Vietnam’s dynamic economy and strategic location make it an attractive destination for foreign investors seeking to establish a presence in Southeast Asia. Setting up a subsidiary in Vietnam offers various opportunities for expansion and market penetration.
This article breaks down the different types of subsidiaries available, such as Wholly Owned Subsidiaries (WOS) and joint Venture Companies (JVC) with each providing unique advantages tailored to different business strategies. We will also delve into the legal and financial requirements for establishing a subsidiary, including the necessary certificates, tax obligations, and regulatory compliance. By understanding these key aspects, foreign investors can navigate the process smoothly and capitalize on Vietnam’s growing market potential.
Core reasons to get a subsidiary up and running in Vietnam
Setting up a subsidiary in Vietnam offers significant advantages due to the country’s rapid economic growth and strategic location. Vietnam has experienced consistent GDP growth exceeding 5.5% in recent years, driven by a youthful labor force and increasing domestic spending. Its position in Southeast Asia provides easy access to the ASEAN market, which encompasses over 673 million people.
Additionally, Vietnam benefits from advantageous trade agreements like the CPTPP and EVFTA, which lower tariffs and enhance market access. The Vietnamese government supports foreign investment through various incentives, including tax exemptions and subsidies. With a population of over 98 million and a growing middle class with rising purchasing power, Vietnam presents a robust consumer market for new business ventures.
The variations in subsidiaries you can expect in Vietnam
Wholly Owned Subsidiary (WOS)
A wholly owned subsidiary (WOS) is a distinct legal entity that is entirely owned by the parent company. While it may require a larger initial investment, it provides the parent business with complete control and flexibility in its operations and strategic decisions.
Joint Venture Company (JVC)
A Joint Venture Company (JVC) involves collaborating with a Vietnamese company, which can offer significant advantages in navigating local regulations and gaining access to established local networks. However, it is crucial to carefully consider aspects such as profit-sharing arrangements and decision-making processes to ensure a smooth and equitable partnership.
Legal aspects to adhere to when setting up a subsidiary in Vietnam
To establish a subsidiary in Vietnam, you must navigate specific legal requirements. Start by addressing foreign investment restrictions, as certain sectors impose limits on foreign ownership. Obtain a Business License outlining your subsidiary’s operations, and secure an Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI). This certificate is necessary for foreign-invested companies to validate their investment projects.
Following the IRC, apply for an Enterprise Registration Certificate (ERC) to formally establish your subsidiary as a legal entity. Lastly, ensure your subsidiary registers with the tax authorities and adheres to all tax regulations in Vietnam.
How to set up a subsidiary in Vietnam for foreigners: The process
Obtaining the mandatory IRC
Foreign-owned companies must obtain an Investment Registration Certificate (IRC) to establish a subsidiary in Vietnam. The Department of Planning and Investment processes the IRC, which typically takes 30 business days. If the subsidiary falls under sectors like agriculture, recruitment, or logistics with no specific local laws or WTO agreements on foreign ownership, processing may be extended, and the parent company must obtain approval from relevant ministries.
Obtaining the mandatory ERC or BRC
To register a business in Vietnam, you need to apply for an Enterprise Registration Certificate (ERC) or Business Registration Certificate (BRC) from the Department of Planning and Investment. This process involves submitting essential documents, such as the company charter and lease agreements. The ERC and BRC are interchangeable terms for this mandatory certification.
Payment of taxes and registration fees for company licenses
The payment of business taxes and the registration of taxes are mandatory requirements for all businesses. This regulation ensures that businesses complete their tax registration and remit their business license tax promptly and accurately. The business license certificate number serves as the company’s unique tax identification number. It is crucial for companies to adhere to these requirements to avoid any legal or financial repercussions.
In Vietnam, companies are obligated to pay taxes for all their subsidiaries through an online system. This digital platform facilitates the submission of tax declarations and reports, streamlining the compliance process. To access and utilize this system effectively, businesses must obtain an electronic signature. This electronic signature is essential for secure and efficient interactions with the tax authorities.
Making your capital contribution within 90 days
After receiving the Enterprise Registration Certificate (ERC) or Business Registration Certificate (BRC), a foreign company establishing a subsidiary must make the required capital contribution within 90 days. Failure to make this capital contribution within the stipulated 90 days will result in financial penalties and potential fines.
Get access to a sublicense or permit when necessary
In Vietnam, company registration and setting up a subsidiary generally take about 30 business days. However, for certain business sectors, the process may be extended due to the need for additional sublicenses. This is common for businesses in lodging, specialized trading, recruitment, manufacturing, and logistics.
Additionally, some industries, like cosmetics, require further permits. Companies in this sector must register their products in advance, which can add several weeks to months to the registration timeline.
Key subsidiary laws to be mindful of in Vietnam
Establishing a Limited Liability Company (LLC) in Vietnam involves navigating complex regulations and can be both costly and time-consuming. Although Vietnam does not specify a minimum capital requirement, it is necessary to secure investors, with options for either a single or multiple investors.
An LLC can be fully foreign-owned or a joint venture involving both foreign and at least one domestic investor. The company must have a management structure that includes a members’ council with a chairman, a director or general director, and a controller. For LLCs with more than 11 members, the structure must also include a board of supervisors, which will handle decision-making responsibilities.
Subsidiaries must comply with rigorous financial reporting requirements, including the submission of balance sheets and profit and loss statements to the Ministry of Finance and tax authorities at the end of each financial year. Additionally, foreign-invested subsidiaries are required to undergo an annual audit by an independent auditor based in Vietnam.
Premia TNC’s incorporation services in Vietnam
At Premia TNC, we offer top-tier incorporation services in Vietnam with a dedicated and highly skilled team of consultants who excel in a wide range of fields. Our expertise ensures you receive exceptional support, completely free of consulting fees. We pride ourselves on delivering efficient, hassle-free processes with reasonable and competitive costs, guaranteeing the highest quality service tailored to your needs.
Choosing us means choosing a seamless incorporation experience. Whether you need comprehensive legal assistance or a straightforward setup, we’re here to make it effortless. Contact us or fill out the form below to get started and discover why Premia TNC is your best choice for incorporating in Vietnam.
