Benefits of Registering a Company in Vietnam
Considered one of the important investment destinations in Southeast Asia, Vietnam has long been famous for its unique geographic location and outstanding business advantages, attracting global investors who wish to expend their operation in this region. With some of the following benefits, you can also accelerate the growth of your business as well.
- Incentive policies: The Vietnamese government has offered a series of incentive policies to attract foreign investors, such as tax reductions and land-use benefits.
- Low Labor Costs: Compared to its neighborhood countries, Vietnam offers relatively low-cost but well-educated labor forces.
- Strategic Location: Locating in the heart of Southeast Asia, Vietnam provides convenient transportation, making it possible to obtain easy access to a broader international market.
- Growing Market Potential: Vietnam’s domestic consumer market is expanding as the purchasing power of the local people increases, leading to higher demand for high quality products and services.
The common types of Business Entities in Vietnam
1. Vietnam Limited Liability Company (LLCs)
Limited liability companies (LLCs) are the most common forms of companies registered in Vietnam, allowing global investors to enter the Vietnamese market without a local business partner. It can engage in profit-making business activities in a wide range of industry categories. In addition, Vietnam allows foreigners to register their wholly foreign-owned companies for full control over their enterprises, which is quite similar to a WFOE in China.
2. Representative Office in Vietnam
A representative office is the local presence in Vietnam, set up by a foreign company to engage in non-profitable activities such as business liaison, customer contacts, market development, and demand research. Unlike an LLC, a representative office will not allow its owners to receive payments and issue invoices to others.
How to Register a Company in Vietnam
Documents for Registering an LLC in Vietnam
- Company Name: the name of your company and the business type (llc).
- Articles of Incorporation: includes the management structure, business scope, and essential details such as the shareholders’ information.
- Registered Capital: although a minimum registered capital is required, a specific amount needs to be indicated.
- Registered Office Proof: the proof of an operation address (either a physical or virtual office address), including lease agreement or property ownership certificate.
- Business Scope: introduction to the types and items of the business activities the company will participate in.
- Commitment Letter from Foreign Investors (if needed): in some specific areas or industries, foreign investors may be required to commit to investing a certain amount of capital.
- Legal Representative Information: passport of the legal representative
Documents for Registering a representative office in Vietnam
- Business License of the Parent Company: Incorporation certificate of the overseas parent company wishing to establish a representative office in Vietnam.
- Bank Statement of the Parent Company: A bank statement issued by the parent company’s bank to confirm that sufficient funds have been prepared to support the establishment of the representative office.
- Power of Attorney: Information about the appointed representative and a description of their duties, authorized by the parent company’s legal representative.
- Registered Address: Proof of the registered address of the representative office, usually in the form of a lease agreement or property ownership certificate.
- Representative Office Business Scope: A detailed description of the activities conducted by the representative office, such as market research, product promotions, or branding (Note: no for-profit activities are allowed).
Process to Register an LLC or a Representative Office in Vietnam
Step 1: Name Pre-Approval
The first step to register a Vietnam business entity is to submit the name pre-approval request to the Department of Planning and Investment (DPI) for compliance examination. You need to select another name if it does not meet the legal requirements, or it has been used by another company.
Step 2: Obtain Registration Certificate
After preparing the documents, you need to submit the registration application to the DPI, who will review the materials and approve the establishment. The Business License (for an LLC) or a Representative Office Registration Certificate (for a representative office) will be issued once the application is approved.
Step 3: Tax Registration
After the company registration is completed, the company must register with the Vietnamese Tax Department and obtain a Tax Code.
Costs of Registering a Vietnam Company
Company Registration Costs
- Registration Application Fee: The DPI usually charges a business registration fee of 2 million VND (around 80-100 USD) when the formation application is submitted.
Bank Account Opening Costs
- Bank account management fee: the bank account management fee around 300,00 to 500,000 VND (12-20 USD) is charged annually depending on the bank you select.
Annual Maintenance Costs
- Annual Report Fee: All companies registered in Vietnam are required to submit an annual report. This fee is generally between 50-100 USD (the cost may vary depending on the province or city).
- Company Annual Inspection Fee: Vietnamese companies must update their registration annually. The fee typically ranges from 100-200 USD (including updates to the business license, tax registration, annual report, etc.).
- Annual Auditing Fee: Foreign-invested companies are typically required to submit an annual financial report, and some companies must conduct an audit. The audit fee varies based on the size and complexity of the business, where small enterprises may spend 1000-2000 USD, or 2500-5000 USD for large enterprises.
Taxes while Doing Business in Vietnam
Knowing the taxes when doing business in a foreign country is more important than just registering a company. For the owner of a foreign-invested company established in Vietnam, you need to remember the following common taxes:
1. Corporate Income Tax (CIT)
From January 1, 2016, Vietnam reduced its standard corporate income tax (CIT) rate from 22% to 20%, where companies in industries such as high-tech enterprises or environmentally friendly businesses, a further reduced CIT of 10% is implemented. In addition, small-scale companies whose annual revenue is less than 200 billion VND (~870000USD) can enjoy a lower tax rate at 17%.
2. Value-Added Tax (VAT)
The standard VAT rate in Vietnam is 10%. However, industries related to the export of goods or services, as well as essential goods and services, can enjoy lower VAT rates of 0% or 5%.
3. Dividend Tax
If your company distributes profits to shareholders, a dividend tax of 5% is usually applied during the distribution process.
4. Franchise Tax
Franchise tax is a fixed tax levied by the Vietnamese government on all companies registered in Vietnam. Since franchise tax is not related to a company’s revenue or profit, but rather determined by the company’s registered capital and size, it is often considered one of the basic costs of company registration and operation. This tax typically ranges from 150 to 350 USD.
