Setting Up a Foreign-Invested Enterprise in Vietnam

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By: Dezan Shira & Associates
Editors: Tam Nguyen and Dam Thi Phuong Mai 

By continually issuing favorable policies and incentives aimed at attracting inflows, and deciding to decrease the country’s corporate income tax levels to 20 percent from January 1, 2016, it is clear that Vietnam’s government is intent on taking a proactive approach to foreign direct investment. Enterprises and individuals interested in taking advantage of the country’s friendly investment environment therefore need to be aware of the various market entry structures available to foreign investors.

There are two main types of vehicles for foreign investment in Vietnam: 100 percent foreign-owned enterprises (FOEs) and joint venture enterprises (JVEs).

100 percent FOEs can be established by one or more foreign investors, under the form of either a limited liability company (LLC) or a joint-stock company (JSC). JVEs can be established as an LLC, a JSC, or a partnership, and the profits and risks in a JVE are distributed among the parties in proportion to their charter capital contributions. Other options for establishing a commercial presence in Vietnam include representative offices and branch offices, but these are not legal entities.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Corporate Establishment Services

In this article, we discuss the establishment requirements, common purposes, as well as the pros and cons for the following foreign investment vehicles:

  • Limited liability companies
  • Joint-stock companies
  • Partnership companies
  • Representative offices
  • Branch offices
  • Business cooperation contracts
  • Specific authorized projects

Limited Liability Companies

100 percent FOEs and JVEs can be established as limited liability companies. In an LLC, members are only liable for the debts of the company to the extent of the capital contribution they have poured into the company.

There is usually no minimum capital requirement for foreign investors that intend to establish an LLC in Vietnam, although authorities will expect the investor to commit a reasonable amount of charter capital according to the scale and business scope of the project.

An LLC can consist of a single member or multiple members, but the total number of members cannot exceed 50. Investors can be corporations or individuals.

Note: An LLC cannot issue shares.

Joint-stock Companies

FOEs and JVEs can also be established as joint-stock companies. A JSC can issue securities and bonds, so investors will often choose this form if they plan to go public in the future.

The JSC’s charter capital is composed of shares belonging to founding shareholders in proportion to the capital they have subscribed. There is no minimum requirement for the charter capital of the foreign investors.

A JSC is required to have at least three shareholders. There is no limitation on the maximum number of shareholders, nor on their nature – they can be individuals or institutions, Vietnamese or foreigners.

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Partnership Companies

A partnership company is a legal entity established by at least two individuals who are the members of the partnership and co-owners of the enterprise. They are the general partners and are liable for all obligations of the partnership without limit. Unlimited liability partners must be individuals who shall be liable for the obligations of the company to the extent of all their assets. 

In addition, a partnership company can consist of limited liability members (individuals or organizations) who only contribute part of the capital and have limited liability and rights in the operation of the company.

Note: Partnerships cannot issue any type of securities.

Representative Offices

In contrast to JVs and 100 percent FOEs, a representative office (RO) is forbidden from conducting any revenue-generating activities. Rather, ROs are permitted to conduct market research, serve as a liaison with an overseas parent company and/or serve other supporting roles such as ensuring quality control, acting as a product showroom and helping to facilitate the execution of the contracts of the parent company. Unlike in certain other Asian countries, ROs in Vietnam are permitted to hire staff directly, both Vietnamese and expatriate.

Branch Offices

A branch office is the subsidiary of a parent company and does not constitute a separate legal entity according to Vietnamese law.

Unlike an RO, a branch office is entitled to do business in Vietnam, although the law prohibits it from carrying out commercial activities other than those stated in the parent company’s business license. If a branch conducts business in a conditional sector, it is only allowed to operate upon meeting the prescribed conditions.

To set up a branch, a parent company must have had conducted business in its home country for at least five years.

Alternative Structures

Business Cooperation Contracts
A business cooperation contract is signed between multiple parties, typically between a foreign investor and a local company or the government with the objective of jointly conducting business operations in Vietnam on the basis of mutual allocation of responsibilities and sharing of profits or losses without creating or forming a legal entity in Vietnam. This form of business is a means of private financing without transferring management control to a foreign partner.

Specific Authorized Projects
Build-operate-transfer contracts, build-transfer-operate contracts and build-transfer contracts are specific projects carried out by foreign investors and an authorized governmental agency.

These additional investment vehicles have been introduced in Vietnam to entice international capital into the infrastructure sector. Business scopes can range from traffic, electricity, production and business or a number of restricted sectors as stipulated by the Prime Minister.

The difference between these contract types is at what point the title of the project is transferred to the government, namely after the investor commences the project, before the investor commences operations on a project, or immediately following completion of a project.

Portions of this article came from the 2013 March/April issue of Asia Briefing Magazine, titled “Expanding Your China Business to India and Vietnam” and has been updated as of March 2o17. This issue discusses why China is no longer the only solution for export driven businesses, and how the evolution of trade in Asia is determining that locations such as Vietnam and India represent competitive alternatives. With that in mind, we examine the common purposes as well as the pros and cons of the various market entry vehicles available for foreign investors interested in Vietnam and India.


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

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14 responses to “Setting Up a Foreign-Invested Enterprise in Vietnam”

  1. To whomsoever it may concern,

    This mail is in reference to starting a company in Vietnam either in the form of a branch office, if that setup permits us to operate a bank account in Vietnam, receiving and making payments or as a 100% foreign owned company.
    I am writing to you on behalf of Apparel Resources Pvt. Ltd, a media company having its parent company in India primarily into the business of running magazines catering to the garment and textile export industry. We try to bridge the gap between exporters of that country and buyers sitting internationally or through their liasion office in that country.
    I would like to know the whole procedure of starting a company in Vietnam along with the necessary approvals required to operate a trade magazine. We are looking at starting the whole process sometime in the end of January. I would also be interested in knowing the minimum capital that needs to be invested to start the company, the amount of taxation and to what extent does the country allow repatriation.
    Hope to get an early reply.

    Thanks
    Mayank

  2. Dear Sir/Madam

    My name is Jana Cerikovaite. I am representative of the company Larus Corporate Services.

    LARUS CORPORATE SERVICES offers services in the field of international consulting, as well as registration of companies and bank accounts opening in different jurisdictions. We offer alternative and relatively inexpensive option of obtaining residence permit in the Baltic States. Advantages of obtaining Residence permit in the Baltic States include no need for visa to travel across all Schengen area (26 countries including Germany, France, Italy etc.), possibility to stay on the territory of Baltic States unlimited period of time etc. The cost of obtaining residence permit starts from 3000 EUR.

    To find out more about services, which we provide, please follow the link on our website: http://laruscorporate.com/en/

    The Representative of our company will be in Vietnam after several weeks, and he wants to meet the Representative of your company to discuss possibility of common collaboration, namely an exchnage of clients interested in yours or ours services. I hope that we will make a fruitful cooperation in future.

  3. Dear Ms Cerikovaite,

    Many thanks for your message.

    We would be delighted to arrange a meeting with your representative. Please see your inbox for further details.

    Kind regards,

    Oscar

  4. Suryani says:

    Dear Sir / Madam,

    First off all let me introduce my self, my name is suryani. i am a Operational Business Manager of Agroxon Group.

    Looking the oppurtunity of our business in Vietnam, We would like to open new company in there.

    Would you please explain to me how to set up New Company in Vietnam?

    What the requirements? How to Process ? How long to set up?

    Looking forward your early reply.

    Thank you for your attention and cooperation.

  5. Dear Suryani,

    Thank you for your comment.

    We would be delighted in assisting the Agroxon Group in establishing a company in Vietnam.

    Please see your inbox for further details.

    Kind regards,

    Oscar

  6. Amadou says:

    Dear
    I would like to know the requirements to open a trading company in Vietnam.
    Please send me email so that we can exchange

  7. Dear Amadou,

    Many thanks for your comment.

    As the requirements for trading companies may vary according to the product traded, I will send you an email to ask for further clarifications.

    Kind regards,

    Oscar

  8. Sherry says:

    Dear Vietnam Briefing,

    I am Sherry, currently working for a company in Singapore. Our company wants to establish a business entity in Vietnam for the convenience of hiring Vietnamese people for our IT project including coding and building up a finance model. We would really appreciate if you can advise us on which form of entities that is suitable for us. Should we set up an Representative Office or a new Foreign Invested Enterprise?

    Thank you for your time.

    Best regards,
    Sherry

  9. Dear Sherry,

    Many thanks for your comment.

    We would be happy to help you establish a business entity in Vietnam.

    Please see your inbox for further details.

    Kind regards,

    Oscar

  10. Victor says:

    Dear Mr Oscar, can you please let me know the requirements / procedure to register a 100% foreign owned company in Vietnam? Thank you, Victor

  11. Dear Victor,

    Many thanks for your comment.

    We would be delighted to assist you in establishing a 100% foreign-owned company in Vietnam.

    There are of course different requirements and procedures, depending on the industry in which you plan to operate and other factors.

    Please see your inbox for further details.

    Kind regards,

    Oscar

  12. U Singh says:

    Dear Sir, We are an Indian based Maritime company wish to establish our base in Vietnam.
    Currently We are into Trading, Chartering of Ships along with Export Import division.
    We want to start a new entity in Vietnam .
    So, Please guide us for the further procedure.
    Thanks and regards,
    U Singh

  13. Dear Mr Singh,

    We would be delighted to be of assistance in establishing your presence in Vietnam.

    Please see your inbox for further details.

    Kind regards,

    Oscar

  14. Kevin says:

    Dear Sirs,
    we currently operate a representative office in HCMC, and are considering changing to a trading company (100% foreign owned); please advise the minimum capital requirements for a trading operation (trading in oil/gas/ petrochemical/Power industries)
    Thank you. Kevin

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