Some important points for foreign investors when establishing a company in Vietnam

Some points for foreign investors when establishing a company in Vietnam

When investing in Vietnam, foreign investors should hire experienced local lawyers who can give correct legal advice so that you can have a good understanding of the regulations and legal procedures needed in Vietnam. In particular, you need to pay special attention to some important points as follows:

Firstly, with regard to areas of business investment

Based on the scope of market access commitments in Vietnam, as well as the demand to set up foreign capital companies in Vietnam, foreign investors should choose sectors of investment/industry. It is best to invest in areas or industries that have been explicitly committed by Vietnam in bilateral or/and multilateral international treaties to avoid the risk of being rejected when registering industries or fields whose market has not been opened yet. Each of them is associated with requirements of investment capital and conditions of specific business licenses corresponding to the list of conditional industries. Therefore, not registering business lines which is not really necessary will help investors to maximum save time and money to complete legal procedures as well as to be most favorable when registering and implementing business investment activities in Vietnam.

Secondly, as for Investors

Foreign investors investing in Vietnam may be individuals (also known as entrepreneurs) or foreign companies. Most of common investment industries fully opened by Vietnam allow foreign owned companies to be set up by a foreign investor or organization. However, there are still some business lines with special conditions that have specific investment requirements on status of investors which must be individuals or organizations. These can be determined through a combination of investment conditions for all sectors and industries registered on the basis of Vietnam’s commitments to WTO and Vietnamese law, if any.

Thirdly, regarding investment capital, charter capital to establish foreign companies in Vietnam

Currently, Vietnam’s market access commitments and Vietnamese laws only stipulate conditions on minimal investment capital to set up foreign owned companies in certain sectors such as education and real estate business, traveling, payment intermediaries,… while other normal business lines often do not have the minimum. Therefore, investors only need to ensure that the investment capital shall be commensurate with the scope and scale of their projects. In order to determine the appropriate amount of investment capital and charter capital, investors should determine all of its conditions applicable to their investment sectors or industries (if any) and prepare a specific financial planning to ensure the feasibility of the project.

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Fourthly, with regard to contribution of charter capital after the establishment of a foreign owned company in Vietnam

It should be noted that the contribution of charter capital should be completed in accordance with the registered time limit shown on the Investment Registration Certificate, the Company’s Charter and Vietnamese law. Accordingly, it should be noted that the time limit for investment capital contribution shall not exceed 90 days from the date of issuance of the Enterprise Registration Certificate. Investors will have to contribute through transfer into the investment capital account opened by a foreign owned company in Vietnam under guidance of the State Bank of Vietnam.

Fifthly, with regard to selecting investment locations and establishing companies

Investors should choose investment locations to set up foreign capital companies in Vietnam with a clear address and sufficient proof of ownership, lease or sublease rights. Offices must be allowed to lease, designed and built in accordance with Vietnamese law, and not in a dispute.

Sixthly, regarding employees

FOC in Vietnam can hire foreign employees or Vietnamese to work at the company. However, if foreign employees are hired, the company must help them to apply for a visa, and an approval for use of foreign employees, as well as a work permit and a temporary residence card under the law of Vietnam.

Seventhly, fulfillment of tax obligations

Every year, every company in Vietnam shall have to pay license fees, depending on the registered charter capital. They must pay income tax on their profit; as well as declare and pay value added tax. Depending on the business lines, companies in Vietnam may also have to pay some kinds of tax such as export, import, special consumption, etc. Vietnam also has many regulations on investment incentives on corporate income tax when investing in industries with investment incentives or in areas with difficult or extremely difficult socio-economic conditions.

ALB & Partners Law Firm is a professional and reputable legal firm related to investment and business activities of foreign investors in Vietnam.

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