Business entities in Vietnam in 2021
Due to the dynamism of the Vietnamese economy, setting up a business in Vietnam has become an appealing option for many multinationals. However, entrepreneurs should be prepared for inconsistent regulations, bureaucratic challenges and licensing delays. Healy Consultants Group PLC will assist our Clients with incorporating the optimal corporate structure for their Vietnam company: there are several ways of doing business in Vietnam, the most common being the setting up of a limited liability company. Some of the industries are still restricted to investment by foreigners. However, our Clients might be required to setup a joint venture company with a Vietnamese shareholder for setting up a company in Vietnam. Our corporate Clients may also setup company in Vietnam as a representative office, or even a branch, if they are willing to expand to the Southeast Asian market.
Doing business in Vietnam with a local entity
The Vietnam limited liability company (wholly foreign-owned LLC)
- A limited liability company in Vietnam can be setup with only 1 shareholder, who can be of any nationality and does not need to be resident in Vietnam. Our Clients will also need to appoint 1 director as the company’s legal representative, who can be a foreigner but will then be required to i) travel to Vietnam; ii) obtain a work permit and iii) show evidence of 12 months of experience on a managerial position. For such a role, Healy Consultants Group PLC highly recommends appointing a staff member who is either residing or often travelling to Vietnam. If needed, our Firm may also provide our Clients with i) nominee resident director services and/or ii) assistance to apply for a work permit in Vietnam;
- In order to complete incorporation, foreign-owned LLCs will be required to i) open a capital account with a local bank, required for share capital injection and transfers of future earnings abroad and ii) obtain approval for a foreign investment certificate (FIC), required by the Vietnam government to allow foreigners to invest in Vietnam. Approval of the FIC requires a minimum investment, commonly set at US$10,000 but which may be higher in some industries;
- During incorporation, all Vietnamese LLCs are also required to provide the authorities with i) a registered address in Vietnam, which may be provided by Healy Consultants if needed and ii) a bank certificate of deposit for the amount of share capital, which will be needed to be transferred no later than 12 months after incorporation is complete;
- Post incorporation, all foreign-owned LLCs must i) provide the authorities with an annual return and ii) submit annual audited financial statements, which are a prerequisite for any remittance of earnings to their parent company;
- Best uses: A limited liability company is fit for most uses. The company can both trade with Vietnamese and foreign customers, have local manufacturing operations and/or render services.
The Vietnam free zone company
- Foreigners can register a company in a Vietnam free zone provided they plan to manufacture and export most of their products. The company can then be registered within an industrial park or a special economic zone after review and approval by the relevant authority.
- Criteria for free zone registration will significantly vary according to the project. They usually include a minimum investment (at least US$200,000 recommended) and at least some job creations in Vietnam. Projects eligible for free zone registration are usually eligible for tax benefits.
The Vietnam joint venture company (partly foreign-owned LLC)
- A Vietnam joint venture company is commonly a standard Vietnam limited liability company incorporated by i) 1 foreigner (our Client) and ii) 1 Vietnamese shareholder. Such legal structures usually correspond to a Government requirement for foreigners to do business in many industries, including but not restricted to i) transportation services; ii) conventional and online advertisement; iii) agriculture and forestry; iv) electronic games businesses and v) most storage services. In such cases, foreign ownership will be subject to a maximum level, from 49% to up to 99%. Joint venture company setup may also be requested by some of our Clients who are willing to benefit from the specialist local knowledge of their Vietnamese partner;
- Like foreign-owned LLCs, Vietnam joint venture companies will be required to i) appoint a resident legal representative ii) open a capital account with a local bank, required for share capital injection and transfers of future earnings abroad and iii) obtain approval for a foreign investment certificate (FIC), required by the Vietnam government to allow foreigners to invest in Vietnam. Setting up a Vietnam joint venture company will however be more complex than an LLC, as our Client will face i) higher share capital requirements and ii) longer licensing delays;
- All Vietnamese joint ventures are also required at incorporation to provide the authorities with i) a registered address in Vietnam, which may be provided by Healy Consultants if needed and ii) a bank certificate of deposit for the amount of share capital, which will need to be transferred no later than 12 months after incorporation is complete. Post incorporation, our Clients will have to submit i) an annual return for license renewal and ii) annual audited financial statements, which are a prerequisite for any remittance of earnings to their parent company;
- Best uses: A joint venture company is usually used when our Clients want to invest in an industry partially closed to foreign investment. It can also be beneficial when our Clients already have an existing business partner in Vietnam.
The nominee Vietnam company (local limited liability company)
- A nominee Vietnam company is a limited liability company with a local nominee appointed as sole shareholder. Such entity is used mainly to i) reduce capital requirements and/or ii) provide services and products in industries closed to foreign ownership;
- Best uses: To limit legal risk and protect our Client’s interests, we usually do not recommend to setup such entity except in a very limited range of cases where this is the only legal solution for our Client’s business plan.
The Vietnam public limited company (JSC)
- A Vietnam public limited company can be setup with i) 3 shareholders, who can be of any nationality and does not need to be resident in Vietnam. Our Clients will also need to appoint 1 director must also be appointed as the company’s legal representative. If this individual is a foreigner, he will be required to i) travel to Vietnam ii) obtain a work permit and iii) show evidence of 12 months of experience on a managing position;
- Like those of a LLC, Vietnam public limited company setup requirements by foreigners include i) provision of a bank certificate showing the availability of funds to be invested in Vietnam ii) the opening of a capital bank account and iii) issuance of a foreign investment certificate and iv) submission of an annual return and audited financial statements, without which our Client will not be able to remit abroad his subsidiary’s earnings;
- Public limited companies are not required to list in Vietnam. To do so, a PLC must have i) a share capital of over US$475,000 ii) over 100 shareholders iii) been profitable for the previous year and iv) no overdue debt. If needed, Healy Consultants will be pleased to assist our Clients with listing their company on the Ho Chi Minh City Stock Exchange;
- Best uses: A joint stock company can be a better alternative than a limited liability company if our Client is planning to form a business with several partners or plans to finance its business through the issuance of equity. In other cases, a limited liability company will usually do just as fine.
Doing business in Vietnam as a foreign entity
The Vietnam branch office
- The Vietnam Law on Commerce stipulates that foreign companies can open branch offices in Vietnam, provided they have been doing business abroad for at least five years. The Vietnam branch office must also i) appoint a resident representative and file ii) audited financial statements with the Companies Registrar and ii) an annual return with the Industry and Trade Department office;
- Because incorporating a branch office in Vietnam i) follows complex procedures and ii) exposes our Clients to unlimited liability, Healy Consultants recommends to setup a Vietnam limited liability company instead of a branch, excepted in a few industries where branches, but not wholly foreign-owned LLCs, are allowed by the Government;
- Best uses: Registering a branch is usually not recommended, except in regulated industries such as banking, finance and insurance where registration of a foreign reputable entity instead of a subsidiary can ease up the licensing process.
The Vietnam representative office
- The Vietnam Law on Commerce stipulates that foreign companies can open representative offices in Vietnam, provided they have been doing business abroad for at least 1 year. While the Vietnam representative office can be 100% foreign owned, it is not allowed to pursue production-related or commercial activities in Vietnam. Consequently, this entity can only engage in i) market research and ii) promotion of its parent company’s business. It will also have to i) appoint a resident representative and ii) to submit annual returns to with the Industry and Trade Department office;
- Best uses: Registering a representative office is a good option to have a local presence in Vietnam, without being subject to local tax and while benefitting from lower reporting requirements. However, such entity is not allowed to trade or conduct manufacturing operations in Vietnam.
Table of comparison between Vietnam entities
|Operations and logistics||LLC (services)||LLC (trading)||LLC (manufacturing)||Free zone company||Joint venture||Nominee company||JSC||Branch||RO|
|Also know as||Foreign invested company||Foreign-invested company||Foreign-invested company||Export processing company||Joint venture||Local company||PLC||Branch||RO|
|Travel required for setup?||No||No||No||No||No||No||No||No||No|
|Doing business in Vietnam permitted?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to sign contracts with local Clients?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to invoice local Clients?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Can rent local office premises?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to export goods?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Accounting and tax||LLC (services)||LLC (trading)||LLC (manufacturing)||Free zone company||Joint venture||Nominee company||JSC||Branch||RO|
|Corporate tax on sales income?||20%||20%||20%||20%||20%||20%||20%||20%||0%|
|Corporate bank account?||Citibank Vietnam||Citibank Vietnam||Vietcombank||Standard Chartered Vietnam||HSBC Vietnam||Vietinbank||Standard Chartered Vietnam||Vietcombank||HSBC Vietnam|
|Statutory audit required||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Access to DTAAs?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Company law||LLC (services)||LLC (trading)||LLC (manufacturing)||Free zone company||Joint venture||Nominee company||JSC||Branch||RO|
|Issued share capital required?||US$10,000||US$100,000||US$250,000||US$50,000||US$50,000||US$500||US$10,000||None||None|
|Resident director required?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Vietnam shareholder required?||No||No||No||No||Yes||Yes||No||No||No|
|Minimum number of directors?||1||1||1||1||1||1||1||1||1|
|Minimum number of shareholders?||1||1||1||1||1||1||1||Parent company||Parent company|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No||No|
|Corporate director(s) allowed?||No||No||No||No||No||No||No||No||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Immigration||LLC (services)||LLC (trading)||LLC (manufacturing)||Free zone company||Joint venture||Nominee company||JSC||Branch||RO|
|Can the entity hire expatriate staff?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|How long to get work permit approved?||3 months||3 months||3 months||3 months||3 months||3 months||3 months||3 months||3 months|
|Fees and timelines||LLC (services)||LLC (trading)||LLC (manufacturing)||Free zone company||Joint venture||Nominee company||JSC||Branch||RO|
|How long to set the entity up?||8 weeks||16 weeks||20 weeks||12 weeks||12 weeks||2 weeks||8 weeks||12 weeks||8 weeks|
|How long to open corporate bank account?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|Draft invoice||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF|
Frequently asked questions
Do I always need to find a local joint venture partner to set up a company in Vietnam?No, such Vietnam company setup requirement only apply to a handful of industries.
Is a branch a good entity to set up a small business in Vietnam?No, a branch is usually only used by foreign multinationals willing to keep complete control over their operations. It is usually preferable to use an LLC for a small business setup in Vietnam.