How to register a foreign owned company in Vietnam

Vietnam is emerging as one of the most attractive destinations for foreign investment in Southeast Asia. With a rapidly growing economy, a young and dynamic workforce, and a strategic location, the country offers significant opportunities for international entrepreneurs. One good example of a sector that is getting more and more attention is the field of IT / AI business. But sectors such as manufacturing, food and beverage, hospitality, education, and infrastructure are also popular for foreign investment in Vietnam. No matter the sector, however, setting up a foreign owned company in Vietnam requires careful navigation of legal and administrative processes. In this article, we will walk you through the main requirements and procedures for registering a foreign owned company in Vietnam. We will also look at the estimated costs and timelines that are involved.

Foreign ownership regulations in Vietnam

It is important to realize that Vietnam is a country in development. Until fairly recently, most companies in Vietnam were owned by the State. At the time, there was practically no foreign investment. However, Vietnam considerably changed its economic policies in the late 1980s (“Đổi Mới”). Since then, it has slowly but steadily opened its economy to: (i) private ownership, and (ii) foreign ownership. It is therefore understandable that not all sectors in Vietnam are open to foreign investment (yet). Sectors such as manufacturing, trading, IT, and F&B already allow up to 100% foreign ownership. However other sectors, such as advertising, tourism, and real estate are either closed to foreign ownership, or they have so – called “joint venture requirements”. It is therefore important to check the situation in the specific sector of your interest.

Choosing a company structure

The most common investment structure for foreign investors in Vietnam is the limited liability company (“LLC”). Many foreigners prefer it because of its straightforward setup and its shareholder protection. An LLC may have a single owner or multiple investors, and they can be individuals, companies, or a mix. If you are planning to issue shares to the public or seek external investment, then the joint stock company (“JSC”) is a viable alternative structure. While JSCs offer flexibility in raising capital, they come with a more complex corporate governance structure. Alternatively, businesses that do not intend to engage in direct commercial activities may opt for a so – called “representative office”. This structure allows foreign companies to establish a presence in Vietnam for market research and promotional purposes. However, local revenue generation is strictly not allowed under this structure.

The registration process, step by step

Step 1 | Investment registration certificate (IRC):

The first major step in registering a foreign owned company in Vietnam is obtaining an investment registration certificate (“IRC”). This document is issued by the Department of Planning and Investment (“DPI”) in the province or city where you want to register. It serves as official approval for foreign investment. The application process involves preparing an investment project proposal, and demonstrating financial capability through (audited) financial statements. Furthermore, you have to submit relevant legal documents, such as the investors’ passports (for individuals) or incorporation certificates (for companies). Normally, proof of having secured an address for the company is also a requirement for the IRC. The IRC approval process typically takes between 30 and 45 working days.

Step 2 | Enterprise registration certificate (ERC):

Once you have obtained the IRC, the next step is to obtain an enterprise registration certificate (“ERC”). The ERC legally recognizes the company’s establishment and is also issued by the local DPI. In other words, this is the step where you register the legal entity. To apply for this certificate, investors must submit an application form, a company charter outlining the corporate governance structure, and a list of shareholders (for JSCs) or members (for LLCs). The ERC is usually granted within 5 to 10 working days. The exact duration depends on the completeness of the documents, and the local DPI who is in charge of your application.

Step 3 | Post – registration:

Following the issuance of the IRC and ERC, you must complete several post – registration procedures, before your company can start its operations. One of the first steps is obtaining a company seal, which is a requirement for making official transactions. Next, the company must register with the local tax authority and obtain a tax code, enabling it to fulfil corporate tax obligations. Opening one or more bank accounts in Vietnam is also necessary for capital contributions and day-to-day transactions. Additionally, businesses must register employees with the labor department, and obtain social insurance codes if they plan to hire staff. These post – registration procedures typically take around 15 to 20 working days to complete.

Step 4 | Sub – licenses:

One important step, which is typically done simultaneously with or after step 3, is the obtaining of so – called “sub – licenses”. These are additional approvals that are only required for certain fields of business. A management consulting company, for example, does not need any such sub – licenses. However, when you register a restaurant: you will need to obtain a food safety and hygiene sub – license. Another example: when you register a hotel, you will need to obtain a public safety sub – license. And when you register a dental clinic, you will need to obtain a business operating sub – license. Depending on which sub – license(s) you need: a different authority will be in charge. It is always recommendable to check timely whether or not you will need to apply for any sub – licenses. Because this may well affect the time and costs of registering your company.

Costs and time frame

• The cost of establishing a foreign owned company in Vietnam varies. Generally speaking it depends on: (i) the type of business, (ii) the location, and (iii) whether you use professional services or not. First things first, the official Government fees for obtaining the IRC and ERC are not very high. They range from USD 100 to USD 200. However, many foreign investors choose to engage legal- or consulting firms to streamline the process for them. Of course depending on the service provider, prices typically range from USD 1,500 to USD 3,000. Other costs, such as seal carving, notarization, and bank account setup, may add another USD 100 to USD 300 to the total costs. Sub – licenses, if you need them, may cost around USD 500 – 1,000 each.
  
• The entire registration process, from preparing documentation to obtaining all necessary approvals, typically takes around 3 to 6 months. 3 months when you do not need any sub – licenses, 6 months when you need 2 or even 3 such sub – licenses. The initial document preparation may take 2 to 4 weeks, followed by the IRC issuance, which requires around 4 to 6 weeks. It is usually possible to obtain the ERC within 1 to 2 weeks after obtaining the IRC. Post – registration steps, such as tax registration and opening a bank account, usually takes another 2 to 3 weeks. And obtaining sub – licenses, depending on which ones you need, may take between 1 and 3 months.

Other considerations

Before registering a foreign owned company in Vietnam, there are several other points to consider. For example, it is useful to have at least a general understanding of Vietnam’s labor laws and employment regulations. This includes topics such as mandatory social insurance, work permits for foreign staff, and compliance with minimum wage requirements. Investors should also be aware of Vietnam’s tax system. This includes topics such as corporate income tax, value added tax, dividend tax, and sometimes import- or special consumption tax. Intellectual property protection is another key point to consider, especially for businesses in technology and creative industries. Furthermore, there will be language and cultural challenges in daily operations. And having a clear exit strategy is also something to consider.

Conclusion about registering a foreign owned company in Vietnam

Registering a foreign owned company in Vietnam involves multiple legal and administrative steps, which may seem daunting at first. However, with diligent planning and some expert support, it is definitely doable. Understanding the requirements, choosing the right business structure, and preparing all necessary documents in a timely manner may all help you streamline the process. It is fair to say that the process often seems a little “formalistic” and lengthy. However, for many foreign entrepreneurs and investors it is still worthwhile to register a foreign owned company in Vietnam. Other foreign investors choose to work with, or for, a Vietnamese partner, which brings its own set of opportunities and challenges. In any case, it often pays off to consult with an experienced advisor before you move forward in one way or another. Such an advisor may help you to understand the process, and ultimately save you both time and money.

VNHL is here to support you

At VNHL, we are always happy to consult our Clients about registering a company in Vietnam. We personally have first hand experience with registering and running both foreign- and Vietnamese owned companies in Vietnam. So if you have any questions about this topic, do not hesitate to contact us. You can reach out to us via the chat button on the right of this page, or via our contact us page for further information and questions. Our three main services are: (i) consulting, (ii) networking, and (iii) supporting. We look forward to hearing from you and to supporting you.

*Dear reader, even though our VNHL Consulting team always tries its very best to provide its Clients with correct and complete info: we are not a Vietnamese law firm. The information in this post is therefore not meant to, and should also not be construed to, constitute legal advice. For specialized advice in the fields of law, accounting, tax, etcetera: we always recommend our Clients to speak with qualified specialists in those fields. We have several such specialists in our nationwide network, and we are always happy to introduce our Clients to them, when appreciated.