Company Registration in Vietnam
Foreign direct investment has flooded into Vietnam in recent years, particularly from South Korea, Japan and Singapore. Investments in IT and software development are popular and contribute about 4% of the total FDI into Vietnam.
If you’re investing in Vietnam for software development, a company structure will be important to enter into contracts, employ staff and collect revenues in Vietnam.
Registration of a company in Vietnam is slightly different to what entrepreneurs from other countries might be used to. While the opportunities for companies based in Vietnam are compelling, the company registration process is more complex and bureaucratic than Hong Kong, Singapore, the United States or Australia, for example.
Fortunately, company registration has become much simpler than in previous times. There is no longer a widespread insistence on local partners or having to wait for 6 months to complete the registration. Steady improvements are being made to the application process and processing times.
Options for Company Registration in Vietnam
Companies can be registered in Vietnam in many different configurations. Four key considerations are outlined below:
1) Company Structure
A company in Vietnam can be a Limited Liability Company (LLC) or a Joint Stock Company (JSC, also referred to as a shareholding company). A joint stock company is intended for medium to large enterprise with many shareholders. Limited liability companies have simplified shareholding and governance arrangements.
Shareholders can be foreign or local. Registration is simpler and quicker for companies that are exclusively owned by local shareholders, although foreign shareholders can register a company in an acceptable timeframe.
Shareholders can be individuals or companies. Note that the documentation requirements differ between these two types of shareholders, as explained below.
The total number of owners in a limited liability company cannot exceed 50.
A limited liability company require at least one director. Directors can be of any nationality and reside outside of Vietnam.
The company will also require a legal representative who is a resident of Vietnam. The role of director and legal representative may be occupied by the same person, but do not need to be.
4) Registered Capital
The minimum amount of capital required to establish a limited liability company is not strictly defined, except for some specific types of business (for example, medical or tourism). However, the registered capital should be adequate for the purposes of the business.
Companies that will focus on software development or consulting are not considered to be capital intensive by the Department of Planning and Investment, as there is no need for large factories or expensive machinery. However, the registered capital that is declared at the time of application should be enough to commence an office and pay staff during the initial stages of operations.
For foreign owners, it is very important that the declared capital is settled into the company’s accounts within 90 days of approval.
Setting up a Limited Liability Company
A foreign-owned Limited Liability Company (LLC) is the most common company structure for foreign-owned startups in Vietnam. This will be sufficient for the typical needs of the production of software and the registration for this type of business is relatively straight-forward. Note that for specialist purposes outside of software development or consulting, you may need other sub-licenses and approvals.
The application to register a limited liability company will go through two stages. Approval will be sought from the Department of Planning and Investment (typically in the form of an Investment Registration Certificate, IRC) for your project in Vietnam, before an Enterprise Registration Certificate (ERC) will be issued for the creation of your company.
The application will require a range of documents. For individual shareholders, a passport and proof of financial capability will be required. Much more documentation is required for companies: a certificate of incorporation (alternatively referred to as a business license); the company charter; audited financial statements and proof of financial capability. Other documents may also be requested. These documents will need to be authenticated.
The Process for Registering a Company
There are seven steps that will need to be addressed before you can establish and then operate your company. Delays during the company registration process can occur where the required preparation has not been completed.
1) Clarify Your Business Lines and Scope
Vietnam’s accession to the WTO required that the nation opened its economy to foreign investment in a wide range of business lines. The majority of tech startups will target ‘software development’ or ‘consulting’ business lines. Applications for these business lines are relatively straight-forward.
However, some business lines remain restricted to foreigners in Vietnam (for example, real estate and finance). Some of these other fields remain subject to case-by-case review or conditional approvals (eg. trading), caps on foreign ownership (eg. tourism) or require licenses and sub-licenses (eg. F&B).
2) Check Your Capital and Proposed Scale
Vietnam requires you to prove you’re serious about your business. While there isn’t a strict law on what represents the minimum capital, approval from the Department of Planning and Investment will only be issued with proof of sufficient capital for your nominated business line. This capital must be deposited soon after creating the company.
3) Confirm Your Ownership & Management Structure
You will need to nominate the owners of the business and verify their credentials. Note, as per above, that the supporting documents required for a foreign owner that is a company are different to those documents required if the foreign owner is an individual. You might be tempted to form a Vietnamese-owned company to avoid some of these hassles, but remember that this incurs some risks and will complicate the payment of any dividends to foreigners.
The management structure underneath this may vary depending on how many owners your company will have.
4) Arrange a Company Address
Physical proof of your company’s planned location in Vietnam is key to your application. This can present a chicken-and-egg argument, as you will need to be incorporated before you can sign a lease, and you can’t incorporate until you have a signed lease. An MOU with your intended address may suffice, but there are other practical solutions to this issue. A virtual office will usually be adequate.
5) Gather Your Documents
Once you’re clear on your preferred ownership structure and the list of required documents, gather these documents.
Remember that foreign documents need to be notarized (alternatively referred to as legalized or authorized) before submitting to the authorities in Vietnam. However, each nation chooses their specific approach to document notarization. The answer changes over time: the embassies of the US, UK and Australia are not currently offering notarization in Vietnam. It is highly worthwhile to checking on your country’s approach to notarization.
6) Submission and Approval
Approval takes some time. The official timelines are 45 days for the completion of this stage, but preparation is key. At the conclusion of the process, you’ll have approval from DPI and an Enterprise Registration Certificate (ERC, otherwise known as a business license). With the ERC you will be able to verify your business’s identity and deal with Government authorities like the Department of Labour, Department of Social Insurance, the Tax Department and many others.
7) Bank Accounts and Capital Transfer
The ERC is also essential to set up Vietnamese bank accounts in the company’s name. As a foreign-owned company, you will need to complete this step quickly and settle your specified capital value into the relevant bank account.
Outcomes at Completion
The registration of a limited liability company will enable you to enter into contracts, employ staff and collect revenues in Vietnam. Depending on your activities, you’ll also be responsible for various types of tax (including corporate income tax, VAT, business license tax, labour taxes and potentially others) and compliance obligations (labour reports, financial reports and audits).