13 Jun Doing Business In Vietnam – How To Set Up Company In Vietnam
There is currently in Vietnam a business law system applicable to both domestic and foreign investors, whereby all companies must operate in accordance with relevant regulations on business registration, taxation, accounting, labour, insurance, foreign exchange, and anti-money laundering, etc.
Our series of articles deal with the following topics:
- How to set up a company in Vietnam
- Management of compliance procedures when operating a business
- Business risk management in accordance with local regulations and culture
- How to acquire and sell an existing company
- How to expand, narrow or withdraw a business from the market
We are willing to share with you our experiences and real cases accumulated and inherited since the 2000s when the Vietnamese business law officially “opened up” to allow the private sector to have been born and grown at storm-like speed throughout the past 18 years.
DOING BUSINESS IN VIETNAM
PART ONE: HOW TO SET UP COMPANY IN VIETNAM
It is sometimes confused that a company is simply set up by applying for an enterprise registration certificate. Starting a business in Vietnam requires the following steps:
1. Business plan:
Prior to the business registration, the founder must determine a business plan containing, at the minimum, the following details:
- Main business lines and production process. It is notable that apart from general business lines, there will be restricted and conditional ones as well as those encouraged to be developed through tax incentives,
- Investment scale, capital structure and resources which will involve subsequent capital contribution procedures and taxation,
- Founding members and board of directors. It is a misconception that all people are allowed to freely set up businesses or directly run businesses.
- Internal governance mechanism which is very important, especially for a business with many co-founders. The absence of an internal governance mechanism would result in potential conflicts which would only be reparable by means of cancellation of cooperation,
- Organizational chart and key personnel. This content aims to anticipate labour, remuneration, tax and insurance procedures as soon as the business goes into operation.
- Revenue scale and cost structure in the latest fiscal year. This information helps with the business’ cost plan and management.
- Business name – brand – website – contact phone number. It is the business name that will exist as the brand throughout the business’ operation period; hence, many factors such as Vietnamese name, English name, abbreviated name, avoidance of being identical with other businesses’ names, no prohibition by applicable laws, etc., should be taken into account during naming the business.
This information helps with accurate identification of the business model, types of records to be prepared, how to manage and prevent business risks during later operations. Professional consultants will assist the founder to complete the information and business plan which not solely fully recognize the original ideas and objectives, but also establish the subsequent corporate governance foundation.
2. Business Location:
A business location is a place where a company is legally allowed to use for the application for the license and its operating activities. Regarding the business locations, it is worth to note that:
- Subject to its actual requirements, a company is entitled to choose a business location for its head office, branch, representative office, showroom – shop, factory or
- Enterprise registration restrictions may apply to certain places which should be avoided such as non-commercial buildings, buildings or factories without completed land-related paperwork, places whose lessors are not licensed to do property business or locations where certain business lines are not permitted to be conducted.
- Some locations may enjoy corporate income tax incentives such as four-year tax exemption and 9-to-15-year tax reduction.
The founder must properly study, select and conduct consultation before signing a contract, making a deposit or even spending on repairing an office and then, cannot register his business. Regarding preparation and signing of the renting contracts, the special attention should be paid to the terms of payment and deposit – rights and obligations of the parties – circumstances arising in order to prevent the risks from the lessors during the contract duration. The skilled consultant will help the founder to verify the legality of the rented place as well as propose and control the terms of the renting contracts.
3. Papers and documents on business registration procedures:
Papers made by the founder:
- Documents to prove that his financial capacity is consistent with the business scale.
- Capacity Profile – professional experience in some specific fields and sectors.
- Current residence of legal representatives.
- Citizen identity cards, ID cards, passports or other legal personal identification documents of members as individuals.
- Establishment decisions, enterprise registration certificates or other equivalent documents and Power of Attorneys; citizen identity cards, ID cards, passports or other legal personal identification documents of the authorized representatives of members as organizations.
- For members as foreign organizations, copies of enterprise registration certificates or equivalent documents which must obtain consular legalization.
- Investment Registration Certificate for foreign investors in accordance with the Law on Investment.
- Power of attorneys for the representatives who carry out the business registration procedures.
Other papers to complete the business registration documents at the State agencies:
- Application for enterprise registration.
- Articles of Association.
- List of members and founding shareholders.
- Production and business plans, and business objectives.
The documents in this step must be not only complete, accurate, legal and reasonable in order to ensure to be granted the business registration certificate, but also properly kept and maintained for the internal administration in future.
4. Completion of other compliance procedures after being granted the business registration certificate:
Initial compliance procedures in term of business:
- Engraving and registering for circulation of the enterprise’s seal specimens.
- Hanging the signboard of the enterprise.
- Contributing the charter capital as registered under licenses.
- Opening bank accounts.
Initial compliance procedures in term of tax:
- Preparing tax registration dossiers.
- Registering digital signatures.
- Printing and carrying out procedures for circulation of VAT invoices.
- Opening accounting records and books.
Initial compliance procedures in term of salary and labourer:
- Registering pay tables and systems.
- Registering regulations and collective labour agreements.
- Declaring situation of labourer use.
- Declaring social insurance and other salary-based deductions.
The initial compliance procedures after being granted the business registration certificate must be implemented in the timely and accurate manner to protect against the administrative penalties as well as interruptions of business activities. These are the specialized tasks which must be carried out by the skilled staffs to not only prevent the risks incurred by many businesses previously, but also optimize the compliance procedures, and minimize the operating costs of the enterprise in future.
Note the differences if you are a local investor and the company’s owner are Vietnamese:
- Procedures for applying for the business registration certificate is within 05 days.
- Only enterprise registration certificate is applied.
- The documents proving the financial capacity and rental contracts of business locations are not required.
- The number of restricted business lines is low, except for specific industries such as healthcare, education and protection …
Note the differences if you are a foreign investor and any of the Company’s owners is not Vietnamese:
- Procedures for applying for the business registration certificate and other licenses can last from 30 to 60 days.
- Normally, the required licenses include Investment registration Certificate, enterprise registration certificate and business registration certificate.
- The procedures for proving the financial capacity and rental contracts of business location are required.
- It should be noted that foreign direct investment accounts must be opened in Vietnam to receive capital contributions from abroad.
- Some papers from foreign countries must obtain consular legalization.
- Some business lines are restricted to be licensed, in accordance with international treaties and commitments of the Vietnamese Government in trade agreements with other countries.
The founder shall not only set out the business plans and breakthrough solutions, but also have the ability to use human resources successfully, integrate and utilize resources to optimize operating results. You can employ the VIVA team featured bye hundreds of years of experience in each of your jobs, to not solely simplify the enterprise establishment but also lay the critical foundation for a long run; thereby, avoiding big mistakes previously made by other enterprises previously:
- We are able to listen to and acquire exactly your requirements and expectations.
- It is our ability to design our own technical solutions in our own way based on your characteristics; accordingly, risk identification, prevention and optimization can be carried out successfully.
- We collaborate with you to obtain and complete all of the required documents.
- We conduct the turn-key-form delivery to bring you the good start.