How To Open A Business In Vietnam

Thanks to its developing economy, opening a business in Vietnam is a popular choice. Many business-oriented people are already joining this trend and establishing businesses in Vietnam. With a fast-growing middle-class population and favorable requirements, a business in this country makes sense. To make things easier, we take a look at how to open a business in Vietnam.

The process of opening and registering a business in Vietnam is straightforward once you know what to do. Some challenges may be encountered, but opening a business anywhere is expected.

Can Foreigners Start A Business In Vietnam?

Foreigners can start a business in Vietnam and own up to 100% shares in the company. However, not all industries allow 100% ownership. For instance, industries like tourism and advertising require a Vietnamese Joint Venture Company for foreigners.

The Vietnam company system follows the general rules of the World Trade Organization (WTO), making it easier for a foreigner. Under special circumstances, such as when the WTO and local laws are unclear on a business matter, there needs to be approval from the industry’s governing ministry.

Requirements For Setting Up A Company In Vietnam

There are several requirements for setting up a company in Vietnam. Some of them include:

1. Capital Requirements

The most interesting thing about setting up a company in Vietnam is that there is no minimum capital requirement. The law states that a new company should have enough capital to run itself until the business no longer needs external funding.

Most companies in Vietnam require an average of VND 230 million, the equivalent of $10,000 as initial capital. Small-scale companies can run on as low as VND 69 million ($3000) capital investment. Seeing as there is no minimum requirement, the minimum capital will depend solely on the nature of your company.

A few sectors employ a minimum capital requirement, like the Banking sector, Insurance, Finance industry (including Fin-tech).

2. Directorial Requirements

A company is required to have one resident director with a local address. Ordinarily, you will need a resident director who could be a Vietnamese or foreigner, but the law is flexible, requiring the resident director have a local address in the country.

Non-Vietnamese directors will require a work permit unless they are founding members of the company. When a non-resident is a founding member of the company, they won’t need a work permit, provided they apply for an exemption.

3. Local Business Address

One of the major requirements for registering a business in Vietnam is that the company has a local address. Some companies can get around the address requirement with a virtual address, but this is usually for service-based companies. All other company types will need a physical address when they are registering.

How Long Does Opening A Company In Vietnam Take?

The total time for registering a new company in Vietnam depends on the individual processes. You can expect to complete the entire process in one month, extending to 5 weeks in some cases. Extenuating circumstances can extend the registration period to up to 20 weeks. The major factors that determine the length of the registration are licenses and sub-licenses required for each company. Each industry has different licenses and sub-licenses requirements for a company to operate. Hence, the total registration period of a company will vary according to the industry.

Alternatives To Company Registration In Vietnam

There may be no need to set up or register a company in Vietnam. You can transact and conduct business through third-party institutions. Here are some ways to do this:

1. Representative Office

A representative office will stand in your stead in the Vietnamese market. Companies such as Premia TNC can help you run a business, without having to register a company. Many companies do this, giving them access to the Vietnamese’s business landscape without the company registration hassle.

2. Employer Of Record

You can hire employees without owning or registering a company if you have an employer of record. A company like Premia TNC will hire and pay employees on your behalf while meeting all local employment conditions and laws.

3. Importer Of Record

An importer of record lets you import goods into Vietnam without registering a company. No need to miss out on business while waiting for registration and approval of the necessary import licenses.

Restrictions For Foreigners To Set Up A Business In Vietnam

1. Restricted Business Activities

Not all business industries are accessible to foreigners in Vietnam  Industries involving firearms, narcotics, prostitution, human trafficking, and debt collection, amongst others, are not available to foreigners. Any activity that is considered illegal (like cloning humans, human trafficking) falls into this category.

A foreigner’s involvement in certain industries is conditional in Vietnam. You or your company will have to meet set criteria before involvement in such industries. Industries such as auditing, accounting, insurance, and the financial industry fall into this category. 

2. Ownership Limitations

Vietnam allows foreign ownership of up to 100% ownership stake in a company, but not in all industries. There may be limitations on foreign ownership, investment, or involvement in a company in some industries.

What Does It Cost For A Foreigner To Start A Business In Vietnam?

Starting a business in Vietnam isn’t without its costs. There is no minimum capital requirement, but you will need to fund the business fully till it becomes self-sufficient. An estimated cost of running a new business will range between $3,000 and $10,000, depending on the nature of the business.

Nonetheless, some industries have a minimum capital requirement, like the financial sector. Banks’ minimum capital requirement varies, usually ranging between 150 billion VND to 3 trillion VND. Tertiary institutions require a minimum capital of approximately 500 billion VND (21.5 million USD).

Registration and tax fees will also be due for every registered company in Vietnam. The business license tax (BLT) is an annual tax all registered companies must pay. BLT rates differ, depending on factors like the economic entity and household size. BLT rates are as follows:

• 3 million VND annually for companies whose registered capital exceeds 10 billion VND
• 2 million VND annually for companies whose registered capital is below 10 billion VND
• All other business entities are due to pay 1 million VND in tax annually

You can expect other costs due to logistics and other registration fees. Premia TNC specializes in company registration in Vietnam and can help estimate the total expected cost of registration.