Starting a business in Vietnam can be a promising venture due to the country’s growing economy, strategic location, and favorable investment policies. Vietnam allows and encourages foreign investors to do business in Vietnam. Here’s a step-by-step guide to help foreign investors navigate the process from legal perspective.

Step 1. Conduct Market Research

The Vietnamese business market is rapidly evolving, marked by dynamic growth and increasing foreign investment. To capitalize on these opportunities, foreign investors should conduct thorough research to understand the local market, customer preferences, and competition. Armed with this knowledge, you can then define your business model, objectives, target market, marketing strategy, and financial projections

Step 2. Select a business entity type

Once you decide on having a physical presence in Vietnam, a primary consideration is the type of business entity to form. These are 3 popular legal entity options in Vietnam for foreign investors to choose from, which are: representative office, branch, and company.

Representative office

A Vietnam Representative Office is a dependent unit of a foreign company, established under the law of Vietnam, to research the Vietnamese market, to perform other business-promoting activities, and is not allowed to carry out any direct profit-making activities.

A Representative Office is a good temporary option for a foreign company to have an initial idea of the Vietnamese market before committing to a long–term investment, or strengthen business connections with local partners within a small budget. It is easy to set up and also avoids the complexity of registering a company in Vietnam and complying with ongoing filing requirements.

Learn more: How to establish a Representative office in Vietnam

Branch

A Vietnam Branch is a dependent unit of a foreign company, established under the law of Vietnam, and permitted to carry out profit-making business activities in only a few sectors (bank, insurance, law firm, etc.) One of the conditions to establish a branch in Vietnam is that the foreign company has been operating for at least 5 years.

In practice, establishing a branch in Vietnam is not a common choice for foreign investors.

Company

A Vietnam Company is an independent legal entity established under the law of Vietnam, and has a full legal capacity of conducting business. It may take the form of either single-member limited liability, multi-member limited liability, or joint-stock company (Learn more: Types of company in Vietnam). Establishing a company in Vietnam is the most effective way to reach and take advantage of the Vietnamese market.

A foreign investor has some options below to have a Vietnam Company:

• Establishing a 100% foreign-owned company: Vietnam allows 100% foreign ownership in most business sectors. With this option, the foreign investor will have full control and power over the company.
• Establishing a joint venture company with Vietnamese partners: In a few business sectors (advertising, gaming, agriculture and forestry, etc.), Vietnam requires foreign investors to joint venture with Vietnamese partners.
• Establishing a nominee company owned by a local person: This is a shortcut for foreign investors that want a quick, easy, and cheap option to have a company in Vietnam. However, this option requires a big trust between parties and is also extremely risky in terms of legality for both the foreign investor and the local nominee.
•  Acquiring an existing Vietnamese company: Foreign investors can utilize commercial advantages of the Vietnamese company. Foreign investors are highly recommended to conduct due diligence on the target company before deciding to buy it.

In addition, a Vietnam company must comply with ongoing filing requirements and pay taxes (if having profits)

Learn more: How to open a company in Vietnam for foreign investors

Among all, Company and Representative Office are the most popular chosen business entity types, because of the flexibility and the ease of operations they provide.

Step 3. Choose a business location

In Vietnam, having a physical business location is a compulsory requirement for the business registration procedure. Before registering your business, you need to find a suitable business location, then sign a leasing contract or MOU with a lessor and obtain the premises’ legal documents.

So weigh your options to determine which major city in Vietnam is most suitable for your particular business, spend time for a site visit before renting, and think clearly about your long-term business goals.

Step 4. Register your business

Registering a foreign business with Vietnamese competent authorities is a must in order to be officially established here. In practice, the business registration process in Vietnam might be complex and lengthy, depending on type of legal entity to be set up. But don’t worry, the law firm will handle all legal entity setup works on your behalf.

Step 5. Open business bank accounts

Opening a business bank account in Vietnam is necessary for managing your finances and facilitating transactions. Choose a reputable bank that offers services tailored to business needs, such as online banking, international transfers, and merchant services.

Learn more: Open business bank accounts in Vietnam

Step 6. Understand tax regulations

Each legal entity will have a different tax scheme and filing requirements.

Taxes for representative offices

Vietnam representative offices are not subject to paying taxes, because it doesn’t allow to earn profit. A representative office only needs to declare the Personal Income Tax and cover compulsory insurance of its employees.

Taxes for companies

Most companies will be affected by the following taxes, which are imposed at the national level:

• Value-Added Tax (VAT): current standard rate is 8%
• Corporate Income Tax (CIT): current standard rate is 20%
• Personal Income Tax (PIT) on Vietnamese and foreign employees: for residents, progressive tax rates from 5 to 35%
• Insurances contributions: employer (21,5%), employee (10,5%)
• Import duties, export duties: upon occurring

Taxes for foreign contractors

Foreign entities and foreign individuals undertaking business or earning income sourced from Vietnam on the basis of business contracts or agreements are subject to Foreign Contract Withholding Tax (FCWT) in Vietnam.

Tax incentives

Vietnam offers various tax incentives for foreign investors based on business sectors (software production, high technology, supporting industry, etc.), and locations (certain qualifying economic and high-tech zones, and especially difficult socioeconomic areas, etc.). Tax incentive schemes are CIT exemption and/or CIT reduction.

Step 7. Apply for visa and work permit

If you plan to employ foreign nationals, including yourself, you’ll need to secure appropriate visas and work permits. A work permit allows a foreigner to legally work in Vietnam, while a working visa or working temporary resident card allows for long-term residence and work. The process involves obtaining a visa approval letter from the Immigration Department and applying for a work permit from the Department of Labor, Invalids, and Social Affairs (DOLISA). Ensure all documentation is complete and accurate to prevent delays.

Learn more: Work Visa and Work Permit for foreigners.

Step 8. Hire employees

Hiring employees in Vietnam requires compliance with local labor laws. Draft employment contracts that outline terms and conditions, including job responsibilities, salary, benefits, and termination procedures. Familiarize yourself with mandatory social insurance contributions and labor union regulations.

Learn more: Vietnam Labor Contract Guide

Step 9. Comply with ongoing requirements

Post-registration requirements are different depending on your type of business entity. It may take the form of: tax registration, insurance registration, filing tax reports, invoicing, applying for additional licenses or permits (if any), and trademark registration (optional).

A team consisting of Vietnamese lawyers, accountants, tax advisors, and bankers would be very helpful for your business along the way to avoid common legal compliance mistakes, avoid penalties, provide bookkeeping best practices, and plan the best deductions.

Now all is set, your business in Vietnam can be ready to start operating!

Conclusion

Starting a Business in Vietnam should be not difficult with the right help from the beginning. It is highly advisable to work with a professional law firm that has a great deal of experience in this field, such as Nova Law Vietnam, to help your business in Vietnam launch smoothly.

Contact Nova Law today for more information. We are glad to be of service.