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Vietnam is one of the most promising economies in the world that offers a vibrant business ecosystem to global entrepreneurs. The Socialist republic of Vietnam has been acknowledged for its pro-investment reforms across diverse areas in the business domain.
Occupying a central position in S.E Asia, it serves as a meeting point for entrepreneurs from East & the West. Essentially, the low cost of living, healthy lifestyle and the promise of wealth are some of the key factor that drives aspirants to immigrate to the shores of this fascinating country.
Reiterating, with a set of encouraging attributes such as pro-business policies, world-class infrastructure, robust transportation network and a pool of talented workforce, Vietnam is the ideal seat for business expansion and wealth creation. The authority is strict on corruption and imposes strong and protective law for intellectual property rights.
These attributes attract foreign investors and entrepreneurs who often end up staying back in Vietnam and make it their second home.
Vietnam Company Registration for Foreign Entrepreneurs
Every year, a horde of foreign entrepreneurs come to Ho chi minh city in search of business opportunities. The ever-rising interest of foreigners in company registration in Vietnam prompted the company registrar i.e. DPI (Department of Planning and Investment) to introduce distinct incorporation options for them. There are three options available:
- Limited liabilities Company
- Branch Office
- Representative Office
Let us dive a little deeper into all three options of Vietnam company registration.
Limited Liability Company:
A limited liability company in Vietnam is a locally incorporated private limited company. Its major shareholder are indivisual foreign investors or locals or foreign companies or joint ventures with any of the above combinations.
As 100% foreign shareholding is allowed in a companies registered in Vietnam, a foreign investor can can set up their base here in the form of a limited liability company. It is the most preferred company incorporation option for small & medium-sized foreign businesses, due to its limited liability and legal identity status.
A limited liability company is an independent legal entity that is distinct from its parent company. It is considered to be a local tax resident of Vietnam and entitled to all tax incentives and allowances available for locals. This is the reason why many international giants and MNCs incorporate a limited liability company in Vietnam.
A parent company is not liable for any loss or debt incurred by its limited liability company. The liability of parent company limits to the amount it spends to buy the share of the limited liability company.
Similarly, the name of a limited liability company can be different from its foreign parent company. A limited liability company comes into existence upon registration with the national regulator i.e. DPI. All the necessary requirements for incorporating a private limited company will be applicable for a limited liability company in Vietnam.
A Few Key Facts of Vietnam Limited liability company:
- The proposed company has to be approved by DPI before filing an application for registration.
- There must be at least one corporate shareholder holding more than 50% of total share. The parent company may own 100% of the company’s shares.
- Appointment of a legal representative is a must. It can either be a local or a foreigner who may or may not be a capital contributing member.
- The minimum paid-up/ investment capital should be sufficient to carry out the intended business i.e carry out the registered business lines. The concept of authorized capital is not applicable in Vietnam jurisdiction.
- A local registered office must be presented during company registration process.
- The Memorandum and Articles of Association/Constitution of the parent company must be lodged with DPI.
- A chief accountant must be appointed within the 6 months of company registration Vietnam.
A branch office is an extension of an overseas company. It is not a separate legal identity and hence its parent company is liable for all the losses or debts incurred by the branch office. By incorporating a branch office, a foreign-based parent company can conduct the business operations and generate revenue in Vietnam.
Unlike limited liability company, it is considered to be a non-resident for tax purposes and thus, not eligible for enjoying the tax incentive and allowances available for locals. While branch office option is popular among the MNCs, it is less attractive for small and medium-sized business.
As per the law on investment, a branch office must appoint minimum of one authorized legal representative who may or may not be a resident of Vietnam. A local registered office address is also needed prior to registering the branch office with DPI.
Requirements of Branch Office in Vietnam:
- The name of the branch office must be same as that of its parent company. However, the name must be approved by DPI.
- The parent company must own 100% share of the branch office.
- The parent company must have been operating in the business for 5 years.
- The parent company also needs to prove financial capacity and experience capacity in the fields of investment to ensure the feasibility of investment project which is typically done by sharing audited financial statements.
- A person Vietnamese or foreigner can be appointed as the authorized representative of a branch office.
- The Memorandum and Articles of Association/Constitution of the parent company must be lodged with the authority i.e. DPI.
Typically, foreign companies engage a local third-party service provider to prepare and submit the application dossier as the process involves filing a series of documents along with the application pack which is in Vietnamese. These are the documents of the parent company such as business license, articles of association, audited financial statement etc. All of these must be notarised and consular legalised and then translated to Vietnamese.
A foreign company, seeking to explore the market and assess its potential without conducting any business activities or without generating any revenue locally, can choose to incorporate a representative office in Vietnam. It is a short-term setup that does not have legal identity.
A representative office is allowed to conduct market research/ feasibility studies on behalf of its overseas parent company. Hence, the filing of annual tax returns is not applicable for this form of company. The parent company is responsible for bearing the implicit liability of the representative office.
The department of Industry & Trade (DoIT) is the authority that administers the registration of representative office for most of the industries including trading and manufacturing. Nevertheless, it is the DPI with whom entities from commerce and financial sectors must register their representative office setups.
There must be at least one chief representative who can be a local resident of Vietnam or staff member of the foreign-based parent company. There is no limit on the number of the support staff of a representative office however companies typically have 5 or less.
You can choose any of the three options based on your company’s needs and business activities. Make sure to hire a trusted and cost-effective company registration firm to start your business.
About Mahan Consulting Company Ltd
Mahan company Ltd is a Vietnam-based registered provider of corporate & trading services. Mahan comprise of a team of 40+ people who have particular expertise in legal, finance, accounting, taxation, consumer goods trading and strategic planning. Mahan is committed to giving foreign investors the local advantage and support to help them make smarter decisions so that they can focus on doubling their investment in their very 1st year of operations. Our top down approach ensures wealth generation for foreign investors.
Mahan Company Ltd (Registraiton No. 0312447844)
85 Hoàng SaĐa Kao, Quận 1, Hồ Chí Minh, Vietnam