Doing business in Vietnam
- How quickly can I set up a business?
- What is the minimum investment needed?
- How can I raise finance?
- What are the legal requirements for setting up my business?
- What structure should I consider?
- What advice can you give me in regards to payroll and taxation requirements?
- Is there anything else that I should know?
How quickly can I set up a business?
The licensing process for setting up a business in Vietnam takes approximately from 15 to 45 days following lodgement of all required license application documents, depending on the applicant’s proposed setup and scope of business.
What is the minimum investment needed?
Generally, there is no minimum capital requirement, except for a few types of business (such real estate, banking etc).
100% foreign ownership is allowed for most businesses. However, in certain protected sectors (e.g., logistics, infrastructure, petroleum, mining etc) a certain percentage of local ownership is still required.
Promoted businesses includes agriculture, food processing, manufacturing, pharmaceutical, health and education etc.
Highly promoted businesses include scientific research, hi-tech or bio-tech developments, infrastructure projects, renewable energies etc.
How can I raise finance?
A company’s capital may be financed by equity or loans. The equity capital must be contributed by the shareholder(s) (in cash or assets) within 90 days following company incorporation. Loan capital may be financed by an onshore or offshore loan (including a shareholder’s loan).
What are the legal requirements for setting up my business?
Commonly, a foreign company may carry on business in Vietnam in the form of (i) a foreign contractor, (ii) a Representative Office or (iii) a limited liability company (with 100% foreign ownership by a single or multiple shareholders, or a joint-venture/joint-stock company with a Vietnamese shareholder. In some sectors (e.g., banking, foreign law firm etc), a branch is also permissible. Other structures include Business Cooperation Contracts (“BCC”), Build-operate-transfer (“BOT”), Build-transfer (“BT”), Build-Transfer-Operate (“BTO”) contracts and Public Private Partnership (“PPP”).
Generally, all foreign direct investments (“FDI””) are welcomed in Vietnam, unless specifically prohibited by law. In some sectors, FDI is subject to certain conditions or restrictions.
To set up legal business presence in Vietnam, a foreign investor must first obtain the relevant licence, permit, or certificate, which depends on the legal form of the business. For setting up a company, a foreign investor must first apply for two certificates namely Certificate of Investment Registration (CIR) and Certificate of Enterprise Registration (CER) by lodgement of an application to the relevant local licensing authority, which is required by law to process the application within 15 to 45 days, but it may take longer in practice.
What structure should I consider?
Common legal forms of doing business in Vietnam include:
• Foreign Contractor – if no legal presence in Vietnam is required. No business license is required.
• Representative Office (“RO”) – if only legal and administrative presence is required and all commercial transactions in Vietnam are carried out by the offshore head office. A RO is not allowed to engage directly in income-generating activities in Vietnam.
• Limited Liability Company – if full legal and commercial presence in Vietnam is required.
What advice can you give me in regards to payroll and taxation requirements?
To date, FDI is seen throughout Vietnam. Key locations include Ho Chi Minh City (south), Da Nang City (central) and Hanoi City (north) and other cities or provinces surrounding these locations.
Payroll and HR requirements:
A FDI company in Vietnam may employ both local and expatriate employees. The employment of expatriates is subject to work visa/permit and pre-approval by the labour authority.
There are employees’ personnel income tax, and statutory insurance contributions (including social, health and unemployment insurances) by both employers and employees. Generally, employers are required to withhold their employees’ personal income tax and statutory insurance contributions, file reports and pay the tax and statutory insurance contributions on behalf of their employees.
The standard corporate tax rate for companies is 20%. Subject to conditions (key conditions including location and type of business), a company may enjoy the following tax incentives:
• Up to 4 years of tax holiday.
• Up to 9 years of 50% tax reduction.
• Reduced tax rate of 10% or 17% for up to 15 Years (or indefinitely in special cases).
• 200% accelerated depreciation.
• Loss-carry forward up to 5 years.
• Import duty exemption for imported fixed assets, for some projects.
• Import VAT exemption for supplies not available in Vietnam.
Foreign contractors carrying businesses in Vietnam (without setting up a legal business presence) pay tax at a deemed flat corporate tax rate ranging from 1% to 10% of Vietnam-sourced income and a deemed flat VAT rate ranging from 1% to 5%.
The standard VAT rate is 10%. Some goods and services enjoy a reduced VAT rate of 5%.
There is no dividend withholding tax. Interest withholding tax rate is 5%. Royalty withholding tax rate is 10% or a lowered rate capped by relevant tax treaty.
Vietnam has entered tax treaties with over 75 countries and over 65 of which are now effective. Most tax treaties follow the OECD Model Convention and tax treaties generally prevail over the domestic tax laws.
Vietnam also has transfer pricing rules which closely resemble OECD transfer pricing rules and tax authorities in Vietnam are becoming increasingly vigilant to transfer pricing practices of multi-national companies in Vietnam in recent time.
Is there anything else that I should know?
Vietnam has emerged as one of Asia’s strongest economic performers in recent years. Since 2010, Vietnam’s GDP growth has been at least 5% per year, and in 2017 it peaked at 6.8%. Its robust economy has even managed to ride out the fallout of the COVID-19 pandemic. The World Economic Forum says: “Today, Vietnam is one of the stars of the emerging markets universe. Its economic growth of 6-7% rivals China, and its exports are worth as much as the total value of its GDP.” With a thriving export economy and strong foreign investment, McKinsey calls Vietnam one of the ‘outperformers’ of the Asian economy. Fitch Ratings says Vietnam’s “economic resilience and success in bringing the coronavirus outbreak under control” puts it in a position to be one of a few APAC countries expected to continue to record positive economic growth.
Vietnam’s key attractions to FDI include: political stability coupled with government’s pro-business policies; stable and high-growth economy; increasing integration into global economy; large market of almost 100 million potential consumers with increasing purchasing power, tech-savvy and receptive to new trends and consumer culture; a young and large workforce with high literacy rate and hard-working attitude; low cost of starting up a business; low labour cost and increasing productivity; strategic geographical location with beautiful landscapes and rich natural resources.
The legal framework for doing business in Vietnam is undergoing rapid reform, which represent both opportunities and challenges. Doing business in Vietnam effectively may require a whole new different approach. Norms, assumptions, and common senses that work in other countries may not necessarily work in Vietnam. Things to watch out for include:
• Legal framework and administrative requirements change frequently. Inconsistencies between rules and practices occur.
• Intellectual property protection law is in place, but enforcement remains an issue.
• Infrastructure is improving significantly but may still be an issue for some businesses.
• Despite large presence of international banks in the country, international banking may be sometimes problematic.
• Customs and taxation rules and practices are complex and change frequently.
Our firms in Vietnam
How can Kreston grow your business?
Select your business type:
Below is the International Accounting Bulletin’s (IAB) latest piece discusses the post-pandemic options for developing countries in relation to tax, […]
HMRC recently published its long-awaited ‘Cryptoassets manual’ signalling that the wait-and-see era might be over when it comes to accounting […]