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An In-Depth Handbook for Setting Up a Foreign-Invested Company in Vietnam
- Van Pham LLC
- May 2, 2024
- 11 min read
Updated: Oct 26, 2024
Emerging as a dynamic participant among the swiftly advancing economies in Asia, Vietnam has assumed the role of a promising market, drawing the attention of investors seeking avenues for business expansion.
This article serves as a guiding framework to furnish a comprehensive roadmap, empowering investors with the requisite knowledge to navigate the intricacies of the Vietnamese business landscape.
Briefing key steps for foreign invested company registration in Vietnam:
Steps | Crucial documents required | Timeline |
1. Register investment project (Acquire Investment Registration Certificate - IRC) |
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2. Register company (Acquire Enterprise Registration Certificate - ERC) |
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Source: Van Pham LLC, 2023
Registration for investment project
Various approaches exist for investors to engage in business activities in Vietnam, with the establishment of a company emerging as the predominant approach. Prior to initiating the company formation process, foreign investors are mandated to register their investment projects with either the Department of Planning and Investment or the Management of Industrial Zones. Noteworthy exceptions pertain to the creation of small and medium-sized start-up enterprises and startup investment funds, as stipulated by the regulations outlined in the Law on Small and Medium-sized Enterprises.
The culmination of this preliminary phase is the acquisition of an Investment Registration Certificate (IRC). It is imperative to note that, in certain instances characterized by exceptional scale or distinctive business sectors, the investment project necessitates submission to higher authorities for approval. This can include regulatory bodies such as the National Assembly, the Prime Minister, or provincial People’s Committees, although such occurrences are rare and contingent upon the specific attributes of the project in question.
Upon receipt of the investment project application, competent authorities engage in a comprehensive assessment, encompassing various dimensions such as project subjects, market entry conditions, project implementation locale, financial capacity, and the schedule for capital injection. Particularly, projects affiliated with the manufacturing sector may undergo scrutiny via an environmental impact evaluation. Additionally, in instances where the project specializes in a distinct business sector, the issuance authorities will seek consultancy and approval from relevant ministries.
Hence, meticulous drafting of the investment project proposal becomes imperative during this phase, incorporating detailed information. Investors are mandated to demonstrate to the authorities a clear investment roadmap, backed by a robust financial plan. This presentation should elucidate how the project contributes to the Vietnamese economy and human resources, along with delineating the key milestones for project development. Such precision aids in mitigating protracted deliberations and queries from regulatory authorities.
While the statutory timeline for standard cases is approximately 15 days (excluding scenarios requiring approval from pertinent government agencies), the actual processing time may extend to one or two months. Notably, cases necessitating approval entail a lengthier timeframe, spanning from four months to a year for the issuance of the Investment Registration Certificate (IRC).
Registration for enterprise
Following the successful acquisition of the IRC, the subsequent imperative step in the investment process involves the registration of a company to actualize the approved project. Investors are presented with the option of selecting from various company structures such as a single-member company, multi-member company, or joint-stock company, each requiring the attainment of an Enterprise Registration Certificate (ERC).
The application for the ERC is facilitated through the National Portal, offering an online platform for submission. While the statutory timeline for authorities to respond to applications stands at a brisk 3 working days, the practical timeframe for completion may extend to approximately 2 weeks.
In essence, the submission of supporting documents for the ERC closely mirrors the requirements of the IRC process. The Department of Planning and Investment (DPI), responsible for issuing the ERC, relies on the previously obtained IRC to assess and approve the ERC application. Consequently, having a pre-existing IRC significantly streamlines the ERC process, emphasizing the importance of adhering to the approved content of the issued IRC during the ERC application. Therefore, meticulous attention to detail, especially regarding contribution capital and business scope, ensures a smooth transition from IRC approval to ERC issuance.
During this stage, investors gain crucial insights into their tax obligations. The process of obtaining the ERC provides investors with their tax code and designates the relevant tax authority to facilitate seamless reporting and fulfillment of taxation obligations.
Document requirement and timeline for company setting up
With the Enterprise Registration Certificate (ERC) firmly in hand, signifying the successful establishment of a legal entity, the commencement of company operations becomes imminent. However, a vigilant approach to post-establishment steps is essential for investors keen on managing unforeseen risks efficiently.
Key post-establishment actions include:
Open bank accounts for company that must include at least a direct investment capital account and a current account
Contribute the capital for company within 90 days since the issuance date of the ERC
Declare and pay license tax
Display a board at the head office clearly indicating the name of the company, company address and tax code
Engrave company seal
Purchase an electronic signature (token) and register e-invoicing system with licensed vendors
Register for sub-license if if mandated by prevailing laws and regulations
Frequently Asked Questions About Company Establishment in Vietnam
4.1 Foreign Investment in Vietnam's Real Estate: Company Setup Guide
Vietnam's real estate market has been experiencing significant growth, attracting interest from foreign investors looking to tap into this dynamic sector. However, navigating the regulatory landscape for establishing a real estate company in Vietnam can be complex, especially for foreign entities. This blog post aims to address some of the most frequently asked questions about setting up a foreign-invested real estate company in Vietnam. Whether you're considering expanding your existing real estate business or starting a new venture, this guide will provide valuable insights into the possibilities and requirements for foreign investors in Vietnam's real estate market.
Q1: Can foreign investors open a real estate company in Vietnam?
A1: Yes, foreign investors can establish a company in Vietnam for real estate-related services such as brokerage, counseling, and management. However, direct real estate business (selling, renting) may have different regulations.
Q2: Can I open a representative office or branch of my foreign real estate company in Vietnam?
A2: No, representative offices and branches are not allowed to operate or engage in real estate activities in Vietnam. You must establish a new company.
Q3: What services can a foreign-invested real estate company offer in Vietnam?
A3: Foreign-invested companies can offer services like real estate brokerage, counseling, management, and operating real estate trading platforms.
Q4: Are there any specific requirements for operating a real estate brokerage in Vietnam?
A4: Yes, to operate a real estate brokerage, you need at least one staff member with a brokerage license. It's recommended to start with real estate counseling and management services initially.
Q5: Can I use my existing brand name for the company in Vietnam?
A5: Yes, you can use your existing brand name. For example, if your company is called "ABC Real Estate", you could name your Vietnam entity "ABC Real Estate Vietnam".
Q6: Who can be the investor in the Vietnam company - an individual or a foreign company?
A6: Both options are possible. Either you as an individual or your existing foreign company can be the investor in the Vietnam company, depending on your preferred funding structure.
Q7: Are there any recent changes in real estate laws that might affect company registration?
A7: Yes, a new real estate law took effect in August 2024. Due to significant amendments, there might be some initial challenges or questions from government authorities during the registration process.
Q8: Is it advisable to seek local legal assistance when setting up a real estate company in Vietnam?
A8: Yes, given the specific nature of real estate regulations and recent legal changes, it's highly advisable to work with local legal experts to ensure compliance and navigate any potential challenges.
By carefully considering the options available, understanding the specific requirements, and leveraging local expertise, foreign investors can position themselves to successfully navigate Vietnam's real estate sector. As the market continues to develop, those who enter with a clear understanding of the regulatory framework and a strategic approach will be best equipped to capitalize on the opportunities that Vietnam's growing real estate industry offers.
4.2 Opening IT Companies in Vietnam: A Guide for Foreign Investors
Vietnam's rapidly growing economy and burgeoning tech sector have made it an attractive destination for foreign investors in the IT industry. As the country continues to embrace digital transformation and foster innovation, many international companies are considering expanding their operations to Vietnam. However, potential investors often have questions about the feasibility and process of establishing an IT company in this dynamic market. In this blog post, we'll address some of the most common queries foreign investors have about setting up IT businesses in Vietnam, providing you with valuable insights to help inform your decision-making process.
Q1: Can foreign investors establish 100% foreign-owned IT companies in Vietnam?
A1: Yes, Vietnam's information technology sector is open to foreign investment. Foreign investors can establish 100% foreign-owned companies for IT and app development businesses.
Q2: Are there minimum capital requirements for setting up an IT company in Vietnam?
A2: There are no specific minimum capital requirements for IT companies in Vietnam. You can register the capital based on your operational needs.
Q3: Can I use my existing brand name for the company in Vietnam?
A3: Yes, you can use your existing brand name. For example, if your company is called "KTech", you could name your Vietnam entity "KTech Vietnam".
Q4: Who can be the investor in the Vietnam company - an individual or a foreign company?
A4: Both options are possible. Either you as an individual or your existing foreign company (e.g., KTech India) can be the investor in the Vietnam company, depending on your preferred funding structure.
Q5: Is the process of setting up an IT company in Vietnam complicated for foreigners?
A5: While there are steps to follow, the process is generally straightforward. It's advisable to work with local legal experts to ensure compliance with all regulations.
Whether you're considering app development, software solutions, or other IT services, Vietnam offers a promising landscape for your business expansion. By understanding the key aspects of company establishment and leveraging local support, you can navigate the process effectively and set the foundation for a successful venture in Vietnam's thriving IT sector.
4.3 Setting Up a Training Business in Vietnam: A Comparative Guide
Vietnam's burgeoning economy presents a lucrative opportunity for foreign training providers. However, navigating the legal landscape to establish a training business can be complex. This Q&A section aims to clarify the key considerations for foreign investors looking to enter the Vietnamese training market. We delve into the core differences between establishing a foreign-invested company (FIC) and a local Vietnamese company, outlining the legal requirements, capital needs, and operational considerations for each structure.
Q1: What are the main options for a foreign company to operate a training business in Vietnam?
A1: There are primarily three options: establishing a foreign-invested company (FIC) or a local Vietnamese company or M&A a current training business.
Q2: What are the key differences between an FIC and a local Vietnamese company for a training business?
A2:
FIC: Requires compliance with educational service regulations, including minimum capital, infrastructure, and teacher qualifications. Setup time is longer (3-4 months).
Local Vietnamese company: Not subject to educational service regulations, faster setup (1-2 months). Foreigners can hold management positions.
Q3: What are the capital requirements for a training business in Vietnam?
A3: The minimum capital is VND 20 million per student, which can be reduced to VND 14 million if the location is leased. The total capital depends on the expected number of students.
Q4: Are there specific infrastructure requirements for a training business?
A4: Yes, there are. Adequate facilities, a minimum teaching area of 2.5m2 per student, offices, and a library are necessary.
Q5: What qualifications are required for teachers in a training business?
A5: Teachers must have a college degree or equivalent in a relevant field. The student-teacher ratio is capped at 25:1.
Q6: Can foreigners hold management positions in a Vietnamese training company?
A6: Yes, foreigners can hold management positions in a local Vietnamese company by signing labor contracts.
Q7: Is it possible to convert a local Vietnamese company into an FIC later?
A7: Yes, it's possible to convert a local Vietnamese company into an FIC through acquisition. However, it will then be subject to educational service regulations.
Q8: What are the estimated timelines for setting up an FIC and a local Vietnamese company for a training business?
A8: An FIC typically takes 3-4 months to set up, while a local Vietnamese company can be established in 2 weeks.
Setting up a training business in Vietnam offers significant potential but requires careful planning and legal guidance. While both FICs and local Vietnamese companies have their advantages, the choice ultimately depends on the investor's long-term goals, risk tolerance, and financial capabilities. Understanding the regulatory environment and compliance requirements is crucial for ensuring a successful venture. It's advisable to consult with legal and business experts to tailor a strategy that aligns with your business objectives.
4.4 Setting Up a Business Consultancy in Vietnam
Welcome to our comprehensive Q&A session on setting up a business consultancy in Vietnam. As more foreign investors look to tap into Vietnam's growing economy, we've compiled the most common questions our customers have asked about establishing their presence in this dynamic market. From exploring different business structures to understanding the legal requirements, this guide aims to provide clear, concise answers to help you navigate the process of starting your consultancy in Vietnam.
Q1: What are the options for establishing a business consultancy company in Vietnam as a foreign investor?
A1:
There are three main options:
1. Establish a foreign-invested company (FIC)
2. Establish a local Vietnamese company
3. Register a Vietnamese local company and then acquire it through an M&A process
Q2: What are the pros and cons of establishing a foreign-invested company (FIC)?
A2:
Pros:
- The company is legally recognized and protected by the Vietnamese Government
- The investor has full decision-making rights from the beginning
- The investor can control the company by being a legal representative
Cons:
- More complicated process compared to a local company
- More compulsory annual reports to comply with
Q3: What are the pros and cons of establishing a local Vietnamese company?
A3:
Pros:
- Simpler and more time-saving establishment procedure
Cons:
- Need to find a Vietnamese partner
- Risk of losing control if the Vietnamese owner removes you as a legal representative
- Cannot directly remit profits officially and legally
Q4: What is the third option for establishing a business consultancy in Vietnam?
A4:
The third option involves:
1. Registering a Vietnamese local company
2. The foreign investor acquiring the local company after establishment (M&A process)
Advantages of this option:
- Quick initial setup
- Business can run immediately
- Company operation is not suspended during M&A process
- Official and direct profit remittance is possible
- Fewer compliance reports required
Q5: What information is needed to estimate the fee for Work Permit (WP) and Temporary Residence Card (TRC)?
A5:
The following information is required:
1. The city in which the company will be based
2. Capital amount
3. Investors: individual or entity
4. Nationality of investors
Q6: Is business consultancy accessible for foreign investors in Vietnam?
A6:
Business consultancy is generally accessible for foreign investors who come from nations that are members of the WTO. The investor's nationality needs to be confirmed to check this matter.
In conclusion, setting up a business consultancy in Vietnam offers exciting opportunities for foreign investors, but it also comes with its unique set of challenges and considerations. Whether you choose to establish a foreign-invested company, partner with a local entity, or pursue an M&A strategy, each option has its pros and cons that must be carefully weighed against your business goals and resources. Remember that factors such as location, capital, investor status, and nationality can significantly impact the process and associated costs. As you move forward with your plans, we recommend seeking professional advice to ensure compliance with Vietnamese laws and to optimize your business structure for success in this promising market.
As the Vietnamese market continues to flourish, savvy investors who adopt informed and strategic approaches can unlock the door to Southeast Asia's most dynamic and promising business landscape. This comprehensive roadmap aims to serve investors the power and confidence to reap the rewards that this thriving economy has to offer.
*** For any further concerns, please feel free to let us know via our support email info@vanphamllc.com.
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