of board members
- Company charter/ articles of association
- Copy of passport/ID card or other valid personal identification documents of individual members
- Copy of Investment Registration Certificate, for foreign investors as prescribed by the Law on Investment
- Please note that the above-stated papers are needed to obtain the Enterprise Registration Certificate only, which presents the legality of your business operation in Vietnam. For foreign investors to start a business in Vietnam, you shall be required to apply for an Investment Registration Certificate with the relevant authorities.
5. Starting business cost
- Costs for registering a company and obtaining business licenses;
- Minimum capital requirements (vary according to the selected business sectors);
- Cost for co-working space/ hiring local offices and relevant facilities and management fees;
- Other types of charges: Salaries for employees, tax payments, and other compliance costs for maintenance of the company.
The above information is about the "How to start a business in Vietnam?". For more information and advice on this issue, please contact Doanh Tri Law Firm directly via:
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