Business Guide – Vietnam
Here’s a practical guide from Enterprise Singapore and our knowledge partner, RSM, on the nuts and bolts of setting up presence in Vietnam.
Starting a business in Vietnam
Business structureHow should I set up my business in Vietnam?
To do business in Vietnam, you may set up a new company, invest in an existing company or project, or set up a representative office or branch office. Different regulations apply to different business structures and activities.
Direct investmentYou may invest directly by:
- Setting up a 100% foreign owned enterprise;
- Entering into a joint venture with domestic investors;
- Participating in contractual forms, including Business Co-operation Contract, Build-Operate-Transfer, Build-Transfer, Build-Transfer-Operate, Build-Own-Operate, Build-Transfer-Lease, Build-Lease-Transfer, and Operate-Manage contracts;
- Purchasing of shares or making additional capital contribution to an existing business;
- Merger and acquisition;
- Expansion of an existing investment project.
These forms of investment have business activities and are regulated by the Law of Enterprise and Investment Law of Vietnam.
Commercial presenceYou can also have a commercial presence in Vietnam by establishing a representative office or branch office. A representative office is not allowed to conduct direct commercial or revenue-generating activities, while a branch office may do so. However, do note that prevailing regulations do not encourage foreign investors to set up branch offices. It is also not a common form of foreign direct investment and is only permitted in a few sectors.
Types of business structuresSetting up a new enterprise or acquiring shares/ interest of existing enterprises, are the most common forms of foreign investment. Typical legal corporate structures include:
- A limited liability company with one member or multiple members. This can be 100% foreign owned or a joint venture;
- A shareholding company with at least three shareholders and no limit on the maximum number of shareholders.
How long does it take to register my business in Vietnam?
It varies, depending on your business structure:
- A limited liability company or a shareholding company: 15 to 60 days
- Contractual forms: 3 to 15 days
- Representative office: 15 to 30 days
- Branch office: 30 to 90 days. You are not encouraged to set up a branch office and need to consult the relevant Ministries before doing so
Directors and shareholdersHow many directors do I need?
You need at least one legal representative. Vietnamese business regulations use "authorised representative" and "legal representative" as the preferred terms, in place of "directors". In some cases, a legal representative can refer to a director. There is no restriction on the maximum number of legal representatives.
Do I need a minimum number of resident directors?
Yes. At least one of your legal representatives must be staying in Vietnam regularly. The resident legal representative can be a foreigner or a Vietnamese.
Any restrictions on who I can appoint as a director?
The legal representative of your company must not be:
- Officials and civil servants defined by law.
- Commissioned officers, non-commissioned officers, workers and civil servants working at units of the army; commissioned officers, non-commissioned officers working at police units, except for those appointed as authorised representatives to manage state capital contributed to other enterprises.
- Executive officers of state-owned companies, except for those appointed as authorised representatives to manage state capital contributed to other enterprises.
- People that are legally incompetent.
- Organisations without legal status.
For some conditional businesses, such as education, food and pharmaceutical businesses, legal representatives must have the required licences.
Can I appoint only foreigners as directors to my board?
Yes, your entire board can consist of foreigners.
Can a company in Vietnam be wholly-owned by foreigners? Do I need a minimum percentage of local shareholders?
Yes, foreigners can have full ownership of a local company. There are specific businesses mentioned in Vietnam's WTO agreement where you may need to partner a local investor in a joint-venture. The minimum local shareholder percentage depends on the nature of the business.
How many shareholders do I need to set up a company?
It depends on your business structure:
- A joint stock company needs at least three shareholders.
- Other legal entities need at least one shareholder.
Business activitiesDo I need approval from the local authorities before my company operates?
Yes, you will need prior approval from local authorities for your proposed business activity. For service sectors covered in Vietnam's WTO agreement, local authorities at a provincial level can approve the registered business. For investment projects involving manufacturing activities or service sectors not covered in Vietnam's WTO agreement, where the project investment is VND 5,000 billion (S$293 million) and above, the local authorities need to consult and seek approval from higher authorities such as specialised Ministries or Governments.
Are there business activities which foreign companies cannot do?
Your company is not allowed to carry out the following activities:
- Trade in narcotic substances specified by investment regulations.
- Trade in chemicals and minerals specified by investment regulations.
- Trade in specimens of wild flora and fauna specified by the Convention on International Trade in Endangered Species of Wild Fauna and Flora as well as specimens of rare and/ or endangered species of wild fauna and flora.
- Human trafficking and trade in human tissues and body parts.
- Business pertaining to human cloning.
LicencesWhat type of licences do I need?
You need two types of licences: Licences for incorporation
Apply for an Investment Registration Certificate and an Enterprise Registration Certificate to set up a new company as a legal entity in Vietnam. Licences for operation
Apply for a one-off licence for the following businesses, after setting up your company:
- Health services
- Pharmaceutical manufacture
- Medical equipment
- Food and beverage
- Real estate business
- Film production
- Water production
- Wine manufacture and retail
- Multi-level marketing
- Cosmetic & supplement business and manufacture
- Promotion business
- Printing production
- Bodyguard business
In addition, apply for an import licence to import some special products, such as mining material, weapons, chemicals, medical products etc. You may need to renew such licences annually, depending on the regulations.
Should I display the business licence prominently at my business location?
No, it is not necessary.
Share capital and capital contributionWhat is the minimum share capital or investment capital I need to set up a company?
Generally, you do not need a minimum investment capital. For these businesses, a minimum capital applies:
- Real-estate (VND 20 billion)
- 100% foreign-owned banking (VND 3,000 billion)
- A non-banking financial enterprise (VND 150 to 500 billion)
- Debt collection (VND 2 billion)
- Security/ bodyguard services (VND 2 billion)
- Movie production (VND 1 billion)
- Airline transportation (VND 500 to 1000 billion)
- Auditing services (VND 3 to 5 billion)
Do I need approval from the local authorities to increase my share capital or investment capital?
Yes. It takes about 15 working days to get approval.
What is the typical share capital requirement for an investment holding and trading company?
There is no minimum investment capital required for a typical trading company. The processing time to get a licence may be shorter for companies with a higher investment capital of at least US$200,000 (S$268,000).
What is the common unit issue price per share?
VND 10,000 (S$0.59) per share.
Can I issue shares in a currency other than Vietnamese Dong?
You can only issue shares in Vietnamese Dong.
Any restrictions on bringing capital out of Vietnam?
Yes. Inform the authorities of all capital repatriation and you may only proceed after clearing all tax compliance requirements.
BankingDo I need a separate bank account to receive capital?
How long does it take to set up a corporate bank account?
It takes four to six weeks to prepare all the necessary documents to open the bank account.
Do I need to keep a minimum amount as capital in my bank account at all times? Or can my company use the entire amount for business activities?
No, you don’t need to keep a minimum capital amount in your bank account at all times and can use the entire amount for business activities. However, some banks may charge an administrative management fee for the bank account.
TaxesWhat is the current corporate tax rate?
20% of taxable profits. For enterprises with total revenues of less than VND 20 billion, a 17% CIT rate shall be applied.
Is the tax rate different from local owned companies?
No. The corporate income tax rate is the same for both foreign-owned and domestic entities.
Any tax incentives that I can use?
The corporate income tax rate in Vietnam is 20%. You may enjoy a lower rate of 10% to 17% if:
- Your project belongs to the encouraged businesses such as high technology, education, vocational training, health, culture, sport, environment protection, agriculture applying high technology, infrastructure and development software.
- Your project location is in difficult or extremely difficult areas prescribed by the Government at specific times.
When and how do I pay corporate tax? Is this paid annually or monthly?
Pay corporate tax on a quarterly basis and declare the final amount at the end of the year.
Do I need to pay tax when I send dividends back to Singapore?
If you repatriate dividends to organisational investors, you may not be taxed if you have fulfilled your tax requirements. Repatriation of dividends to individual investors may be subject to 5% personal income tax depending on the amount of investment.
What are the withholding tax rates on interest, dividends and royalties? They are:
Type of Tax Interest Royalties Withholding Corporate Income Tax 5% 10% Withholding Value Added Tax Exempt Exempt or 5%
Any value-added tax or goods & services tax in Vietnam?
The Value Added Tax is 5% for essential goods and services, and 10% for all other goods and services other than those specified as VAT-exempted goods or services, or those subject to 0% or 5%. Value Added Tax does not apply to export of goods and services but only for production, business, and consumption.
Are there any tax treaties between Vietnam and Singapore?
Vietnam and Singapore have the following free trade agreements and tax treaties:
- ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)
- ASEAN Trade In Goods Agreement (ATIGA)
- ASEAN-Japan Comprehensive Economic Partnership (AJCEP)
- ASEAN-India Free Trade Area (AIFTA)
- ASEAN-Korea Free Trade Area (AKFTA)
- ASEAN-China Free Trade Area (ACFTA)
- Vietnam-Singapore double tax treaty
Human resourceWhat basic employment benefits must I give to my employees?
Under the Vietnamese Labour Code No.45/2019/QH14, you must provide your employees annual leave and public holidays. There are also rules on working hours, overtime work, payment of social insurance, strikes, and termination of employment contracts.
Do I need to pay taxes or social security contributions for employees?
Yes. Both employer and employee must contribute to compulsory social insurances:
Type of Contributions Rate Social Insurance Employer: 17.5%
Health Insurance Employer: 3%
Unemployment Insurance Employer: 1%
Trade Union Fee Employer: 2%
Social Insurance and Unemployment Insurance contributions are applicable to Vietnamese individuals only. Health insurance contributions are required for Vietnamese and foreign individuals that are employed under Vietnam labor contracts.
If I send a Singaporean employee to work in Vietnam for less than a year, does the employee need a work pass?
Yes, your employee must have a work permit. There are two types of work permits:
- Confirmation of work permit exemption (for managerial positions such as legal representative, director, manager)
- Typical work permit
The maximum duration of a work permit is 24 months, which can be extended when subject to certain conditions. The typical processing time for work permit application is 7 working days. However, Vietnam has implemented border restrictions for foreigners since March 2020 due to the COVID-19 pandemic. Please check on the latest requirements for foreigners to enter the country.
Must I have a physical office in Vietnam? Can I use another business’ address or a virtual office address?
Yes, you may use a virtual office, depending on the nature of your business. For example, you may use a virtual office if your business provides services. However, if you are running a business that requires a physical location, you may need a lease contract for a suitable address with the needed floor area.