How to Establish a Business in Vietnam | Company Registration for Foreigners – Everything You Need to Know

Are you aspiring to establish a company registration in Vietnam? If so, today’s article is for you.

Are you aspiring to establish a company registration in Vietnam?(Are you aspiring to establish a company registration in Vietnam?)

Becoming a foreign business in Vietnam can require a significant amount of time and effort to start due to the differences in laws and regulations for registering a foreign-invested company here. However, don’t let that overshadow the fact that starting a business in Vietnam can be a great opportunity for you to pursue. You may have heard a lot about how Vietnam is developing in Southeast Asia. There are abundant opportunities for various industries to grow as the demand increases, with a young and sustainable workforce, along with affordable labor costs, allowing you to start even with a modest budget.

 

1. Why should you invest in Vietnam and establish a company registration in Vietnam?

Today, Vietnam is a dynamic country, emerging as a newly developing economy and a market that attracts many skilled workers domestically and internationally to work for companies, such as engineers, technicians, experts, etc. With the opening of the WTO trade agreement, this is a perfect time if you need to establish factories in Vietnam for manufacturing goods for export. And your factory’s growth will be substantial due to the relatively low taxes you have to pay. Therefore, this can be a good opportunity to seize. Lastly, opening a company in Vietnam is relatively inexpensive compared to other countries in Southeast Asia: from a few dongs to a few thousand dollars, you can have a solid base for your business and establish a long-term presence in Vietnam.

(Vietnam's accession to the WTO is an opportunity for development and attracting foreign investment. )(Vietnam’s accession to the WTO is an opportunity for development and attracting foreign investment. )

Therefore, as a businessperson, you should pay close attention to and have a deep understanding of the Vietnamese market.

2. The benefits of owning a business when establishing a company registration in Vietnam are as follows:

FDI enterprises continue to expand investment in Vietnam to establish companies(FDI enterprises continue to expand investment in Vietnam to establish companies)

Owning a business in Vietnam will help you in two ways:

  • First, you can start your entrepreneurial journey in Vietnam easily and quickly. If you already have one or several businesses in other countries, owning a business in Vietnam helps you expand your operational and business market, as Vietnam has a good import-export ratio in the Asian region.
  • Second, owning a business in Vietnam is a condition that can help you obtain a long-term investment visa in Vietnam. For details, please refer to the investment visa in Vietnam here: https://vietnamwp.com/en/investment-visa-investment-temporary-residence-card/

3. Ways to establish a company registration/commercial presence in Vietnam

According to the regulations of Vietnamese law, there are three common types of companies/commercial presences in Vietnam:

  • Establishing a company with 100% invested capital, with the type of company being a Single Member Limited Liability Company (LLC).
  • A Vietnamese or foreign enterprise contributes capital as regulated to establish a company, with the types of companies being Joint Stock Companies (JSC) or Multi-member Limited Liability Companies.
  • Establishing a Representative Office in Vietnam.

Each type of business entity has its advantages and disadvantages, depending on the needs and capabilities of individuals or organizations to choose the appropriate establishment model.

3.1. Single Member Limited Liability Company (LLC)

(Established Single Member Limited Liability Company)(Established Single Member Limited Liability Company)

This type of business entity is owned by one individual or organization that contributes capital to establish the company.

  • Advantages of a Single Member TNHH 

As a legal entity, the members of the company are only liable for the company’s activities within the scope of the capital contributed, thus reducing risks for the owner.

  • The organizational structure of the company is the simplest among types of enterprises.
  • The owner of the company has full authority to decide on all matters related to the company’s operations without being influenced or facing difficulties in making decisions.
  • The owner can be the company’s accountant without having to hire another person.
  • Allowed to issue bonds to raise capital.
  • Disadvantages of a Single-member TNHH:
    • Capital mobilization for a Limited Liability Company is restricted due to having only one member and not having the right to issue shares.
    • The owner’s salary is not considered a business expense.

3.2.  Multi-member limited liability company

A multi-member limited liability company is a business entity with two or more members, who can be organizations or individuals, and the number of members cannot exceed 50.

Established a multi-member limited liability company(Established a multi-member limited liability company) 

  • Advantages of a multi-member limited liability company:
      • As a legal entity, the members of the company are only liable for the company’s activities within the scope of their capital contribution, which reduces risks for the contributors.
      • The number of members in a multi-member limited liability company is usually small, and the members are often acquaintances or trusted individuals, making the management and operation of the company less complex.
      • The transfer of ownership of capital is tightly regulated, making it easy for investors to control changes in membership and limit the entry of strangers into the company.
      • When transferring capital, the transferring member is required to declare and pay personal income tax, and in the case of transferring capital at a nominal value, the tax to be paid is zero.
      • The company is allowed to issue bonds to raise capital.
  • Disadvantages of a multi-member limited liability company:
    • A multi-member limited liability company is subject to tighter legal regulations compared to a sole proprietorship or partnership.
    • The ability to raise capital for a multi-member limited liability company is limited as it does not have the right to issue shares.

3.3. Joint stock company (JSC)

Established Joint-stock company(Established Joint-stock company)

  • Advantages of a joint stock company:
      • The liability of shareholders in a joint stock company is limited to the extent of their capital contribution, so the risk exposure for shareholders is not high.
      • The capital structure of a joint stock company is highly flexible, allowing for multiple contributors to invest in the company.
      • The ability to raise capital for a joint stock company is high through the issuance of shares for sale or public offering, which is a unique characteristic of a joint stock company.
      • The transfer of ownership of capital in a joint stock company is relatively easy, without the need to go through procedures for changing shareholders with the Department of Planning and Investment, thus the range of participants in a joint stock company is broad, including even civil servants who have the right to purchase shares of a joint stock company.
  • Disadvantages of a joint stock company:
    • The management and operation of a joint stock company can be complex due to the large number of shareholders, who may not know each other and may even have conflicting interests.
    • Founding shareholders may lose control over the company.
    • The establishment and management of a joint stock company are more complicated than other types of companies due to strict regulations, especially regarding financial and accounting regimes.
    • Only founding shareholders will display information on the national business registration system (if there is a transfer of shareholders, the founding shareholder will still have his or her name on the business registration, and will not be lost even though the transfer is complete. Capital). The shareholders who contribute capital to each other do not have to carry out the procedures for changing the contents of business registration, only within the enterprise and not recorded on the enterprise registration system of the management agency.
    • For a joint stock company, when transferring shareholders, the personal income tax rate is 0.1% according to the securities transfer (even though the company has no profit), but this personal income tax rate is still applied.

3.4. Representative Office of Foreign Trader in Vietnam

Representative Office of Foreign Trader in Vietnam(Representative Office of Foreign Trader in Vietnam)

  • Advantages of a Representative Office of Foreign Trader in Vietnam
    • Easy to establish and manage, as the representative office is allowed to recruit foreign and Vietnamese labor to manage and promote local business contracts, search and develop products, and explore opportunities for buying and selling goods and providing services. Foreign employees working for the representative office may be granted work permits and 02-year temporary residence cards, equivalent to multiple-entry visas, for themselves and their family members.
    • Although the representative office can support many business activities for the parent company, it is easy to manage, cost-effective, and avoids risks arising from local administrative procedures: not subject to taxes such as Value Added Tax (VAT), Corporate Income Tax (CIT), not required to keep accounting records or perform independent audits, and easy to dissolve the representative office. Therefore, the representative office is the most cost-effective option for investment activities in Vietnam.

Disadvantages of a Representative Office of Foreign Trader in Vietnam

  • The representative office of foreign traders in Vietnam is not allowed to engage in profit-generating activities but is limited to conducting surveys, market research, and other non-profit activities. In cases where the trader does not have enough information to decide on investment, the representative office will be a suitable position in Vietnam, as the costs before and after establishing the representative office will be much lower than setting up a subsidiary company. On the other hand, establishing a joint-stock company or a limited liability company will be the optimal choice for investors with plans to produce goods in Vietnam or engage in sales activities. Establishing a company in Vietnam will provide investors with more flexibility in their business activities.
  • The representative office of foreign traders in Vietnam must comply with labor and social insurance regulations when employing and paying monthly wages to employees. The mandatory social insurance costs may be up to 34.5% of the basic salary. Foreign employees working for more than 3 months will be granted work permits.
  • Foreign representative offices will have to comply with regulations related to Personal Income Tax (PIT) such as registering a tax identification number for each individual, monthly PIT declaration, and preparation, and submission of finalization reports. annual tax. PIT for non-residents is 20% of legal income in Vietnam, residents are from 5% to 35% of global income.
  • Foreign representative offices must comply with relevant regulations such as Anti-Money Laundering Laws, Tax Laws, and Commercial Laws for operations in Vietnam. In particular, the representative office must collect and manage all relevant business records in response to inquiries or requests from the competent authorities. After every 03 (three) to 05 (five) years of operation, the Tax Authority will carry out inspection procedures to confirm the legitimacy and validity of each transaction…
  • The foreign representative office must prepare and submit annual reports to the licensing agency.
  • The maximum operating time of a representative office is 05 (five) years and can be extended.

 

4, How to start and open a company registration in Vietnam

  • Step 1: Enter Vietnam and spend at least 1 year to understand the market and business models.
  • Step 2: Meet with various entrepreneurs in your field. You can connect with them through events, workshops, or in ex-pat communities living and working in Vietnam. Exchange and share weaknesses and strengths when setting up a company in different models/forms. From there, you can gather information and come up with the best investment plan for establishing a company in Vietnam.
  • Step 3: After finalizing the investment plan, you can choose to invest 100% of the capital to establish your own company or contribute a certain percentage of capital along with your partners to establish a Joint Stock Company (JSC) or a Multi-member Limited Liability Company. Your partners can be Vietnamese or foreign individuals or foreign organizations.
  • Step 4: This is very important, we recommend that you meet with legal advisors or reputable consulting services to support you in company establishment and related issues such as business models, taxes, labor, insurance, etc.

The above are legal issues related to the procedures for registering a company registration for foreigners. If you need further in-depth consultation on this matter, please contact AT Service for quick and efficient consultation with the most cost-saving. You can contact us via Hotline: 0966 222 840 or chat with our consultants on our website.

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