There are several types of business structures you could choose from. Some are more limited than others. To keep it simple: if you do not plan to have an income generating activities in Vietnam, opt for a Representative Office (RO). Otherwise the Limited Liability Company will be the most common “legal entity”. It is simpler to manage, cheaper to maintain and known to be the most flexible legal entity for small, medium as well as larger businesses!
TIPS: The choice of the LLC is a clear choice for many investors as it is straightforward, and the level of capital can be defined ex ante. The Limited Liability Company does not require many legal procedures once incorporated (notably in terms of corporate compliance) and will allow all types of changes later on, such as address, business activities, names, capital, etc. Its advantages will be described shortly in the steps below!
Business activities in Vietnam will be classified into 4 different groups :
TIPS: Invoicing in Vietnam works differently than in other country, it is possible in order to avoid much trouble (and if your client permits it) to invoice for a matter that is slightly different than what you are actually performing. For instance, event organization will be invoiced as marketing advisory. Vietnam is a country that is opening and where laws tend to be more in favor of foreign investment. We would advise you to choose the most general business activity to keep things legal and compliant. Do not hesitate to talk to us!
See also: What is a VAT red invoice ? What subject may I use when issuing an official VAT invoice ?
Who will be investing with you?
Shareholders will typically share the profits and the losses and limited legal responsibilities.
Who will take care of the daily management and represent the company?
That would be your Director(s)/Legal representative(s). Vietnam Law will allow up to an infinite number of Directors in a limited liability company and up to 50 shareholders. If you are shareholder and wish to work, nothing easier, investors are eligible for an exemption of work permit if they invest over 3 billions VND since July 2020 in their company. Shareholders are also eligible for a Temporary Resident Card from 1 to 5 years depending on how much capital they contribute. PCA Company Services will take care of both for you if you wish so! Since January 2021, the immigration and labor law has been amended (once again) and the minimum capital per shareholder in an LLC to receive an investor visa and a work permit exemption has risen to VND3.000.000.000, roughly US130.000. For investors who invest less than the minimum capital decided the new decree, there are still solutions to remain and work in Vietnam. Typically applying for a work permit and a Temporary Resident Card of a maximum validity of two years.
TIPS: Once the company is incorporated, it will come with a standard approved-by-law shareholders’ agreement and company charter. It is advised for our investors to work on an agreement that will suit best their needs. It is often key to settle the terms of exit of shareholders before it actually happens.
If your business activities do not require you to invest a mandatory amount of minimum capital, you may invest just VND1.000. However, in order for your company to have a certain credibility towards stakeholders (authorities, clients, suppliers, banks, etc.), it has to be registered with a certain amount of capital. It is dependent on the industry and the type of activity. A construction company will typically not have the same amount of capital than a small design studio. It is therefore necessary for the shareholders to assess the amount of cash needed to run their business (rent, salaries, etc.) plus the eventual liability of their activities to calculate the optimum amount of capital. You do not want to invest a huge capital when creating your company? Please hold on with us, we will go through the capital contribution options later in Step 6.
TIPS: Although often a minimum capital is not imposed, the market currently (2021) considers that a reasonable capital to enter the Vietnamese market will be around 5.000USD (ten thousands US dollar) or 115.000.000VND (two hundred million Vietnamese Dong). Below that amount, the credibility of the company will not only be at stake with the stakeholders but as well, the company may be suspected of being a shelf company. Furthermore, if the shareholders need to apply for a Temporary Resident Card with a very limited capital, the price of TRC processing will be very high.
You will need an address! Not necessarily to run your business but to receive mails, notifications from the government and other notices. There are 4 commonly accepted types of locations allowed to register a business.
1. Town house / villa
2. Office building
3. Ground floor of a real estate development (i.e. shop houses)
4. Office-tel in a condominium
TIPS: Please note that apartments in condos are not allowed (unless specified otherwise by a written notice from the building management) to host a company or any kind of commercial activities. According to , a company that is not properly registered will receive a fine ranging from VND5.000.000 to VND10.000.000 with a company suspension. You do not have a suitable address for the moment? Don’t worry! If you do not have an address PCA will be happy to provide our office address for you. Contact us for a quote!
There are two ways to enter the Vietnamese market either by ways of direct investment (FDI) or via a Mergers&Acquisitions (M&A).
1. FDI Method (direct incorporation)
You will apply for an Investment Registration Certificate (IRC) after having shown enough financial resources abroad. Once the IRC is granted for the chosen capital and business activities, we will file for the Enterprise Registration Certificate (ERC) also called Business License (BL). Please note that the capital will need to be contribution from the same account as the previous proof of funds to the direct investment capital account (DICA) of your company here in Vietnam. Kindly note that any other method or “shortcut” is going to create long term liability and is against the law according to Circular No 06/2019/TT-NNN (“Circular 6”) replacing the Circular 19/2014/TT-NHNN defining the rules of engagement for foreign investors in Vietnam. Please note that the FDI method will require maintenance fees that are higher than the M&A companies. For instance, there will be 7 declarations to be filed per year to report the status of the investment.
2. M&A Method (indirect incorporation)
We will incorporate a brand new company with Vietnamese ownership at first, then foreign investor(s) will purchase the shares of that company. In this case, there is no IRC required but a equivalent authorization for market entry delivered by the government and there is a need to wire the capital of the companies. Do not hesitate to contact us to clarify the ways of capital contributions.
TIPS: Sometimes funds to contribute the capital are not immediately available. That is why many investors will opt for the M&A method because it is faster, easier and requires nothing more than a notarized copy of their passport to start the process. It is acknowledged that the FDI method is more constraining and fastidious but for international group or companies with holding structures, group consolidation with the intention to repatriate dividends back home, it would be the right choice. FDI take between one and two months when M&A takes just one month!
There are basically three ways to enter the Vietnamese market and start your ambitious projects. The FDI method (direct incorporation), described above for business activities that do not require a sublicense, is the first one. Then comes the M&A method (also called the indirect incorporation), that is by far the most commonly chosen incorporation method, still for businesses that do not require a sublicense or any special authorization from the Government. Third, comes the incorporation with conditions of either capital or sublicensing for which a deeper analysis will be required.
After getting your brand new business license you may need these to jump start your business…
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