Setting up a company in Vietnam – If you are thinking about ‘setting up a company in Vietnam’ or want to apply for a business registration certificate but don’t know how, then this article is for you. Applying for a “business registration certificate in Vietnam” is actually quite easy however foreign business in Vietnam often struggle with this since they don’t understand the procedure for incorporation of a company and/or fall prey to a law firms in Vietnam that overcharge for business registration services.
To begin with, we would like to state that at Mahan, we are dedicated towards guiding foreign businesses in Vietnam extract value from a growing economy using a combination of our investment expertise and local experience so that if you have a good business idea, your business can grow and expand and avoid costly pitfalls that most first time investors fall victim to.
We do this by offering simple and direct advice on setting up company in Vietnam. This predominantly includes information on the business registration process in Vietnam i.e. what documents need to be provided in order to apply for a business registration certificate and the activities to be undertaken post company registration.
Setting up a company in Vietnam
Minimum requirements for Business registration certificate
For setting up company in Vietnam there are three basic requirements which ever foreign business needs to have in place prior to commencing the business registration process.
Shareholder
Atleast one shareholder is required for setting up a company in Vietnam. This shareholder can also act as the director of the company. In Vietnam, there is no need for a company to appoint a local director or a company secretary.
Legal Address
Every foreign business in Vietnam needs to have a legal address in order to register their business. A rented apartment cannot be used as a legal address to register a business since it is primarily a residential space and hence cannot be used for commercial activities. Typically an address of a town house or any commercial space will work for business registration.
Paid up capital/ Charter capital
Incorporation of a company in Vietnam requires a minimum capital investment of USD 10,000.
In actuality, for setting up a company in Vietnam there is no set minimum capital. The investor may decide on amount of paid up capital vis-a-vis their business. We typically propose a minimum investment capital of USD 10,000 on the basis of average business operations cost for one year. If you would like to know more on how we arrived at this figure, please refer to our section on Common investor questions by clicking here.
Timelines for setting up a company in Vietnam
Generally, incorporation of a new foreign business takes around 25 working days. The registration time is however dependent entirely on the nature of the business. Conditional businesses are a subset of businesses in Vietnam which required multiple governmental approvals. These businesses typically take 45 – 60 working days to register. The reason these businesses take longer to register is because they go through a review process and so require multiple clearances.
Type of entity
Limited Liability company (LLC)
In general, if you are setting a company in Vietnam and do not intend to go public then a limited liability company (LLC) is the best solution. This type of entity is simple to register and is easy to operate.
Some of the features of a limited liability company (LLC) are as follows.
1. A limited liability company can be setup as a 100% foreign owned entity or a joint venture (JV).
2. Limited liability companies can be setup by an individual or a corporation and can have form between 1 to 50 members.
3. Limited liability companies do not require a management board to pass resolutions.
4. In case of limited liability companies with more than 1 member, a simple members council can pass resolutions.
5. The liability of the members in a limited liability company is equivalent only to the limit of the paid up capital.
Joint Stock Company (JSC)
The next option available is a joint stock company (JSC). Generally, big established corporations favor this type of entity. The main feature of a JSC is that it can get listed on a stock exchange and thereby offer shares to the public. It however has a complicated organisational structure requiring at least 3 directors and a corporate board to pass resolutions. It also necessarily requires a third party to audit its books of accounts each year.
Representative Office (RO)
A representative office, commonly referred to an RO is another option available for doing business in Vietnam. An RO is a vehicle that allows foreign companies to have a presence in Vietnam to carry out the following activities only.
- Market research;
- Promoting the activities of the foreign company; and
- Acting as a representative for the foreign company.
Though simple to setup and operate, a RO suffers from one main drawback mainly that it cannot conduct any commercial activity or generate any revenue locally.
Typical Costs for setting up a company in Vietnam
Pre Incorporation
The costs for company registration in Vietnam using our services, for most business range from between USD 1900 – 2400. However, the final costs depend on the nature and complexity of the business lines. Typically, our company registration costs cover the following services.
1. Consultancy on pre & post company registration activities.
2. Applying for an investment registration certification and a business registration certificate .
3. Procuring and registering a company seal.
4. Registering the company with the registrar of companies.
Post Incorporation
Tax registration is also a part of of setting up a company in Vietnam process. The deadline to complete this procedures is 10 days post company registration. In order to avoid any un-necessary fines and penalties, we include this service as part of our business registration package. The typical costs for these are around USD 1000 – 1200 and include the following services.
1. Opening the company bank accounts (investment account in USD & current account in VND).
2. Completing the mandatory tax registration.
3. Payment of annual business license tax.
4. Procurement & registration of company digital signature (3 year subscription) and e-VAT invoices (300 invoices).
As part of our one stop service with setting up a company in Vietnam, we also provide immigration and related services. The costs for there are around USD 1300 – 1500 depending on the nationality of the investor. This service includes the following.
1. Applying for an investor visa and residence card post incorporation of company.
2. Applying for a letter of work permit exemption.
FREE services after setting up a company in Vietnam
Post incorporation of company, we also provide a wide range of FREE services that most other agencies will not provide. These are typically aimed at helping foreign business in Vietnam optimize their operations. They typically include the following.
1. Advice on accounting and book keeping.
2. Tax planning and avoidance.
3. Contract due diligence.
4. Assistance with HR & staffing.
5. Low cost office setup.
6. Sharing of vendor contacts for cheap supplies.
Process for business registration in Vietnam
1) Identify the business codes to register prior to incorporation of company
The process for setting up a company in Vietnam begins with identifying the correct business codes to register. These business codes are essentially a four digit number associated with a brief description of the business eg. 4632 – Wholesale of food products. This code along with the description is recorded in the investment registration certificate and provide a basis for a foreign business in Vietnam to carry to investment activities in that particular business.
As one might imagine, there are indeed a large number of business codes to choose from. In order to simplify this process, we will identify the correct business codes to register, once you let us know the exact nature of the your business.
In addition, to letting you know which business codes to register, we will also share information on which business codes and associated business lines are open to 100% FDI eg. wholesale trading, which business lines require a local partner and/ or have a cap on foreign ownership eg. tourism, which business lines are conditional and require case-by-case review or departmental approval eg. e-commerce, which business lines require sub-licenses eg. F&B and which other business lines are not open to foreign investment eg. finance. One should be aware that there is no limit on the number of business lines/ codes a foreign business may register in Vietnam. However the more the number of business codes being registered, the higher must be the charter capital.
2) Prepare the necessary documents and show proof of funds
Notorised passport copies
As stated in an earlier section, there has to be a minimum of 1 shareholder to setup a company in Vietnam. In order to carry out the incorporation of a company in Vietnam, this shareholder will need to provide notorsied copies of his/ her passport.
When working with Mahan, we will get the necessary notoray work done and manage this aspect.
Legal Address
The next requirement for setting up a company is a legal address. This will serve as the registered address of the company. A singed lease agreement is required for this purpose. This lease must be made in the name of the investor prior to setting up a company.
At Mahan, we can provide assistance in getting a legal address to register the company for a small fee. The costs for this service are $120/ month for a minimum lease period of 6 months.
Proof of funds
Prior to setting up a company in Vietnam, you will also be required to show that you have sufficient funds to carry out your intended business. There are essentially two ways to go about this.
1. Procure a bank statement from your overseas bank
In Vietnam, all documents that originat outside of the country need to be consular legalised. This is the main drawback of this process.
In conclusion, we would like to state that consular legalisation though straightforward, is a time consuming and expensive process. Hence we do not recommend it
2. Get a bank statement from a local Vietnamese bank
At Mahan, we will help you open a special category account with a local bank prior to setting up a company in Vietnam. This way you can deposit the charter capital (in USD) into this account, get a bank statement from the local bank and present this as proof of funds.
The benefit of this is that the charter capital which anyways has be deposited into the company account within 90 days post incorporation is already in the country.
3) Sign off on the application pack for IRC, ERC & company seal
The application pack consists of the application documents for the Investment registration certificate (IRC), enterprise registration certificate (ERC), the seal registration. In total, an investor will sign about 12-15 as part of the business registration process.
At Mahan, our legal associates will prepare the entire application pack, then submit these documents to concerned government department along with other documents of the investor viz. passport, lease contract, proof of funds, pay all the necessary fees, follow up with the authorities, answer any queries and lastly receive the investment certificate and enterprise registration certificate on your behalf.
Additionally, they will also prepare the seal as per the required specifications and get is registered with concerned government department. Subsequently, we will also ensure that the company is registered with the registrar of companies and listed on the national registration portal.
On completion, your company details will also appear online and be available in the public domain. If you wish to test this please click the link here . Then enter ‘Mahan’ in the search box in the top right hand corner. YOu will not be able so see all of our company’s details.
The total time to get an investment registration certificate and business registration certificate is about 25 days from the date of submission. This is applicable for all business lines that do no require governmental review and are not subject to any pre-conditions.
4) Tax registration, company bank account opening & business license tax
The next step as part of setting up a company Vietnam is registering the business license number listed on the business registration certificate with the tax department. This procedure has to be completed within 10 days of being awarded a business registration certificate. Once registered, this number becomes the tax/ VAT number of the company. This number is typically quoted in all transactions. It is useful to know that in Vietnamese this is also referred to Ma so thue (MST).
Post incorporation of a company, it is also mandatory to pay the business license tax. This is annual tax which is levied on all business who intend on doing business in Vietnam. This tax is based on the charter capital.
For businesses with a registered charter capital of less than 2 billion the annual business license tax is VND 1 million (USD 50). However, for business with a higher charter capital higher than VND 2 billion, the annual business license tax is VND 1.5 million (USD 75).
As per the guidelines of the company registration process in Vietnam, the charter capital has to be transferred to the company bank account within 90 days and hence it is necessary to open a company bank account immediately after registering the tax number. Four documents are needed to open a company bank account viz. passport of investor, IRC, ERC, company charter & company seal. Another reason why it is imperative to open a bank account is that all taxes are paid electronically via the company bank account. This includes the annual business license tax.
At Mahan, we carry out the entire process of tax registration, company bank account opening and payment of the annual business license tax for you, as part of our one stop service. Also included in this service is the purchase of a digital signature in the name of the company which is used to sign all reports which are submitted to the tax department on behalf of the company. We also provide 300 e-VAT invoices. These are essentially tax invoices which can be issued to customers for services rendered.
5) Investor Visa, Residence card and work permit cancellation
After incorporation of a company, an investor automatically becomes eligible for a temporary residence card (TRC). This enables an investor to stay in Vietnam to manage their business. It is useful to know that a temporary residence card once issued also serves as a multiple entry visa and can be used to enter and exit Vietnam multiple times. The fist step in getting a temporary residence card is to apply for an investor visa (category DT). Next, you will need to exit and re-enter Vietnam using this visa. After entry, we will file and application with the immigration department requesting them to issue a TRC. The process take around 7 working days after which you will get temporary residence status in the form of an temporary residence ID card.
At Mahan, we carry out this process simultaneously with the tax registration process. As part of our one stop service, we also help our clients who are setting up a company in Vietnam get a certificate of work permit exemption as it permits them to work/ manage their business without the need for a work permit.
Both the residence card and letter of exemption from work permit are typically issued for 1 year after which they have to be renewed.