What Foreign Investors Should Know When Setting up company in Vietnam in 2022?

 In the period of global economic integration, especially Post-Covid-19 era,  Vietnam – a developing country is considered one of the countries with potential markets that foreign investors choose to establish the business here taking advantage of the government policy to promote the economy i.e. “new normal” adaption living with Covid-19, quick opening of border allowing tourists to visit Vietnam since Apr 2022,  tax reduction, public investment increase…

Whom can set up business in Vietnam?

First, the objects allowed to establish and manage enterprises in Vietnam are all organizations and individuals who are not in the following cases: (i) Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons; (ii) People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, is not able to control his/her own behaviors, is banned by the court from holding certain positions or doing certain works; other cases prescribed by the Law on Bankruptcy and the Anti-corruption Law. At the same time, individuals with foreign nationality implementing business investment activities in Vietnam are considered foreign investors. The implementation of investment forms; the scope of operation as well as related procedures must meet the conditions under the Investment Law; related legal documents; other conditions of international treaties that Vietnam is a member.

How to invest and set up business in Vietnam?

Second, foreigners, foreign investors must explore legal forms of investment in Vietnam including: (i) Investing in establishing economic organizations; (ii) Invest in capital contribution, share purchase and purchase capital; (iii) Implementing investment project; (iv) Investment in the form of BCC contract; (v) Forms of investment and new economic organizations according to the Government’s regulations. They need to consider projects planning to invest in Vietnam in case of requesting approval of investment policy of 2020 Investment Law. The investment project of foreign investors is required to carry out procedures for granting investment registration certificates. If the case must be proposed to approve the investment policy, they must prepare dossiers and carry out procedures to request approval of investment policies. When completing the procedure, they will be granted a written decision on investment policy and investment registration certificates. If not falling in the case of approval of investment policy, foreign investors conduct procedures for applying for investment registration certificates.

What documents required to set up company in Vietnam?

Third, after being granted a certificate of foreign investment registration, foreign investors shall continue the procedures for enterprise registration. Vietnam laws do not have to limit the type of enterprise to foreign investors, hence investors can choose: One member limited liability Company; Two-member limited liability companies or more; Joint stock company; Partnerships. Each type of business has different advantages and disadvantages, and foreign investors should base on the purpose and investment scale to choose the type of suitable form of investment. In addition, the investment under the conditional business lines need to fully meet the conditions according to the provisions of law. Depending on the type of business, there will be the document requirements that need to register accordingly. And most importantly, foreign investors must prepare necessary conditions and sufficient conditions (validated documents for use in Vietnam, business name, head office address, business line, charter capital, legal representative,…) attached to the understanding and implementation of the order and procedures when they want to establish a certain type of enterprise in accordance with the Enterprise Law 2020.

Bloomberg said Vietnam is an attractive destination for startups in 2023

According to the international press last week, in 2023, Vietnam’s economy has been facing challenges both at home and abroad. However, there are still positive signs with the growth prospect of the economy. Meanwhile, Vietnam is also focusing on long-term economic growth to promote startups to choose Vietnam for setting up company, make investment and do business in Vietnam.

In 2023, the economy is returning to a long-term growth trajectory as the boom period of reopening after COVID-19 has ended. Vietnam aims to increase infrastructure spending to 7% of GDP this year to support economic growth, ensuring continued FDI inflows into the country for years to come.

Vietnam’s foreign direct investment is boosting the economy in the future. With the advantage of favorable business environment, stable political environment, sustainable macroeconomic development, abundant labor force, low cost, Vietnam is an ideal destination for tourists and foreign investors to establish company in Vietnam.

According to expert, the situation is very difficult globally, but so far Vietnam has been recovering and returning to the development trajectory. There will still be challenges from the risk of recession, global protectionism that reduces export demand, but there are still many positive aspects, and there are several drivers of growth from foreign investment, investment in human resources, and infrastructure. In addition, there is rapid growth in the recovery of consumer and business confidence. There has been a recovery in domestic demand.

According to Bloomberg, Vietnam is an attractive land for startups thanks to an abundance of qualified engineers but low labor costs, along with a fast-growing economy.  Vietnam aims to turn Ho Chi Minh City into a “magnet” by 2030 to attract technology investment capital and aim for a digital economy.

Vietnam is now a manufacturing hub and an important part of the global supply chain. Therefore, it is important for businesses and economies to step up automation.  Digitization of the value chain along with rapid improvement of labor productivity is one of the key drivers. Vietnam has great potential for rapid economic development and digital transformation across all sectors.

There are common understandings about the factors that help ensure Vietnam’s growth. These factors include accelerating structural and institutional reforms, deeply participating in new-generation trade agreements, enhancing foreign investment attraction, accelerating digital economic transformation, and deep integration into the global supply chain

Set up company in Vietnam and comply

Vietnam’s economy is increasingly diversified in terms of business activities and business regulations are also constantly being improved and enhanced. Accordingly, foreign investors can freely choose the right type of business to set up company in Vietnam.  After the investors set up company in Vietnam, the continuous procedures to comply is always a matter of great interest to foreign investors.

Why it is important to comply with the laws after the investors set up company in Vietnam?

Complying with the law after the investors set up company in Vietnam is of utmost importance for several key reasons.

Firstly, legal compliance ensures that your company operates within the boundaries of the law, avoiding any potential legal repercussions or penalties. Vietnam has specific regulations and requirements that businesses must adhere to, such as tax obligations, labour laws, environmental regulations, licensing requirements, and corporate governance standards. By following these regulations, you demonstrate your commitment to ethical business practices, maintain a positive reputation, and reduce the risk of legal disputes or regulatory actions.

Secondly, legal compliance fosters a stable and sustainable business environment. Adhering to the law helps create a level playing field for all market participants, promoting fair competition and ensuring that businesses operate on a fair and equitable basis. Compliance also enhances transparency and accountability, which can attract potential investors, partners, and customers who value companies with strong ethical practices. By establishing a reputation for legal compliance, your company is more likely to build long-term trust and maintain fruitful relationships with stakeholders.

Furthermore, compliance with the law safeguards the rights and interests of your employees. Labour laws in Vietnam provide essential protections for workers, such as fair wages, working hours, occupational safety, and social insurance. By complying with these regulations, you create a safe and equitable working environment, fostering employee satisfaction, loyalty, and productivity. Prioritizing legal compliance in Vietnam also minimizes the risk of labour disputes, ensuring harmonious and productive relationships with your workforce.

Lastly, legal compliance contributes to the overall economic development and stability of Vietnam. When businesses operate in accordance with the law, they contribute to a robust and sustainable economy. Compliance supports government initiatives, such as tax revenue generation, social welfare programs, and infrastructure development, which benefit the country as a whole. By fulfilling your legal obligations, you actively participate in the growth and progress of Vietnam’s business ecosystem.

What are steps to follow to set up company in Vietnam and comply with the laws?

With the promulgation of the enterprise law, the business setting up process has been adjusted with many favorable regulations for investors.  However, in order for a business to start up and comply in operation, the following basic steps should be noted:

The first step is to set up company in Vietnam. To take this step, the investor first needs to determine the type of business to choose to establish and provide the business name and expected information. Accordingly, the composition of the enterprise establishment dossier will be prepared according to regulations and submitted at the Business Registration Office, the Department of Planning and Investment of the place where it is expected to be headquartered. After submitting a valid application, the enterprise will be granted an enterprise registration certificate and announced the registration contents on the National Business Registration Portal.

The second step is to publish the contents of business registration. After being granted an enterprise registration certificate, an enterprise must make a public announcement on the National Business Registration Portal.

In the third step, the enterprise conducts stamp engraving. Enterprises can request to make a seal from the seal making agent. Accordingly, the enterprise actively decides on the type, quantity, form and content of the seal and is solely responsible for the use of its legal entity seal.

Fourth step is that to open a bank account in Vietnam. Currently, businesses can choose a bank to open an account for their business, to open an account, the bank requires an application form issued by the bank, a seal sample, the company’s charter, and a certificate. Business registration and related documents are required by different bank.

The fifth step is to register the tax declaration form in Vietnam. Accordingly, enterprises register for the use of e-invoices and notify the use of e-invoices to their tax authorities. Enterprises need to contact the invoice supplier to order the printing of value-added invoice books and must register self-printed invoices with tax authorities.

In the sixth step, the enterprise needs to conduct labor registration in Vietnam. Enterprises register with the Department of Labor, War Invalids and Social Affairs to declare the use of labor. Within 30 days from the date of commencement of operation, the employer must register the employer to the Labor Department (according to the prescribed form). In addition, enterprises should note that the relationship between the employer and the employee is regulated by the Labor Code and specified in the labor contract.

Seventh step is to register for social insurance in Vietnam. Enterprises register with the Social Insurance Agency to pay health insurance and social insurance for employees. Employers must fill in all information according to the form provided by social insurance, including: full name, date of birth, salary (recorded in labor contract), number of social insurance book (for employees who have been issued with a book), a certified copy of the company’s business registration certificate and a copy of each labor contract.

How a consulting firm in Vietnam could help set up company in Vietnam and stay complied?

It can be seen that in order for the investors to set up company in Vietnam, it requires investors to carry out a number of procedures and comply with many different regulations of tax, banking, labour, insurance… Therefore, besides learning about legal regulations and businesses can seek the support of professional consulting firm to set up company in Vietnam with expertise and experience in the field of business establishment to implement the process quickly and effectively.

Compliance with the law after the investors set up company in Vietnam is essential for maintaining a strong legal standing, fostering a fair and transparent business environment, protecting the rights of employees, and contributing to the sustainable development of the country’s economy. By upholding legal compliance, your company can thrive and build a solid foundation for long-term success in Vietnam while doing business in Vietnam.