Vietnam is one of the fastest-growing economies in the world. As a foreign investor, here’s why you should consider to do business to Vietnam.
- Vietnam is located in a special position connecting Asian region and China and lies on the world’s most important maritime route.
- Vietnam has the feature of a creative economy, but at a low starting point. The country has the young population and the government has opened up its economy to the global economy at full capacity.
- The government has enhanced the national security and the political stability as well as committed to protect foreign investors’ rights and property rights. It has become more transparent and integrity, which has strongly impacted on each agency, enterprise, and locality.
- Vietnam put the environment over the economic benefits in licensing investments. The state-owned monopolies have been reduced by privatization and forced to be listed on the stock market.
- The country also has a huge number of overseas Vietnamese, especially in developed countries like the U.S, Germany, France, and Japan.
Doing business in Vietnam as foreign investor
Every foreign investor allowed to do business in Vietnam, regardless of indirect or direct investments.
The first option is to choose a direct investment. Direct foreign investment indicates a 100% foreign-owned company or a joint venture company in which the foreign investor and a Vietnamese partner work together.
As a foreign investor, if you choose the form of direct investment, you will need to proceed with legal procedures to obtain the investment as well as enterprise licenses as stipulated in respective laws in Vietnam.
But, if you choose the form of indirect foreign investment, the investment can be made through the purchase of shares in Vietnamese companies, capital contribution, stocks, investments fund, or other similar financial vehicles. Indirect investment creates the foreign investor’s presence in the management of a company based upon the agreement among the involved parties.
In what follows, we will delve into comparison among common forms of business investment, and key considerations when it comes to starting a business in Vietnam as a foreign investor!
Eligible business sectors for foreign investors
As a foreign investor, you can do business in most of business sectors as a local investor could do, but there are some certain business sectors and trades that are prohibited, such as:
- Carry out business or trading in natural specimens of endangered, rare and precious wild fauna and flora species (stipulated in Appendix I, CITES and Appendix 3, LOI);
- Carry out business or trading in toxic chemicals, precursors, and minerals (stipulated in Appendix 2, LOI);
- Carry out business or trading in narcotic substances (stipulated in Appendix 1, LOI);
- Carrying out prostitution, human trafficking, or clone of human-related businesses;
- Carrying out business or services on debt collection; and
- Carrying out firecracker related business.
There is also another group of business activity in which foreigners are permitted to make their investment, but subject to specific criteria to gain access to the Vietnam market. This group is also known as “conditional business investment”. Here’s the list
- Tax agency service
- Price valuation service
- Accounting and Auditing services
- Insurance/Reinsurance/Insurance brokerage/Insurance agency/Insurance auxiliary services
- Customs related business: Customs agency services, Trading duty-free goods, bonded warehouse or container freights stations
Securities-related business - Other financial businesses: Lotteries business, Debt collection services, Credit rating services, Prize-winning electronic games for foreigners, Casino business.
Taxes for foreign invested businesses in Vietnam
Foreign investors doing business in Vietnam, regardless of which business structure is selected, must be subject to relevant tax obligations. There are four popular types of tax that foreign investment is well attached, namely: Value Added Tax (VAT), Corporate Income Tax (CIT), Personal Income Tax (PIT), and Foreign Contractor Tax (FCT).
There are many tax reliefs that foreign investors can look for to reduce their tax liabilities when starting a business in Vietnam. Below are some typical tax reliefs in Vietnam for eligible investors:
- VAT: VAT exemptions on specific businesses;
- CIT: Preferential tax rate and tax holidays;
- FCT: No withholding tax is levied on dividends of overseas corporate shareholders;
- PIT: Allowable deductions from compulsory insurance contributions, charity purposes, family related deductive relief.
Business structure for foreign invested businesses in Vietnam
As a foreign investor, you can choose either a limited liability company (LLC) or a joint-stock company (JSC) to set up a company in Vietnam, which can be a 100% foreign-owned company or a joint venture company.
A limited liability company in Vietnam is restricted to a max of 50 members, and the liability of each member is limited to the capital contributed to the company.
By contrast, a joint-stock company is formed on the basis of founding shareholders who subscribed to their shares in the company. A JSC required least three shareholders and has no maximum number of shareholders.
In addition to the above-mentioned structures, foreign investors can also consider registering a business in Vietnam through a Business Cooperation Contract (BBC). This acts as an agreement between the foreign investor and the Vietnamese partner to conduct business in Vietnam. Note that BBC’s participants have unlimited liability for any debts or financial obligations to the company.
You can find basic information about the legal forms of business in this article. In case you do not feel confident about making the correct choice about the legal form of your business, you are encouraged to discuss your options with a lawyer and with other business owners or contact GBS at info@gbs.com.vn for advice.
Document required for a foreign invested company in Vietnam
As a foreign investor, you are requested to provide fundamental documents for registering a company in Vietnam, including:
- List of board members
- Company charter/ articles of association
- Application for enterprise registration: Information provided should include the enterprise name, the office address, business line, charter capital of the investors, types of shares, particulars of relevant partners/representatives, and tax registration information. This items can be advised and drafted by our lawyers if you work with GBS as the company formation agency in Vietnam
For individual investors:
- Copy of passport of all company members
- Personal bank account confirmation letter proving financial capacity for an investment project
For corporate investors:
- Copy of business registration certificate
- Copied passport of legal representative managing contributed capital
- Copied passport of the appointed legal representative of Vietnam company (if any)
- Corporate bank account confirmation letter proving financial capacity for investment project, or
- Audited financial statements for the last 2 years demonstrating financial capacity for an investment project.
- Other documents like leasing contract for factory, warehouse, headquarter, etc.
Every document in foreign languages must be translated into Vietnamese and consular legalized with remaining validity of no less than 3 months.
Process of Company Formation in Vietnam
Step 1. Consulting
Every agency in Vietnam offers multiple packages of company formation to meet your demands. If you work with GBS, during this process, our team will also provide free consulting to help you set up the right company structure as per your need.
Step 2. Collect and verify related documents.
After receiving your order and advance payment, our team will contact you to confirm the information and gather the required documents for incorporation in Vietnam.
Step 3. Proceed the incorporation of your company in Vietnam
The foreign invested company registration in Vietnam could be finished within 10 days or span from 1 to 3 months contingent on your selected business sectors, business entity structures, and project’s scale.
About GBS
Global Business Services (GBS) Co., Ltd is a commercial law firm in Vietnam providing business and legal services, investment consulting, and other business support service (company formation, license arrangement, commercial agreements, mergers and acquisitions, shareholder arrangements and disputes, work permit, employment contracts, tax, consulting and financial advisory and executive search services).
The GBS organization is focused on helping senior management and owners of mid-market organizations to reach their goals by providing practical, customized solutions and identifying and pursuing business opportunities in Vietnam.
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Source: Vietnam Insider