5 minutes How to Start a Business in Vietnam
Due to its growing economy, setting up a business in Vietnam has become a popular option. Numerous entrepreneurs are embracing this trend and setting up businesses in the country. Given its rapidly growing middle-class population and favorable regulatory conditions, establishing a business in Vietnam is a logical choice. To simplify the process, let’s explore the steps involved in how to start a business in Vietnam.
The procedure for initiating and registering a business in Vietnam is relatively straightforward once you are familiar with the necessary steps. While certain challenges may arise, encountering obstacles is a common aspect of starting a business anywhere.
How can foreigners navigate setting up a business in Vietnam?
Yes, foreigners are permitted to initiate a business in Vietnam and can own 100% of the shares in the company. However, it’s important to note that certain industries may not allow full ownership by foreigners. For example, sectors like tourism and advertising necessitate the establishment of a Vietnamese Joint Venture Company involving foreign partners.
Vietnam’s business framework aligns with the general principles of the World Trade Organization (WTO), facilitating the process for foreign entrepreneurs. In specific cases where there is ambiguity in business matters according to the WTO and local laws, approval from the relevant industry’s governing ministry may be required.
Essential criteria for setting up a business in Vietnam
Setting up a business in Vietnam entails various prerequisites including:
1. Capital criteria
Setting up a company in Vietnam is distinctive due to the absence of a mandatory minimum capital requirement. According to the law, a new company should possess sufficient capital to sustain itself until external funding becomes unnecessary. While most companies typically begin with an average capital of VND 230 million (approximately $10,000), smaller enterprises can operate with an initial investment as low as VND 69 million ($3,000). As there is no fixed minimum, the required capital is contingent on the nature and scale of the business. Certain sectors, such as banking, insurance, and the finance industry (including fintech), do impose specific capital requirements.
2. Directorial mandates
Every company is obligated to have at least one resident director with a local address. The law offers flexibility regarding the director’s nationality, allowing for both Vietnamese and foreign directors. Non-Vietnamese directors may need a work permit unless they are founding members of the company. In cases where a non-resident is a founding member, a work permit is not required if they apply for an exemption.
3. Local business residence
A fundamental requirement for business registration in Vietnam is the need for the company to have a local address. Although some companies, especially service-based ones, may use a virtual address to meet this requirement, physical addresses are essential for all other company types during the registration process.
Time frame for setting up a business in Vietnam
The timeframe for registering a new company in Vietnam is variable and contingent on specific processes. Typically, the entire process can be completed within one month, occasionally extending to five weeks.
However, certain exceptional circumstances may prolong the registration period up to 20 weeks. The key determinants of the registration duration are the licenses and sub-licenses necessary for each company. As each industry imposes distinct requirements for licenses and sub-licenses, the overall registration period varies depending on the nature of the business.
Options beyond company registration in Vietnam
Establishing or registering a company in Vietnam may not be essential. You have the option to engage in transactions and business activities through intermediary institutions. Here are some approaches to consider:
1. Representative Office
Opting for a representative office allows you to operate in the Vietnamese market without the necessity of company registration. Companies like Premia TNC provide assistance in running businesses, offering a convenient alternative to the complexities of company registration.
2. Employer of Record
By utilizing an employer of record service, you can hire and manage employees without the requirement to own or register a company. Services like Premia TNC handle the hiring and payment processes on your behalf, ensuring compliance with local employment regulations.
3. Importer of Record
Engaging an importer of record enables you to import goods into Vietnam without the need for company registration. This eliminates the waiting time for registration and approval of essential import licenses allowing you to conduct business without unnecessary delays.
Limitations for foreigners when setting up a business in Vietnam
1. Restricted business sectors
Certain business industries are off-limits to foreigners in Vietnam. These include sectors dealing with firearms, narcotics, prostitution, human trafficking, debt collection, and other activities deemed illegal, such as human cloning. In specific industries like auditing, accounting, insurance, and finance, a foreigner’s participation is subject to meeting predefined criteria.
2. Ownership constraints
While Vietnam permits up to 100% foreign ownership in a company, this isn’t universal across all industries. Some sectors may impose restrictions on foreign ownership, investment, or involvement in a company.
Costs involved when setting up a business in Vietnam for foreigners
Commencing a business in Vietnam involves certain expenditures. Although there is no obligatory minimum capital requirement, financial support is necessary until the business attains self-sufficiency. The estimated cost of launching a new business typically falls within the range of $3,000 to $10,000, depending on the nature of the enterprise.
Nevertheless, specific industries, such as the financial sector impose minimum capital requirements. For instance, banks usually have minimum capital requirements ranging from 150 billion VND to 3 trillion VND, while tertiary institutions necessitate a minimum capital of approximately 500 billion VND (21.5 million USD).
In addition to initial capital, every registered company in Vietnam is subject to registration and tax fees. The Business License Tax (BLT), an annual obligation, varies based on factors like the registered capital, economic entity and household size.
- 3 million VND annually for companies with registered capital exceeding 10 billion VND.
- 2 million VND annually for companies with registered capital below 10 billion VND.
- Other business entities are required to pay an annual tax of 1 million VND.
How can we help – Our Incorporation Service
Additional expenses may arise due to logistics and various registration fees. Premia TNC, specializing in company registration in Vietnam, can assist in estimating the overall expected registration cost.
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