Company Incorporation in Vietnam

Can foreigners incorporate a company in Vietnam?

Yes, foreigners can fully own and operate a company in Vietnam through various legal structures, most notably a Limited Liability Company (LLC), which can be either single-member or multi-member. Vietnam allows foreign investors to own 100% of their company in most industries, with certain sectors requiring local partnerships. The incorporation process involves obtaining an investment registration certificate and an enterprise registration certificate, which typically takes between one and three months. Vietnam's legal environment is supportive of foreign direct investment, making it an increasingly attractive destination for global businesses.

Additionally, foreign-owned companies in Vietnam can benefit from various incentives, such as tax holidays, reduced corporate income tax rates, and exemptions from import duties on certain goods. These benefits are particularly appealing for investors in sectors prioritized by the Vietnamese government, such as high-tech industries, renewable energy, and infrastructure development. By incorporating in Vietnam, foreign investors also gain access to a rapidly growing market, a young and skilled workforce, and strategic positioning within Southeast Asia, making it a compelling option for expanding their business operations in the region.

What is the structure of an LLC in Vietnam?

Directors:

An LLC in Vietnam must have at least one director, who is responsible for managing the daily operations of the company. The director can be a foreign national or a Vietnamese citizen, but if the director is a foreigner, they must obtain a valid work permit and reside in Vietnam. Corporate directors are not allowed; the director must be a natural person. Nominee directors are not officially recognized, meaning that the director listed in the company documents must genuinely fulfill the role.

Shareholders:

In a single-member LLC, there is only one shareholder, while a multi-member LLC must have at least two and can have up to 50 shareholders. These shareholders can be individuals or corporate entities of any nationality, allowing for 100% foreign ownership in most sectors. Shareholders' liability is limited to their capital contribution, and nominee shareholders are not officially recognized in Vietnam.

Legal Representative:

The LLC must appoint a legal representative, who is typically the director. This individual must reside in Vietnam and can be either a Vietnamese national or a foreigner with a valid work permit. The legal representative is responsible for representing the company in legal matters and must have a registered address in Vietnam.

Share Capital:

There is no minimum capital requirement for an LLC in Vietnam, but the declared charter capital should be sufficient to cover the company's operational needs. This capital must be fully contributed within 90 days of the company’s incorporation. The amount of capital required may vary depending on the industry and specific business activities.

Office Space:

An LLC in Vietnam must have a registered physical office address. This can be a traditional office space or, in some cases, a virtual office, depending on the business type and the location within Vietnam. Certain industries, such as manufacturing, may require a physical office space.

Documents required for a company formation in Vietnam

To incorporate a company in Vietnam, you need to prepare and submit various documents. These documents are essential to comply with Vietnamese regulations and ensure your business operates legally. The documents will be used in KYC due diligence procedures, application preparation, and document submission to the authorities.

Proposed Company Details:

1. Proposed company names.
2. Business Activities: Detailed description of the company’s purposes and objectives.
3. Share Details: Number of shares, share classes (if any), rights attached, and nominal value.
4. Power of Attorney: Signed by each shareholder for submission.
5. Proof of a registered address in Vietnam

Personal Documents for Directors and Shareholders:

1. Colored passport with at least 18 months of validity notarized at the Vietnamese Embassy.
2. ID/ Passport of the Legal Representative of the company notarized in Vietnam or legalized at Vietnam Embassy in your country
3. Valid IDs (equivalent for foreigners) notarized at the Vietnamese Embassy
4. Proof of a foreign residential address.
5. Resume and contact information.
6. Bank statements/Financial documents showing sufficient charter capital (legalized at Viet Embassy in your country)

Corporate Documents for Corporate Shareholders:

1. Certificate of Incorporation notarized at the Vietnamese Embassy.
2. Memorandum & Articles of Association/Constitution and Amendments.
3. Certificate of Incumbency.
4. Proof of the registered address.
5. Board of Directors structure and corporate chart.
6. Corporate representative details and board resolution.
7. Confirmation letter for the bank balance account.
8. Audited financial statements for the latest 2 years.

Additional Requirements:

1. Written confirmation that directors, shareholders, and other key individuals are not Politically Exposed Persons (PEPs).
2. Principal place of business address.
3. Source and origin of funds used in the business.
4. Expected location of the company’s customers and suppliers.
5. Information on the beneficial owner, if different from the named shareholder.

How do I incorporate a company in Vietnam?

Step 1 - Prepare and Submit the Required Documents

You need to prepare several documents, including the application for enterprise registration, the company charter, the list of members (for multi-member LLCs), and other relevant documents. These documents must be submitted to the Department of Planning and Investment (DPI) in the province where your business will be located.

Step 2 - Obtain the Investment Registration Certificate (IRC)

For foreign-owned companies, the first official step is to apply for an Investment Registration Certificate (IRC). This certificate is required if your business has foreign investors, and it allows you to invest in and operate a company in Vietnam. The process typically takes about 15 working days.

Step 3 - Obtain the Enterprise Registration Certificate (ERC)

Once you have the IRC, you must apply for the Enterprise Registration Certificate (ERC), which legally establishes your company in Vietnam. The ERC includes important details such as the company's name, business code, and registered office address. This process takes around three working days.

Step 4 - Post-Registration Procedures

After obtaining the ERC, your company must complete several post-registration procedures, including publishing the business registration content on the National Business Registration Portal, making a company seal, opening a bank account, and registering for taxes. You'll also need to apply for any specific business licenses required for your industry.

Step 5 - Capital Contribution

The shareholders must contribute the charter capital within 90 days from the date of issuance of the ERC. This capital is used to cover the initial expenses and operations of the company.

Step 6 - Obtain Necessary Business Licenses

Depending on your business activities, you may need additional licenses or permits. These could range from import/export licenses to specific operational permits for industries such as manufacturing or education.

Step 7 - Register for Social Insurance and Labor

Finally, if you plan to hire employees, your company must register for social insurance and comply with labor regulations, which include filing employee contracts with the local labor authorities.

Compliance requirements post-incorporation

Incorporating a company in Vietnam comes with several post-incorporation compliance requirements that companies must adhere to in order to maintain their legal standing and operate smoothly. Here's a summary of the key compliance obligations:

Tax Registration

After obtaining the Business Registration Certificate, the company must register with the local tax department. The company will receive a registration code that serves as both a tax code number for filing quarterly and annual tax returns and for other required reports. VAT registration is also mandatory, and companies must issue VAT invoices using the credit or direct method depending on their business activities​.

Business Licensing and Capital Contribution

All companies must secure a business license to operate legally in Vietnam. An annual Business License Tax (BLT) must be paid by January 30th each year, with new companies being exempt for the first year. Additionally, companies have 90 days from registration to fully contribute the charter capital as stated in their registration documents​.

Employee and Labor Compliance

Companies must register their employees, both local and foreign, for mandatory social insurance contributions. The company is also responsible for ensuring that foreign employees have valid work permits and for submitting bi-annual labor use reports. For companies employing foreign workers, quarterly reports must be filed to justify the employment of foreign personnel​.

Corporate Compliance Reporting

Companies in Vietnam are required to submit various reports throughout the year. These include quarterly VAT and Personal Income Tax (PIT) returns, Corporate Income Tax (CIT) payments, and labor reports. Annual compliance includes filing audited financial statements, finalizing CIT and PIT, and submitting Foreign Direct Investment (FDI) reports. These reports must be submitted within 90 days of the end of the fiscal year​.

Profit Remittance

After fulfilling all tax obligations, foreign-owned enterprises (FOEs) can remit profits abroad. Companies planning to remit profits must notify the relevant tax office at least seven working days before the remittance​.

Retention of Documentation

Companies must retain various types of documentation for specified periods: five years for general management documents, ten years for accounting data and financial statements, and indefinitely for documents of significant national importance​.

Visas for foreign investors and employees in Vietnam

In Vietnam, there are several visa options available for foreign investors and employees, each serving different purposes and offering varying durations of stay.

Investor Visa (DT Visa)

The Investor Visa is designed for foreign investors who wish to invest or start a business in Vietnam. There are four categories of Investor Visas (DT1, DT2, DT3, DT4), differentiated by the size of the investment and the nature of the business. The DT1 visa, for example, is for investors who contribute capital of over VND 100 billion (~USD 4.3 million) or invest in sectors prioritized by the Vietnamese government. The visa duration can range from 1 to 10 years depending on the category, with DT1 and DT2 allowing for the longest stays. This visa also enables investors to apply for temporary residency in Vietnam, making it ideal for those who plan to reside in the country for an extended period​.

Work Visa (LD Visa)

The Work Visa is required for foreign nationals employed by Vietnamese companies. To obtain this visa, the foreign employee must first secure a work permit, which requires proof of professional qualifications and experience. The work permit is typically valid for up to 2 years and can be renewed. Once the work permit is issued, the foreign employee can apply for the LD Visa, allowing them to legally work and reside in Vietnam during their employment period. The LD visa is often tied to the validity of the work permit.

Business Visa (DN Visa)

The Business Visa is intended for foreign nationals who need to enter Vietnam for short-term business activities, such as attending meetings, signing contracts, or conducting market research. This visa is not tied to employment and does not require a work permit. The DN Visa is usually valid for 3 to 12 months and can be single-entry or multiple-entry. It is suitable for business travelers who do not plan to work in Vietnam but need to frequently visit for business-related purposes.

These visas provide flexibility for foreign investors and employees depending on their role and the length of time they plan to stay in Vietnam. For those seeking long-term residency or employment, the Investor and Work Visas are the most appropriate, while the Business Visa suits those with short-term or frequent business needs

VAT and tax considerations for companies in Vietnam

Value Added Tax (VAT)

Vietnam imposes VAT on the supply of goods and services at rates of 0%, 5%, and the standard rate of 10%. VAT applies to most goods and services used in Vietnam, including imports. Businesses typically use the credit method to calculate VAT, where the amount payable is the output VAT minus the input VAT. Companies must file VAT returns either monthly or quarterly, depending on their revenue, and payments are due on the 20th of the following month or quarter​ (Vietnam Briefing).

Corporate Income Tax (CIT)

The standard CIT rate in Vietnam is 20% for most businesses. However, certain sectors, such as oil and gas exploration, may face higher rates ranging from 32% to 50%. Tax incentives are available for companies investing in specific industries or regions, potentially lowering the CIT rate to as low as 10%. Companies must make quarterly CIT payments based on estimated profits, with final annual payments adjusted for actual income. Any shortfall exceeding 20% of the final CIT liability is subject to interest​ (Vietnam Briefing).

Other Considerations

Foreign companies and contractors working in Vietnam may also be subject to the Foreign Contractor Tax (FCT), which includes both VAT and CIT components. Additionally, special consumption taxes (SCT) apply to certain luxury goods and services, further affecting tax liabilities​ (Vietnam Briefing)​ (Vietnam Briefing).