Vietnam has developed to become an important destination for foreign investors and business growth, as well as one of the region’s fastest-growing economies in the world. One of the primary factors that draw foreign business owners and entrepreneurs to Vietnam is its position as the third-largest market in Southeast Asia. This is further bolstered by its rapid economic growth and cost-effective business environment.
The essential procedures you must take into consideration to effectively expand your operations to Vietnam will be outlined in this article.
Vietnam’s Encouraged Sectors for Foreigners
Vietnam incentivizes investment in specific sectors by offering tax exemptions. These sectors typically align with the government’s priorities and may be categorized as “high tech,” “large scale,” or “socially important” industries.
Here are some examples of these sectors:
- Research and development
- Software Production
- Goods manufactured and produced for exports
- Processing of raw materials
- Sectors utilizing cutting-edge manufacturing techniques
- Sectors that effectively use natural resources
- Building constructions (infrastructure facilities and industrial productions).
- High-tech activities, high-tech industrial support products, R&D activities, production, and products derived from technological and scientific discoveries in line with applicable laws, and technology.
Vietnam’s Restricted Sectors for Foreigners
The Vietnamese government imposes restrictions on foreign investment in certain sectors to protect sensitive or strategic industries. The following are associated with the restricted industries:
- Newsgathering, press activities, and public opinion polling.
- Services for contracting Vietnamese laborers to work abroad Services for industrial property representation and intellectual property evaluation.
- Vacation services (except for international tourism services for inbound tourists).
- Oil & Gas Exploration
Legal Entity available to foreign investors in Vietnam
A foreign individual or entity looking to establish a company in Vietnam must choose an appropriate legal structure that suits their business operations. Typically, three types of legal entities are appropriate for investors:
A limited liability company formed by foreign investors in Vietnam may be under the forms of either:
- A 100% foreign-owned enterprise; or
- A foreign-invested joint-venture company between foreign investors and at least one domestic one.
- A joint-stock company is formed by shareholders based on their subscription for shares in the company.
- A joint-stock company must have at least three shareholders. The company may either be 100% foreign-owned; or a joint venture between both foreign investors and domestic ones.
This form of foreign investment in Vietnam may be set up between a legal entity or an individual and the individual general partner. The partner has unrestricted liability for the operations of the partnership
Foreign investors may do business in Vietnam by:
- Opening Representative offices
- Opening Branches
- Forming a Business cooperation contract (BCC)
- Build-operate-transfer (’BOT’), Build-transfer (’BT’), and Build-transfer-operate (’BTO’) Contracts.
When foreigners are in the process of establishing a business in Vietnam, they need to prepare the following document:
- Investment Registration Certificate (IRC): This certificate is required for foreign investors and outlines the details of the investment project, including capital, business activities, and project location.
- Enterprise Registration Certificate (ERC): This certificate is issued upon the establishment of the business entity, providing legal recognition to the company. It contains information about the company’s name, address, business lines, and ownership structure.
- Open a bank account and prove the investment balances: Proof of financial capacity, often in the form of bank statements, is necessary to demonstrate the ability to cover initial investment and operational expenses.
- Office Lease must have a registered office address in Vietnam: If the business will operate from a specific location, a lease agreement for the premises may be required.
- Legalized Copies of Foreign Documents: Depending on the type of business and industry, additional documents such as licenses, permits, and approvals from relevant government authorities may be necessary.
- Passports and Legal Documentation for Shareholders/Directors: Personal identification documents, such as passports, and legal documents demonstrating the eligibility of shareholders and directors may be required.
- Initial Tax Registration: Registration with the tax authorities is essential to fulfill tax obligations.
Please note that specific documentation requirements can vary depending on the type of business, location, and other factors. It’s advisable to consult with a legal advisor or a local business registration authority in Vietnam for precise information and guidance related to your particular business venture.
ASL LAW, with our highly experienced business lawyers and legal consultants, is committed to offering our clients comprehensive legal services at an affordable rate for the establishment of companies in Vietnam. Our services cover every stage, from the initial steps to full operational readiness.
As a result, our clients can ensure that their businesses operate in Vietnam in a legally compliant, efficient, and cost-effective manner.