- Starting a business in Vietnam requires careful planning and compliance with the Law on Enterprises and related regulations.
- Entrepreneurs can choose from several business structures, including a Limited Liability Company (LLC), Joint-Stock Company (JSC), Partnership, or Sole Proprietorship.
- Foreign investors may need additional permits, particularly for industries with restrictions or conditions under the Foreign Investment Law.
- Key steps include registering the business with the Department of Planning and Investment (DPI), securing a tax code, opening a local bank account, and fulfilling any sector-specific licensing requirements.
Why Start a Business in Vietnam?
Vietnam is one of Southeast Asia’s fastest-growing economies, offering numerous opportunities for entrepreneurs and investors. Key factors driving its appeal include:
- Strategic Location. Vietnam’s position in the ASEAN region makes it a natural hub for trade and logistics, particularly with its proximity to China and other key markets.
- Growing Consumer Base. With a population of just over 101 million, rising incomes, and increasing urbanization, Vietnam presents a strong market for retail, e-commerce, and services.
- Favorable Trade Agreements. Vietnam has signed several Free Trade Agreements (FTAs), including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP), offering reduced tariffs and better market access.
- Government Support for Investment. Policies encourage foreign investment in priority sectors such as high technology, renewable energy, and manufacturing.
Key Steps to Start a Business in Vietnam
1. Choose a Business Structure
The first step in establishing a business in Vietnam is selecting the right legal structure. Common options include:
- Limited Liability Company (LLC): Ideal for small to medium-sized businesses, an LLC requires only one or more members and offers limited liability protection.
- Joint-Stock Company (JSC): Suitable for larger enterprises or businesses planning to raise capital through public or private offerings. It requires at least three shareholders.
- Partnership: Typically formed by individuals or entities engaged in professional services (e.g., law firms, consultancy businesses).
- Sole Proprietorship: Owned and operated by a single individual, though less common among foreign investors due to limited liability and scalability issues.
Foreign investors frequently choose an LLC because it offers flexibility, limited liability, and simpler governance compared to a JSC.
2. Register Your Business
Business registration is managed through the
Department of Planning and Investment (DPI). The process generally involves:
- Securing an Investment Registration Certificate (IRC): Foreign investors must obtain this document, which outlines the scope, capital, and structure of the investment project.
- Applying for an Enterprise Registration Certificate (ERC): Once the IRC is approved, businesses register for the ERC, which includes the company name, address, legal representative, and business activities.
- Submitting Required Documents: Common documents include:
- Company charter
- List of founding shareholders or members
- Proof of capital contribution
- Passport or identification documents for individual investors
Depending on the industry and location, processing times for these certificates may range from a few weeks to several months.
3. Open a Bank Account and Deposit Capital
Once the ERC is issued, businesses must open a local bank account to deposit the charter capital. Proof of capital contribution is critical for both LLCs and JSCs and must comply with the timelines stated in the company charter. In addition, foreign investors must open a
capital account to handle inbound and outbound transactions related to their investment in Vietnam.
4. Obtain Sector-Specific Licenses
Certain industries in Vietnam require additional licenses or permits. Examples include:
- Food and Beverage: Licenses from the Ministry of Health and local authorities for hygiene and safety.
- Education and Training: Approval from the Ministry of Education and Training for schools and vocational institutions.
- Import/Export: Customs registration and import/export licenses for businesses involved in trade.
These licenses must be obtained before commencing operations, and the application process can vary depending on the location and type of business.
5. Tax Registration and Compliance
After incorporation, businesses must register with the local tax authority to receive a tax code. Vietnam’s tax system includes:
- Corporate Income Tax (CIT): Standard rate of 20%, with preferential rates for certain industries and regions. In a select few industries, like oil & gas it can be higher — 25-40%
- Value-Added Tax (VAT): Standard rate of 10%, with reduced rates for specific goods and services.
- Personal Income Tax (PIT): For employees, calculated progressively based on income levels.
Businesses are required to file taxes periodically and maintain accurate accounting records. Hiring a professional accountant or outsourcing to a local firm is advisable to ensure compliance with Vietnam’s tax laws.
6. Lease a Business Premises
Vietnamese law requires that businesses provide a physical address for registration. Whether it’s an office, factory, or retail space, you must secure a lease agreement and register the address with the DPI. If your business operates in multiple locations, each must be registered.
7. Obtain Work Permits for Foreign Employees
If you plan to hire foreign staff, including yourself, work permits are mandatory. The process involves:
- Submitting proof of qualifications and experience
- Justifying the necessity of hiring foreign employees
- Applying for work permits through the Department of Labor, Invalids, and Social Affairs (DOLISA)
Foreign employees must also apply for temporary residence cards to stay legally in Vietnam for extended periods.
8. Register Social Insurance for Employees
Vietnam requires companies to enroll employees in the country’s
social insurance program, which covers health insurance, unemployment insurance, and pension contributions. This is mandatory for both local and foreign employees with work permits.
9. Develop a Strong Understanding of Local Culture and Regulations
Vietnam’s business culture emphasizes personal relationships, mutual trust, and formalities. Foreign investors benefit greatly from networking with local partners or working with consultants who understand the local market. Additionally, staying informed about changes in regulations at both the national and provincial levels is critical.
Challenges of Starting a Business in Vietnam
1. Bureaucratic Processes
While Vietnam has made significant strides in streamlining business registration, investors may still face delays due to paperwork, varying local interpretations of regulations, or incomplete submissions. Working with experienced local advisors can mitigate these challenges.
2. Foreign Investment Restrictions
Some industries are restricted or conditional for foreign investors, requiring additional approvals or local partnerships. Examples include real estate, telecommunications, and certain areas of agriculture. Consult Vietnam’s
Negative List for guidance on restricted sectors.
3. Language and Cultural Barriers
Although English is widely spoken in business circles, official documents and applications are typically in Vietnamese. Having bilingual staff or hiring professional translators is essential to avoid miscommunication or errors.
4. Compliance Risks
Tax compliance, labor regulations, and reporting obligations require ongoing attention. Non-compliance can result in fines, audits, or operational disruptions. Engaging reliable legal, accounting, and tax professionals is highly recommended.
Tips for a Successful Business Setup
- Partner with Local Experts: Engage a local law firm or corporate services provider, such as MSA, to navigate regulations, prepare documents, and liaise with authorities.
- Conduct Market Research: Understand your target audience, competition, and industry trends to make informed decisions.
- Stay Updated on Incentives: Vietnam offers investment incentives in priority sectors and less developed regions. Take advantage of these opportunities when planning your business location and operations.
- Leverage Technology: Use modern tools for accounting, tax filing, and compliance management to streamline operations.
Start a Business in Vietnam, with MSA
Vietnam offers a dynamic business environment with opportunities across various industries. While setting up a business involves navigating regulatory requirements, proper planning and assistance from local professionals can simplify the process. Whether you’re a small entrepreneur or a multinational investor, Vietnam’s growing economy, supportive trade policies, and strategic location make it an attractive destination for business expansion.
Get in touch with
MSA’s Vietnam expansion experts to find out what the best business structure is for you in Vietnam, and how to manage your ongoing accounting and compliance obligations.
