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It is no more a hidden fact that like Singapore, Vietnam is also fast becoming a favorite business destination for global entrepreneurs.
For the last few years, the Socialist republic of Vietnam (SRV) has been attracting a massive number of foreigners to incorporate a company in Vietnam.
Just like foreigners, local Vietnamese are also showing overwhelming response when it comes to company incorporation in Vietnam. The residents who have an entrepreneurial bent of mind usually kickstart business venture to fulfill their innate skills.
This article will outline the company incorporation options available for foreign investors who are keen on doing business in Vietnam but are not sure where to start.
What are the types of business Entity available under Vietnam jurisdiction?
It makes sense to take a few crucial factors into consideration before taking the final plunge into company incorporation in Vietnam.
Out of all factors, deciding on the right business entity is an important one. This decision of yours will have a lasting impact on the amount of tax payable, public perception about your business, compliance requirements and so on.
Leaf through the list of key business entity types in Vietnam:
- Limited Liability Company
- Joint Stock Company
- Representative Office
- Branch Office
- Business Corporation contracts or Special purpose vechiles
When it comes to popular business entities in Vietnam, the three types of business entities that come to one’s mind are limited company (a form of LLC), Joint stock company (JSC) and Representative office (RO).
Nevertheless, a foreign investor can start his business in any one of the types listed above based on nature of his business and areas of interest.
Let us dive little deeper into the features and characteristics of popular business entity types available for foreign investors.
Limited Liability Company
The limited liability company in Vietnam is the favorite choice for both foreign and local entrepreneurs due to its numerous advantages. In an LLC, shares are not available to the general public.
The number of the shareholders can be up to 50. Most of the privately-owned businesses in Vietnam are registered as the limited liability companies. In these types of entities the company name ends with the suffix such as Ltd (Limited).
Any local individual of 18 years and above can setup a limited liability company in Vietnam. Both an individual or corporate entity can act as the shareholder of an LLC in Vietnam.
If properly incorporated, a limited liability company is the most tax-efficient entity in Vietnam. Similarly, it is the most advanced and flexible business entity. There is a ton of advantages that a entity of this nature has to offer.
It is an independent legal entity and can acquire assets in its name. A company can sue or be sued in its name.
- The liability of the shareholders is limited to the amount in shares they contributed to the company.
- The company continues to exist even after the retirement, death of the member(s) or the transfer of ownership.
- It builds a credible image of the entity, and thus, potential investors, customers, and suppliers are willing to engage with the company.
- It is easier to raise the capital either by bringing in new shareholders and selling new shares to existing shareholders.
- A limited liability company is entitled to enjoy the various benefits of Vietnam taxation. The profits are taxed at corporate tax rates.
Company Incorporation Vietnam: What is the process?
A company must be registered with the national regulator i.e. DPI (Department of Planning and Investment). Since all of the paperwork has to be in Vietnamese you will typically need the support of an 3rd party consultant to help you draft, file and follow up on your application. Working with an consultant makes the process simpler, faster and convenient.
In order to register an business in Vietnam it is necessary to provide the following inforamtion
- Information on the nature of the business
- Where in Vietnam you want to register you business
- Three names in English in the order of your preferece.
Documentation wise, there are three pieces of information which need to be provided.
- Passport of the investor or if it an entity, the business license of the entity
- Address to register the company. This is mostly in the form of a lease agreement.
- Proof of funds/capital investment. This can be in the form of a bank statement. There is no set minimum capital to setup a company in Vietnam though standard expected paid up capital is typically SD10,000.
If the registering entity is a corporation they will also need to appoint a legal representative who will sign all the application documents and in effect be the chairman of the Vietnam company.
Joint Stock Company
A Joint stock company is meant for established corporations who intend to get listed and offer shares to the public. It has a complicated organisational structure requiring atleast 3 directors, a corporate board to pass resolutions and necessarily requires its books of accounts to be audited by a third party each year.
A third options available for doing business in Vietnam is a representative office commonly referred to an RO. An RO is a vehicle that allows foreign companies to have a presence in Vietnam to carry out the following activities only.
- Market research;
- Promoting the activities of the foreign company; and
- Acting as a representative for the foreign company.
Though simple to setup and operate, a RO suffers from one main drawback mainly that it cannot conduct any commercial activity or generate any revenue locally.
An overseas company may choose to setup a subsidiary in Vietnam in the form of a Branch office. To be able to register a branch office, the overseas parent company must have been in operation for at least 5 years.
This type of entity is permitted to carry out economic activity and generate revenues. Additionally, it is also permitted to remit profits back to the overseas to the parent company.
- A branch office is very similar to setting up a new LLC company and has no real advantage in most cases. It is mainly suited to big corporations who wish to build an existing brand.
- This type of entity can only carry out activities registered in its business license.
Business corporation contracts & Special purpose vechicles (SPV)
SPV’s are not registered entities in the true sense. They are essentially business cooperation contracts intended to attract foreign investment in large scale infrastructure projects. The main goal of SPV’s is to provide a means for private government partnerships. SPV’s are of 4 types.
i. Build operate transfer contracts (BOT)
ii. Build transfer operate contracts (BTO)
iii. Build transfer contracts (BT)
iv. Business corporation contracts (BCC)
- Foreign entities and local companies can be signatories to a BCC. These serve as means of doing business without the need for setting up a local company.
- This is a form of private financing without transferring ownership to a foreign entity.
A foreign investor can choose any of the business entities mentioned above to fulfill his entrepreneurial desire. The selection should be based on the objectives of the business, nature of activities, funds and many other factors.
Each of the entity types has its share of advantages and disadvantages. You are advised to do some groundwork before taking the leap of faith.
Among all, limited liability companies are the most popular choice for serious entrepreneurs. Thereby, company incorporation Vietnam continued to receive an overwhelming response from the people from both within and across the border.
More information and contact details in this link : https://www.expatchoice.asia/services/business-services/mahan-consulting-company-ltd-vietnam
Mahan Consulting Company Ltd
A. 29/65 Hoang Hoa Tham, District Binh Thanh, Ho chi minh City, Vietnam
P. +84 (0) 96466061
E. [email protected]