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Vietnam Company Formation Frequently asked questions (FAQs)

1. How do I register a company in Vietnam if I am a foreigner?

Foreigners are allowed to register their company in Vietnam for starting a business.

In most industries, they can own 100% of the shares of their business. In a few selected industries, company registration in Vietnam is only allowed in a joint venture agreement with a Vietnamese individual or corporate shareholder.

One IBC’ Vietnam company registration specialist will advise you with regards to the need for a joint venture partner.

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2. Does registration of a Vietnam business differ from registration of a foreign-owned one?

Yes. in many ways.

Foreigners registering a new business in Vietnam are notably required to open a capital account in the country, which they will have to use in other to inject their company’s share capital.

Read more: The first step in setting up a company in Vietnam

3. In Order to Carry Out an Investment Project in Vietnam in WFOE or JV Form, must an Investor Set Up a Vietnamese Legal Entity?

Not necessarily. A foreign investor may set up a new legal entity as a wholly foreign-owned enterprise (“WFOE”) or as a JV (and contribute capital to this entity): in this case, an investor must apply both for an investment registration certifcate (“IRC”) and an enterprise registration certifcate (“ERC”), which was formerly called a business registration certifcate (“BRC”). A foreign investor may also contribute capital to an existing legal entity in Vietnam, which does not require an issuance of an IRC or ERC.

Thus, in respect of foreign investors carrying out their frst project in Vietnam, the incorporation of the Vietnamese legal entity takes place simultaneously with the licensing of their frst project. In other words, a foreign investor cannot incorporate a legal entity without a project. However, subsequent to the frst project, an investor may carry out additional projects either using the established legal entity or by setting up a new entity.

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4. What types of Vietnamese legal entities are available?

A foreign investor (just like a local investor) may select one of the following Vietnamese legal entities to carry out a project:

  • A limited liability company (“LLC”), in the form of either a single-member LLC (“SLLC”) or an LLC with two or more (up to a maximum of 50) members (“MLLC”).
  • A shareholding or joint stock company (“JSC”) which is a company with at least three shareholders but no maximum number of shareholders.
  • A general partnership or a limited liability partnership.
  • A private enterprise (akin to a sole proprietorship).

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5. What factors should a foreign investor consider in deciding whether to choose a JV (Partly foreign-owned LLC (The Vietnam joint venture company)?

The two main factors that lead a foreign investor to choose a JV are:

  • (i) some business sectors in Vietnam require a JV to establish a commercial presence in Vietnam; and
  • (ii) the Vietnamese party has a key asset, local know-how and knowledge, or other factors that make the JV the preferred choice.

For example, in real estate development projects, the Vietnamese party usually has the land use rights, which by law cannot be directly transferred to a foreign investor, but may be contributed into a JV.

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6. What are the Vietnam Corporate Income Tax (CIT) rates?

The standard Vietnam corporate income tax (CIT) rate is 20%, though enterprises operating in the oil and gas sectors will be subject to rates between 32% and 50%;

Dividends paid by a Vietnamese company to its corporate shareholders will be completely tax exempt. Furthermore, no withholding tax will be imposed on dividends remitted to overseas corporate shareholders. For individual shareholders, the withholding tax will be 5%;

Interest payments and royalties paid to non-residents individuals or corporate entities will be subject to withholding tax of 5% and 10% respectively;

Personal income tax for residents is levied under a progressive system, ranging between 5% and 35%. However, for non-resident individuals, the tax is levied at a flat rate of 20%.

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7. What are the Value Added Tax (VAT) Rates in Vietnam?

There are three VAT rates: zero percent, 5%, and 10%, depending on the nature of the transaction.

The tax rate of zero percent applies to exported goods and services, international transportation and goods and services not liable to value-added; offshore reinsurance services; credit provision, capital transfer and derivative financial services; post and telecommunications services; and exported products which are unprocessed mined resources and minerals.

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8. Setting up company in Vietnam does has to Tax filings?

Annual corporate income tax returns must be filed with the General Department of Taxation within 90 days from the end of the fiscal year. However, the company will be required to make quarterly income tax payments, based on estimates.

Accounting records must be kept in the local currency, which is the Vietnamese Dong. They must also be written in Vietnamese, though they may be accompanied by a common foreign language such as English.

A Vietnam-based auditing company must audit annual financial statements of foreign business entities. These statements must be filed with the licensing agency, the Ministry of Finance, the statistics office, and tax authorities 90 days before the end of the year.

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9. What are regulations for setting up a company in Vietnam that foreigners must notable?

With the new Law on Enterprises implemented in 2014, an entrepreneur must obtain a Foreign Investment Certificate before company incorporation and will be allowed to appoint multiple legal representatives for the Vietnam company.

A foreign investor may set up a new legal entity as a wholly foreign-owned enterprise or as a JV. The investor must apply for both a Foreign Investment Certificate (FIC) and an Enterprise Registration Certificate.

A private Vietnam company is required to maintain both a local registered address and a resident legal representative. Before the Government approves company registration, the company must sign an office premises lease agreement.

Before any Vietnamese company can repatriate profits, it must submit audited financial statements and complete tax filings to the authorities. Once these compliances are fulfilled, the company must inform the local taxation office, after which it can remit its profits; These profits must be remitted through the company’s capital account, instead of its corporate bank account which is used for daily business operations.

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10. What are required to incorporation company in Vietnam With the type of entity Wholly foreign-owned LLC (100% foreign owned company in Vietnam)?

In order to complete incorporation, foreign-owned LLCs will be required to open a capital account with a local bank, required for share capital injection and transfers of future earnings abroad and obtain approval for a foreign investment certificate (FIC), required by the Vietnam government to allow foreigners to invest in Vietnam. Approval of the FIC requires a minimum investment, commonly set at US$10,000 but which may be higher in some industries.

All Vietnamese LLCs are also required at incorporation to provide the authorities with a registered address in Vietnam, which may be provided by One IBC if needed and a bank certificate of deposit for the amount of share capital, which will need to be transferred no later than 12 months after incorporation is complete.

Post incorporation, all foreign-owned LLCs must provide the authorities with an annual return and submit annual audited financial statements, which are a prerequisite for any remittance of earnings to their parent company.

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11. I would like to expand my business to Vietnam. Can I set up a company there as a foreigner?

Yes, foreign citizens are entitled to expand to Vietnam and incorporate a foreign-owned company in the country.

However, there are certain restrictions and 100 % Foreign Invested Enterprise in Vietnam can be started only in the form of Limited Liability Company (LLC) or Joint Stock Company (JSC).

Depending on the type of business entity you want to pursue, there are further regulations for foreigners to follow when establishing a company in Vietnam.

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12. What are types of company in Vietnam?

The most common company types are Limited Liability Company known as LLC and Joint Stock Company known as JSC.

Both types are suitable for foreigners with an LLC being recommended to smaller companies with a few owners while a JSC better fits big businesses or those that plan to go public.

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13. Is there any minimum capital required prior to company registration in Vietnam?

Although the local law does not stipulate the minimum capital, US$ 10,000 is commonly considered as the minimum capital investors should prove during the registration.

14. Will I be able to hold 100 percent ownership of a foreign-owned company?

Most probably yes. The Vietnamese law enables foreigners to open foreign-owned companies in most business sectors except for six business fields mentioned in the Negative List, namely:

  • Drugs and narcotics.
  • Hazardous chemicals and minerals.
  • Range of specimens of endangered flora and fauna.
  • Prostitution.
  • Human trafficking, sale of human body parts and tissue.
  • Human cloning or asexual reproduction.

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15. Am I required to visit Vietnam to incorporate a company there?

No. One IBC can legally incorporate your Vietnam company without you needing to travel.

16. What is the minimum number of directors required for a Vietnam company?

Under statutory regulations, a Vietnam company requires a minimum of one director.

17. Can my company be 100% foreign-owned?

Yes, a company in Vietnam can be 100% foreign-owned in selected sectors.

18. What is the minimum number of shareholders required for a Vietnam company?

A Vietnam company requires a minimum of two shareholders.

19. Are shareholder/director details available for public viewing?

Yes.

20. Is a Vietnam company required to submit an annual tax return and/or financial statement?

All foreign company in Vietnam are obliged to submit an annual return and are required to have their financial statements audited annually.

21. What are the problems of setting up a 100% foreign owned company?

A foreign-owned company is prohibited from operating 100% foreign-owned entities for the distribution of imported and domestically-produced goods, investment in the securities businesses, warehouse services and freight transport agency services, and maintenance and repair services of household equipment.

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22. What is the process to register a company in Vietnam?

The process to register a company involves 5 steps.

  1. Applying for an investment registration certificate (IRC).
  2. Applying for an enterprise registration certificate (ERC).
  3. Making and registering the company seal.
  4. Making a public announcement.
  5. Registering the tax code/ VAT number with the tax department.

This is the standard process to register a company to operate any type of business in Vietnam. After this, depending on the nature of the business, the entity may or may not require additional sub licenses.

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23. How can I get a legal address to register a company?

If you do not have an address to register your entity, One IBC will provide you with a legal address for a competitive price. Alternatively you can use any of the many virtual office services in Ho Chi Minh City.

24. What is the next step after the entity has been registered?

The next step after an enterprise registration certificate has been issued is opening up of a company bank account, transferring in the charter capital and registering the tax code with the tax department.

25. Do I need any special licenses over and above the investment registration certificate (IRC) & enterprise registration certificate (ERC)

Depending on the nature of your business you may or may not need a special licenses.

For example if you consider the case of any un-conditional businesses such as general consultancy, no special license is required. On the other hand any sort of food or cosmetics related business, though unconditional may require some special licenses. For example a whole sale food import business will require a food import license issued by the ministry of health. A similar license is required to setup and operate a restaurant or food processing facility.

In the case of conditional business, most of these require additional licenses. For example investors looking to setup up educational institutions, require a special education license from the department of education. Retail trading also requires a special retail trading license issued by the department of industry and trade.

It should be noted that for both conditional as well as unconditional business, these special licenses can only be obtained after an investment registration certification and enterprise registration certificate have been issued. A good rule of thumb is to examine the licensing laws for a particular business in your own country along with the required criteria. Generally something of a similar nature will be applicable in Vietnam.

One IBC as an experienced consultant can advise and assist in procuring these additional licenses. Furthermore in certain cases where the investor may not be able to meet certain conditions, we can suggest practical solutions or workarounds to overcome the more stringent requirements.

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