Guide to Setting Up A Company in Vietnam

Looking to expand into Southeast Asia? Vietnam is a growing hotspot for international businesses, offering a young workforce, strong economic potential, and favourable trade agreements. But how do you get started?

What business structure should you choose? Do you need a local partner? And how do you navigate the registration process?

This guide breaks down the essential steps and key considerations for setting up a business in Vietnam, helping you make informed decisions as you enter this dynamic market.

Overview of Foreign Ownership Rules and Restrictions in Vietnam

Starting a business in Vietnam can be a great opportunity, especially since many key sectors are open to full foreign ownership. This gives foreign investors the ability to control their business entirely without needing a local partner. Fully open sectors include manufacturing, IT, e-commerce, education, logistics, and a wide range of professional services.

That said, some sectors are still subject to foreign ownership restrictions. Areas such as telecommunications, publishing, finance, and services like advertising and logistics may require a joint venture with a Vietnamese partner or additional licensing. The extent of these restrictions can vary depending on Vietnam’s international trade commitments and whether the investor’s home country is part of a relevant agreement.

The good news is that trade agreements like the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) have made it easier for foreign businesses to enter the Vietnamese market. These agreements often provide preferential treatment to member countries, including reduced restrictions on foreign ownership, simplified licensing procedures, and faster approval timelines. Some of the sectors with improved access under these agreements include retail, manufacturing, IT, and education.

For EU nationals, the EVFTA offers specific advantages that can streamline the company registration process and improve access to key service industries. These include business services, financial services, and environmental services, among others.

Popular Legal Structures for Company Setup in Vietnam

When it comes to setting up your business in Vietnam, selecting the right structure is key. The good news is, you’ve got several options depending on your goals and the type of business you’re running. Here’s a quick rundown to help you decide:

• Limited Liability Company (LLC): This is the most popular choice for foreign investors. It allows you to own 100% of your business, giving you full control. It’s perfect if you want to run a smaller to mid-sized operation without a local partner.
• Joint-Stock Company (JSC): This structure is ideal if you plan to raise capital or expand significantly in the future. Unlike other company types, a JSC can issue shares to multiple investors, making it easier to attract funding from venture capital, private equity, or through a public listing. This flexibility makes it well-suited for businesses with large-scale growth ambitions.
• Representative Office: This structure is appropriate if you want to set up a base for research, market study, or as a liaison with local businesses. However, keep in mind that a representative office is not allowed to perform any revenue-generating activities. If your goal is revenue generation, it is advisable to set up an LLC or a branch office..
• Branch Office: A branch office is essentially an extension of your foreign parent company. It’s suitable for businesses that want to establish a presence in Vietnam, but it is limited to certain service sectors. Industries where branch offices are allowed include banking and finance, tourism and travel agencies, and information technology services.

In most cases, a Limited Liability Company (LLC) is the preferred option for foreign investors due to its simplicity and adaptability. However, if you’re still unsure which structure best suits your needs, our expert advisors are here to help. We’ll review your business plans and guide you toward the most appropriate legal entity for your operations in Vietnam.

Key Requirements for Setting Up A Company in Vietnam

Aside from choosing the right business structure, you must meet several key requirements that can help you navigate the registration process more smoothly:

• Capital Requirement: For most industries, there is no legally mandated minimum capital requirement, but the amount you commit should align with your business plan and industry to cover your operational costs. The usual benchmarks are around USD 15,000 to USD 40,000, depending on location and sector. However, there are certain industries like medical and security services, vocational schools, and airport businesses that have their own fixed capital requirements.
• Minimum One Shareholder: You’ll need at least one shareholder (individual or company).
• Minimum One Director: Your company must have at least one director.
• Local Representative: Vietnamese law requires the company to have at least one legal representative who resides in Vietnam.
• Registered Legal Local Address: Every company must have a registered office in Vietnam. This is where your business will be officially based and where all legal correspondence will be sent.

Mandatory Documentation for Incorporation Application

In terms of documentation, as a foreigner, you will need to obtain the following to submit your incorporation application successfully:

• Investment Registration Certificate (IRC): Outlines your investment plans and the legal basis for your foreign ownership in Vietnam. The IRC ensures that your business complies with local regulations.
• Proof of Capital Contribution: This could be in the form of bank statements or other relevant documents verifying your investment as proof of capital.
• Identification Documents: Copies of passports and ID of legal and authorised representatives.
• Lease Contract (or MOU): For proof of the company’s physical office and documentation regarding the landlord.

Having all these documents ready will help speed up the process and ensure everything is in order for a smooth incorporation. It’s always a good idea to double-check the requirements before submission to avoid any delays.

How to Register A Company in Vietnam – Step-by-Step Process

Company formation in Vietnam can be a challenging process, but with the right preparation and a clear plan, it can move forward smoothly. Understanding each step in advance helps avoid delays and ensures that all legal requirements are met. 

Here is an overview of the process:

1. Reserve Business Name

The registration process begins with securing approval for the proposed company name through the Department of Planning and Investment (DPI). Once approved, the name is reserved exclusively for the company until the business registration is finalised.

2. Obtain Investment Registration Certificate (IRC)

Foreign-owned companies must first obtain an Investment Registration Certificate to operate in Vietnam. The application requires submitting details such as the investment amount, business activities, and ownership structure.

3. Obtain Enterprise Registration Certificate (ERC)

Following the issuance of the IRC, the next step is to apply for the Enterprise Registration Certificate. This document legally establishes the company in Vietnam and includes important information such as the business name, address, and legal representative.

4. Open A Corporate Bank Account

After registering the company, the business opens a corporate bank account. Most banks in Vietnam require copies of the IRC, ERC, and other supporting documents. This account serves to provide proof of capital and manage business transactions.

5. Obtain A Tax Identification Number (TIN) or Tax Code

Registering with the tax authority to obtain a Tax Identification Number is essential for tax compliance and required for issuing VAT invoices and completing regular tax filings.

6. Hire and Manage Employees

After setting up your company, you must follow labor laws by signing contracts, registering employees for social insurance, and securing work permits for foreign staff. Tax obligations include a 20% corporate income tax, VAT, personal income tax, and annual reporting. Staying compliant keeps your business running smoothly.

Expand Your Business to Vietnam with RecruitGo

Establishing a business in Vietnam involves navigating local regulations, cultural nuances, and administrative processes that can be complex without the right guidance. Our in-house experts handle this process on your behalf. 

You can request a free consultation to discuss your planned business activities and long-term goals with our experts. We will reach out to discuss how we can help you set up and manage your operations in Vietnam.

Frequently asked questions

Yes, foreign employees can work in Vietnam, but they typically need a work permit unless they qualify for specific exemptions, such as diplomats, experts, or those on short-term assignments under certain conditions. According to labor law, the work permit is usually valid for up to two years and can be renewed once for an additional two years, provided the renewal conditions are met and approved by the labor authorities.

A local partner is necessary only in sectors where law restricts or limits foreign ownership. In many sectors, businesses can fully own 100%, but in restricted sectors, they must partner with a local entity or form a joint venture with Vietnamese companies.

Yes, franchising is allowed in Vietnam. However, you must comply with Vietnamese regulations, including registering the franchise agreement with the Ministry of Industry and Trade (MOIT) and ensuring the franchisor has been operational for at least one year. The franchise agreement must cover specific legal and operational details. MOIT prohibits certain products and services, such as gambling, weapons, and toxic minerals from franchising.

No, 13th-month salary bonuses are not mandatory by law in Vietnam. However, it is a common custom, especially as a year-end or Lunar New Year (Tet) bonus on top of the employee’s regular minimum wage salary. Companies decide on bonuses based on their business performance and employee contributions.

Businesses in Vietnam are subject to corporate income tax at a standard rate of 20%, value-added tax (VAT), personal income tax (for employees), and other relevant local taxes depending on the nature and location of their operations.

Yes, Vietnam has multiple Free Trade Zones and Economic Zones offering incentives such as tax exemptions, reduced import duties, and streamlined customs procedures. Those that choose to operate in these zones can benefit from preferential treatment depending on the sector and investment scale, encouraging foreign investment and export-oriented activities.

Vietnam uses Vietnamese Accounting Standards (VAS). Financial reports must be in the Vietnamese language and use the Vietnamese Dong (VND) as the reporting currency. This is important to keep in mind when dealing with your employees’ payroll and taxation compliance.