Vietnam’s growing economy and open policies towards foreign investment make it a prime location for business expansion. This article provides an overview of the essential aspects of incorporation in Vietnam for foreign investors. Understanding the local market, legal requirements, and procedural steps is crucial to successfully start and operate a business in Vietnam.
1. Key Points to Consider Before Incorporation
Before taking the leap into incorporating a business in Vietnam, there are several critical areas that foreign investors need to understand. These areas cover the regulatory framework and investment prerequisites essential for a smooth incorporation process.
(i) Conditions on Business Lines
To participate in Vietnam’s market, foreign investors must adhere to specific market access conditions. These include commitments under the WTO and other international agreements, as well as Vietnamese law.
(ii) Conditions on Investment Capital
The requirements regarding investment capital in Vietnam vary depending on the business scope and scale. Although there’s no strict minimum or maximum, certain investments may necessitate a specific capital amount.
(iii) Ownership Rights of Foreign Investors
Ownership rights are defined by Vietnam’s investment laws and its commitments under the WTO. While many sectors allow full foreign ownership, some require partnership with Vietnamese entities.
(iv) Types of Incorporation
Choosing the right incorporation type is vital, with options ranging from single-member limited liability companies to joint-stock companies. Each type has its own legal implications and operational frameworks.
2. Incorporation Procedures
source: freepik.com
Incorporation in Vietnam involves a step-by-step process, from investment registration to business incorporation. Understanding these steps ensures compliance and facilitates the establishment of your business.
(i) Register Investment Project
The first step involves registering the investment project to obtain an Investment Registration Certificate (IRC), essential for moving forward with incorporation.
(ii) Apply for Business Incorporation
Following the receipt of the IRC, the next step is to apply for business incorporation. Successful application results in an Enterprise Registration Certificate (ERC), allowing business operations to commence.
After obtaining the IRC and ERC, foreign investors are permitted to engage in business operations within Vietnam. It’s important to acknowledge, however, that certain regulated sectors require foreign investors to fulfill extra prerequisites and/or secure a specialized business permit. For example, companies with foreign investment that wish to engage in retail must obtain a retail business license from the Department of Industry and Trade. Only upon receipt of this license can the company commence its retail operations.
3. Considerations After Incorporation
After the business is officially incorporated, several post-incorporation considerations need to be addressed to ensure operational compliance and financial clarity.
(i) Submission of Declaration Form and Payment of License Fees
Timely submission of declaration forms and payment of license fees is mandatory, with specifics depending on the business’s incorporation year and operational commencement.
(ii) Duration for Contributing Investment Capital
The law specifies a 90-day period for fulfilling the committed investment capital, essential for maintaining your business’s legal status.
(iii) Bank Account Opening
Opening the required types of bank accounts is a critical step for managing your business’s finances effectively in Vietnam.
(iv) Notice of Bank Account Information to the Tax Authority
While not always mandatory, notifying the Tax Authority of your bank account information is required in certain cases and ensures financial transparency.
(v) Purchase of E-invoices
E-invoices must be acquired through licensed providers, and their use must be registered with the Tax Authority.
(vi) Company Seals
Vietnamese law allows companies flexibility in creating their seals, a crucial aspect of official documentation and authentication.
(vii) Company Nameplate
Displaying a nameplate at your business’s physical locations is not just a legal requirement but also a mark of professionalism and legitimacy.
Incorporation in Vietnam presents a promising opportunity for foreign investors, but it requires thorough preparation and understanding of local regulations. From pre-incorporation considerations about business lines, investment capital, and ownership rights, to the procedural intricacies of registering a project and obtaining the necessary certifications, each step is crucial. Additionally, post-incorporation requirements, including license fee payments, capital contributions, and banking arrangements, must be carefully managed to ensure compliance and operational success. By navigating these considerations strategically, investors can effectively establish and grow their business presence in Vietnam.
Article by
Attorney Nguyen Duc Tinh
Managing Partner of TTP Bengoshi Law Firm
Email: [email protected]
