Doing business in Vietnam

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?

Location

Foreign direct investment can be found throughout Vietnam.

The principal commercial centres are Ho Chi Minh City in the south and Hanoi in the north, with Da Nang an important commercial centre in central Vietnam. Significant manufacturing and industrial investment is also located in surrounding provinces and industrial zones.

The appropriate location will depend on factors including the nature of the business, infrastructure, availability and cost of labour, proximity to customers and suppliers, logistics and the availability of investment incentives.

Payroll and HR requirements

A foreign-invested enterprise in Vietnam may employ both Vietnamese and expatriate employees.

The employment of foreign nationals is subject to Vietnam’s immigration and labour requirements. Depending on the circumstances, foreign employees may require an appropriate visa and work permit or confirmation that they qualify for an exemption.

Employers are generally responsible for withholding Personal Income Tax (“PIT”) from employees and accounting for applicable statutory insurance contributions.

Vietnam has compulsory social, health and unemployment insurance regimes. The contributions applicable to employers and employees, and the position for expatriate employees, depend on the relevant statutory rules and circumstances of the individual.

As contribution rates, thresholds and requirements can change, businesses should confirm the current requirements when establishing or reviewing their Vietnamese payroll.

Corporate Income Tax

The standard Corporate Income Tax (“CIT”) rate in Vietnam is 20%.

Reduced CIT rates can apply to certain qualifying smaller enterprises. Different rates can also apply to particular industries and activities.

Vietnam offers a range of tax incentives designed to encourage investment in particular industries, activities and geographical locations.

Depending on the nature, scale and location of the investment, qualifying projects may benefit from:

• preferential rates of Corporate Income Tax
• periods of exemption from Corporate Income Tax
• subsequent periods of reduced Corporate Income Tax
• incentives for qualifying research and development and technology activities
• exemptions from certain import duties
• other investment incentives available under Vietnamese legislation

Activities that may qualify for incentives include certain high-technology activities, scientific research and development, digital technology, environmental protection, renewable energy, infrastructure and other sectors encouraged under Vietnam’s investment legislation.

Special incentives can also be available for certain large-scale investment and research and development projects.

The availability and duration of incentives are subject to detailed conditions and can change as Vietnam’s investment and tax policies develop. Investors should therefore confirm the incentives available to a particular project before making an investment decision.

Tax losses can generally be carried forward for up to five consecutive years, subject to the relevant conditions.

Foreign Contractor Tax

Foreign organisations doing business in Vietnam or deriving Vietnam-sourced income without establishing a Vietnamese legal entity may be subject to Foreign Contractor Tax (“FCT”).

FCT generally comprises a Corporate Income Tax component and, where applicable, a Value Added Tax component.

The applicable rates and method of taxation depend on the nature of the goods or services supplied and the method under which the foreign contractor is taxed.

Different deemed rates can apply to activities including the supply of goods, services, construction, transportation, interest and royalties.

Businesses entering into contracts between Vietnamese and overseas entities should consider the FCT implications when negotiating the commercial terms, including whether contractual amounts are expressed on a gross or net-of-tax basis.

Value Added Tax

Vietnam operates a Value Added Tax (“VAT”) system.

The standard VAT rate is 10%, with a reduced 5% rate applying to specified goods and services. Certain supplies can also be zero-rated or exempt from VAT.

Temporary VAT reductions may apply to qualifying categories of goods and services as part of Government economic measures. Businesses should therefore confirm the applicable VAT rate at the time a transaction takes place.

VAT treatment can also differ for cross-border supplies, imports and digital or e-commerce services supplied by overseas businesses.

Withholding taxes

Vietnam does not generally impose withholding tax on dividends paid by a Vietnamese company to a foreign corporate shareholder.

Payments of interest and royalties to overseas recipients can be subject to Foreign Contractor Tax. Under the standard domestic rules, the Corporate Income Tax component is generally 5% for interest and 10% for royalties, although the precise treatment will depend on the nature of the payment and the circumstances.

Relief may be available under an applicable Double Taxation Agreement, subject to satisfying the relevant conditions and procedures.

Double Taxation Agreements

Vietnam has an extensive and growing network of Double Taxation Agreements with countries around the world.

These agreements can provide relief from double taxation and affect the taxation of cross-border business profits, employment income, interest, royalties, capital gains and other income.

Treaty entitlement and relief are subject to the terms of the relevant agreement and Vietnam’s domestic requirements, so the position should be considered on a case-by-case basis.

Transfer pricing

Vietnam has comprehensive transfer pricing rules which are broadly based on the arm’s length principle and international transfer pricing concepts.

Businesses undertaking transactions with related parties may be subject to transfer pricing disclosure, documentation and compliance requirements.

The Vietnamese tax authorities continue to focus closely on transfer pricing and related-party transactions, particularly within multinational groups.

Businesses should therefore ensure that appropriate transfer pricing policies, supporting documentation and intercompany agreements are established and maintained.

Is there anything else that I should know?

Vietnam has developed into one of Southeast Asia’s most significant destinations for foreign direct investment, supported by its growing domestic market, manufacturing base and increasing integration into international supply chains.

Its location within Southeast Asia, extensive coastline and proximity to major Asian markets have helped Vietnam develop as an important manufacturing and export hub.

Vietnam also has an extensive network of free trade agreements. These include agreements with major trading partners and participation in regional arrangements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) and the Regional Comprehensive Economic Partnership (“RCEP”), as well as its free trade agreement with the European Union.