Everything investors should know about setting-up a foreign company in Vietnam

Vietnam is forecast to become the second-largest economy in Southeast Asia after Indonesia and the 20th-largest economy in the world by 2036, according to the World Economic League Table 2022 report by the Center for Economic and Business Research (CEBR).

Vietnam has 15 preferential trade agreements in force. The trade-weighted average tariff rate is 5.6 percent, and 83 non-tariff measures are in effect. The overall investment framework has been modernized and facilitates foreign investment. The financial sector continues to evolve, and directed lending by state-owned commercial banks has been scaled back in recent years.

Statistics show that FDI inflows continue to flow strongly into Vietnam and some Southeast Asian countries, especially in the manufacturing sector as the country is transforming itself into a technology production center.

As a foreign investor, here’s what you should know before investing into Vietnam.

A foreign owned company will be set up through following steps.

1. Obtaining investment policy decision.
2. Obtaining investment registration certificate. The investment registration certificate application is prepared and submitted to the Department of Planning and Investment.
3. Obtaining enterprise registration certificate. When the investment registration certificate is approved, the application for enterprise registration certificate will be submitted.

Forms foreign investment you should know

There are four different types of foreign investment in Vietnam:

• 100% foreign-owned entity: Limited Liability Company, with One or More Members (“LLC“); Joint Stock Company (“JSC“); Partnership; or other economic organization.
• Capital contribution to; purchase of shares; capital contribution portions in a Vietnamese company
• Public-private partnership (“PPP”) contract; and
• Business Co-operation Contract (“BCC”): This form of investment does not set up a new legal entity. The investors in a Business Cooperation Contract (BCC) share the revenues and products arising from a BCC. It is a cooperation agreement between foreign investors and at least one Vietnamese partner to carry out specific business activities.

Condition to set-up foreign company in Vietnam

A foreign company that wants to establish a branch in Vietnam must proceed with the procedure of registering for a Branch Establishment License. A foreign company may not establish more than one Branch with the same name within a province or city directly under the Central Government. Besides, the foreign company must also meet the following requirements:

• Investment projects not in industries or trades banned from business investment;
• Having a location for the implementation of the investment project;
• investment projects following the planning specified in the LI;
• Satisfy the conditions on investment rate per land area and number of employees (if any);
• Meeting market access conditions

Foreign investors shall implement investment projects through the company setup, except cases of investment in the form of capital contribution or share or capital contribution purchase or under contracts and based on investment nature, scale, location, the investors shall have to implement following procedures:

• Proposing land lease or land allocation
• Making investment construction project
• Designing and obtaining the approval for fire fighting and fire prevention design
• Obtaining and evaluating technical drawing and construction drawing
• Making and obtaining the approval for environment assessment impact report
• Obtaining construction permit.

If you need any support about setting up a foreign company in Vietnam, contact the local Department of Planning and Investment or Sophie Dao, Partner of Global Business Services LLC at her email: sophie@gbs.com.vn or call +84903189033