Despite the timelines are clearly stated by laws, however, the licensing process for setting up a legal entity in Vietnam takes approximately 8 weeks following including the period of preparing the application, lodgement of all required license application documents until obtaining the licences from competent authorities, depending on the applicant’s proposed setup and scope of business. 

Generally, there is no minimum capital requirement, except for a few types of business (such real estate, banking etc).

100% foreign ownership is allowed for most businesses. However, in certain protected sectors (e.g., logistics, infrastructure, petroleum, mining etc) a certain percentage of local ownership is still required.

Promoted businesses includes agriculture, food processing, manufacturing, pharmaceutical, health and education etc.

Highly promoted businesses include scientific research, hi-tech or bio-tech developments, infrastructure projects, renewable energies etc. 

Contributed capital assets include Vietnamese dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, business technical know-how, and other assets that can be valued in Vietnamese dong.

According to the Law on Enterprises 2020, members of limited liability companies, partnership members, and shareholders of joint-stock companies must transfer the ownership of contributed capital assets to the company. Therefore, depending on the type of contributed capital asset, it is necessary to meet some or all of the following conditions:

1. The assets used for capital contribution must be legally owned by the contributor, free from disputes, and not restricted in terms of the right to dispose of them as per agreement or law.

2. The assets used for capital contribution must be transferable to the recipient of the capital contribution.

3. There must be complete documentation certifying the ownership of the assets that are required to be registered for ownership.

A company’s capital may be financed by equity or loans. The equity capital must be contributed by the shareholder(s) (in cash or assets) within 90 days following company incorporation. Loan capital may be financed by an onshore or offshore loan (including a shareholder’s loan). 

Commonly, a foreign company may carry on business in Vietnam in the form of (i) a foreign contractor, (ii) a Representative Office or (iii) a limited liability company (with 100% foreign ownership by a single or multiple shareholders, or a joint-venture/joint-stock company with a Vietnamese shareholder. In some sectors (e.g., banking, foreign law firm etc), a branch is also permissible. Other structures include Business Cooperation Contracts (“BCC”), Build-operate-transfer (“BOT”), Build-transfer (“BT”), Build-Transfer-Operate (“BTO”) contracts and Public Private Partnership (“PPP”).

Generally, all foreign direct investments (“FDI””) are welcomed in Vietnam, unless specifically prohibited by law. In some sectors, FDI is subject to certain conditions or restrictions.

To set up legal business presence in Vietnam, a foreign investor must first obtain the relevant licence, permit, or certificate, which depends on the legal form of the business. For setting up a company, a foreign investor must first apply for two certificates namely Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) by lodgement of an application to the relevant local licensing authority.

Depending on the number of the investors of the FIE, there are 03 common types as below:

• Single Member Limited Liability Company (“SMLLC”): This is applicable to the FIE when there is only one corporate/individual investor.

• Multi Members Limited Liability Company (“MMLLC”): This is applicable to the FIE if it has more than one corporate/individual investor and capped at 50 investors.

• Joint Stock Company (“JSC”): This form of Company is only applicable to the FIE if it has at least 03 shareholders and no limitation on the number of shareholders.

Depending on the form of Company provided in Item 1 above, each of them will have different corporate governance structure as below:

For SMLLC: In this case, the FIE can follow one of the following options:

1. President: This structure is led by a President, followed by Director/General Director.

2. Members’ Council: This structure will be led by a Members’ Council (including all individual investors or authorized presentatives of corporate investor), followed by Director/General Director. Among the members of the Members’ Council, there will have 01 person to be nominated to be the Chairman of the Members’ Council.

For MMLLC: Under this form, the FIE can follow the corporate governance structure mentioned in Option 2 above

For JSC: Under this form of Company, the FIE can follow one of the following structures:

1. General Meeting of Shareholders and followed by Board of Directors, Board of Controllers and Director/General Director. If the JSC has fewer than 11 shareholders and the shareholders are organisations hold less than 50% of the Company’s total shares, Board of Controllers is not mandatory.

2. General Meeting of Shareholders and followed by Board of Directors and Director/General Director. In this case, at least 20% of the members of the Board of Directors shall be independent members and there has to be an audit committee affiliated to the Board of Directors.

Under the Law on Enterprise, the FIE is allowed to appoint 01 Legal Representative or more. In case there is only 01 person to act as Legal Representative of the FIE, such person must reside in Vietnam. Otherwise, in case there are more than 01 Legal Representatives, one of them must reside in Vietnam. 

The Investor can propose the business lines that they would like the FIE to carry out in the application dossier to be submitted to the licensing authority. Based on the proposed business scope, the licensing authority will evaluate and decide which business activities can be permitted. The allowed scope of businesses will then be stated in the IRC granted by the licensing authority to the FIE and must be strictly adhered to. In some cases, the licensing authority may not necessarily approve all business activities as proposed by the Investor. The ERC is no longer stated the business lines of the FIE in accordance with the applicable laws. 

As stipulated in the Law on Investment 2020 and its amendments, there are 10 business sectors in which investments are prohibited, including:

• Business in narcotic substances;

• Business in chemicals and minerals;

• Business in specimens of wild flora and fauna, specimens of rare and/or endangered species of wild fauna

• Human trafficking; 

• Trade in human tissues, corpses, human organs and human fetuses;

• Business activities pertaining to asexual human reproduction;

• Trade in firecrackers;

• Provision of debt collection services;

• Trading of national treasures; and

• Export of relics, antiques

Based on the current applicable regulations, there are certain business lines that the FIEs are required to apply for Business Licence before officially operating in Vietnam, including:

-      Perform the retail distribution right of goods;

-      Perform importation right, wholesale distribution right of lubricant products;

-      Perform the retail distribution right of rice; sugar; recorded items; books, newspapers and magazines;

-    Offer logistics services; other than sub-sectors of logistics for which Vietnam has committed to open its market as specified in international treaties to which Vietnam is a signatory.

-      Good rental, excluding finance lease; other than lease of construction equipment with operators;

-      Provide commercial promotion services, excluding advertising services;

-      Provide commercial intermediary services;

-      Provide electronic commerce services; and

-      Providing bid-holding services.

The permitted duration of an investment project in Vietnam is established in the IRC and is generally capped at a maximum of 50 years. However, in cases where the proposed project demonstrates outstanding economic, social, or developmental contributions, the Vietnamese government may grant an extended term of up to 70 years, subject to the approval of the Prime Minister 

There are some supporting documents that the investor is required to provide for submission to the licensing authority, details are as follow:

For individual investor:

• Certified copies of personal ID (for Vietnamese) or Passport (for foreigner). In case the investors are not in Vietnam, their copy of ID or passport must be notarized and legalized in home country.

• Original of personal bank statement.

For corporate investor:

• Certificate of Incorporation;

• Latest Audited Financial Statement (can be replaced by the latest Bank Statement);

• Business Profile (if any);

• Business Registration Certificate;

• Charter/Articles of Association; and

• Certified/legalized passport of authorized representatives of the investor.

All such supporting documents are required to be notarized, legalized in home country and translated into Vietnamese for submission to the licensing authority in Vietnam.

Following the issuance of the IRC and ERC, the FIE must complete the following post-licensing procedures prior to commencement of business: 

1. Making a public announcement about the Company on the National Business Registration Portal;

2. Making corporate identification seal(s). Under the prevailing regulation, the Company has the right to decide on the appearance, quantity and content of its seal. However, the seal must display information about the Company’s name and identification number. The Company is not allowed to use the following images, words and symbols in the seal: 

• Vietnam’s National flag, National Emblem, Vietnamese Communist Party’s flag.

• Images, symbols, names of the state, state agencies, people’s armed forces units, political organisations, socio-political organisations, socio-political-professional organisations, social organisations associations, professional social organisations.

• Words, signs and images that violate the historical, cultural, ethical and fine traditions of the Vietnamese nation. 

3. Opening a Direct Investment Capital Account (DICA) of the Company at a licensed commercial bank in Vietnam.

4. Notifying to the management tax office of the Company’s financial year, Value Added Tax declaration method and e-filling registration.

In Vietnam, legal entities are subjected to several key taxes that impact their operations. 

• The Corporate Income Tax (CIT) is imposed on business profits, typically at a standard rate of 20%, with potential reductions for specific industries or regions. 

• Value-Added Tax (VAT), a consumption tax on goods and services, generally stands at 10%, though essential products may qualify for lower rates or a 0% rate for exports. 

• Personal Income Tax (PIT) affects legal entities through withholding on employee salaries and payments. 

Additionally, entities must account for Property Tax on real estate ownership and Foreign Contractor Tax (FCT) for foreign service providers operating within the country. 

There is no limited number of foreign employees to be hired by the Vietnam Company. However, any foreign employee wishes to legally work in Vietnam must comply with the requirement of obtaining a Work Permit and Temporary Resident Card for long term staying in Vietnam. Please kindly refer to this link for more details.

The Vietnam Company can distribute after tax profit to foreign investor, subjected to the following conditions: 

1. Fulfill Financial Obligations: Ensure that all financial obligations to the Vietnamese state have been met, including the submission of audited financial statements and the corporate income tax finalization declaration.

2. Submit Documentation: Prepare and submit the necessary documentation to the tax authorities, including the audited financial statements and the corporate income tax finalization return.

3. Obtain Approval: Apply for approval from the tax authorities to remit the profits abroad. This may involve providing additional documentation and information as requested by the authorities.

4. Transfer Funds: Once approval is obtained, the after-tax profits can be transferred to the foreign investor's account abroad.

It is important to note that profits can be remitted annually or upon the termination of investment activities in Vietnam. However, profits cannot be remitted if there are accumulated losses in the financial statements that have not been carried forward according to the corporate income tax law.