Establishing a business in Vietnam Foreign direct investment (FDI) requires investors to comply with a strict legal process and meet statutory requirements. This article details this process. The process and requirements for establishing a company in Vietnam. For foreign investors, this applies to all types of entities: wholly foreign-owned companies, joint ventures, branches, and representative offices.
In addition, this article provides further information. Related costs, legal requirements, business culture, as well as opportunities and challenges. Therefore, the aim is to support investors in making sound decisions and leveraging consulting services to optimize the investment process.
1. The process of establishing an FDI enterprise in Vietnam
The process for establishing FDI enterprises in Vietnam is regulated by: Investment Law 2020 , and Enterprise Law 2020, including the following specific steps:
1.1. Applying for an Investment Registration Certificate (IRC)
All FDI projects must apply for approval. Investment Registration Certificate (IRC)An Investment Regulatory Document (IRC) is a legal document confirming the right to invest in Vietnam. The IRC application includes:
- Application for investment project implementation.
- Proposed investment project, including site lease agreement.
- The investor's financial statements for the two most recent years.
- Investor's legal documents (notarized copies of business license, passport, etc.).
- Other documents demonstrating investment capacity and conditions.
The application was submitted to Department of Planning and investment or the Management Board of industrial parks, export processing zones, or high-tech zones, depending on the project location. The processing time is usually: 15 working daysHowever, it may take longer for projects not covered by World Trade Organization (WTO) commitments.
1.2. Applying for an Enterprise Registration Certificate (ERC)
After receiving the IRC, the investor proceeds with the application. Enterprise Registration Certificate (ERC)This is also known as a Business License, used to formally establish a business. The required documents include:
- Business registration application.
- Company charter.
- List of members or shareholders.
- Documents authorizing and appointing a legal representative.
- IRC copy.
The application was submitted to Department of Planning and investment, and the processing time is approximately 3 working daysThe ERC also serves as the business's tax identification number.
1.3. Post-licensing procedures
After receiving the ERC, businesses need to complete the following procedures to begin operations:
- Engraving a sealBusinesses must have a company seal engraved and notify the business registration authority of the seal's design.
- Open a bank accountOpen a direct investment account to execute capital transfer transactions.
- Labor registrationRegister your employment with the local labor management agency.
- Pay business license taxAnnual payment of business license tax.
- Announcement of establishmentPublishing the business registration details on the National Business Registration Portal.
These procedures are usually completed within 1-2 weeks After receiving the ERC, the process will depend on the complexity of the project.
*Register for investment policy (if needed)
For large-scale FDI projects or those in specialized sectors such as housing, airports, oil and gas, or casinos, investors must register their investment policy with the Provincial People's Committee or other competent authorities, such as the Prime Minister or the National Assembly. The required documents include information about the project, the investor's financial capacity, and relevant legal documents. This step aims to ensure the project aligns with Vietnam's socio-economic development strategy.
2. Costs of establishing an FDI enterprise
The cost of establishing a foreign direct investment (FDI) enterprise in Vietnam includes government fees and other mandatory expenses, as stipulated by regulations. Circular 47 / 2019 / TT-BTC and relevant legal documents. Below is a detailed breakdown of the costs:
|
Fee type |
Amount (VND) |
Note |
|
Business registration fees |
50.000/time |
Free if you register online. |
|
Fee for publishing business registration information |
100.000/time |
Submitted at the time of filing the incorporation application. |
|
Cost of engraving a seal |
300.000 - 500.000 |
Depending on the type and number of seals |
|
Digital signature purchase fee |
2.000.000 - 3.000.000 (3 years) |
Depending on the provider and service period |
|
Cost of electronic invoicing software |
2.000.000 - 3.000.000 |
Mandatory from July 1, 2023, depending on the provider. |
|
Licensing fees (business license tax, capital >10 billion VND) |
3.000.000/year |
Based on registered capital or investment capital |
|
Licensing fees (business license tax, capital <10 billion VND) |
2.000.000/year |
Based on registered capital or investment capital |
|
Licensing fees (for branches and representative offices) |
1.000.000/year |
Annual fees for additional business units |
|
Minimum bank account balance (VND) |
1.000.000 |
Minimum balance requirement for VND accounts |
|
Minimum bank account balance (USD) |
50 – 100 USD |
Minimum balance required for USD account |
⚠️ Please note regarding IRC feesThe cost of obtaining an Investment Registration Certificate (IRC) is not fixed and can vary depending on the type of project and the locality. For example, manufacturing projects typically have higher costs than import-export projects. Investors should consult with the Department of Planning and Investment or consulting firms for accurate information.
Additionally, if you use consulting services, the overall cost may range from $3.500 or moreThis includes service fees, translation fees, and other administrative costs.
See more: Tax policies and investment incentives in Vietnam for foreign direct investors.
3. Legal and business culture requirements
3.1. Legal requirements
FDI enterprises must comply with the regulations of Investment Law 2020 , and Enterprise Law 2020, as well as regulations related to the business sector. Some key legal requirements include:
- Business ActivitesInvestments are prohibited in industries such as drug trafficking, the trade of toxic chemicals, or endangered plant and animal species..
- Authorized capitalThere are no minimum capital requirements for most industries, but the capital must be sufficient to carry out the project. Some industries, such as finance, banking, or education, have specific capital requirements.
- Registered addressBusinesses must have a legal address in Vietnam, as evidenced by a lease agreement or prior rental agreement.
Legal representativeThere must be at least one legal representative residing in Vietnam, who may be a foreigner with a work permit.
3.2. Business Culture
Understanding and respecting Vietnamese business culture is crucial for building relationships and achieving success. Some cultural characteristics to note include:
- Building relationshipsVietnamese people value long-term relationships. Investors should take the time to get to know their partners and avoid rushing into negotiations.
- The concept of "face"Avoid embarrassing your partner by refraining from public criticism; issues should be resolved privately.
- Meeting scheduleSchedule meetings in advance using printed invitations, avoiding direct phone calls. Use a local interpreter and prepare bilingual documents.
- Business attireIn Hanoi, attire is typically more professional (suits for men, skirts and blouses for women); in Ho Chi Minh City, the style can be more relaxed (business casual).
Gift-giving cultureGive small gifts such as pens or stationery with the company logo after meetings. On major holidays like Lunar New Year, give high-end gifts such as wine or imported fruit.
4. Opportunities and challenges when investing in Vietnam
4.1. Opportunity
Vietnam offers many attractive opportunities for foreign investors:
- Critical positionLocated in the heart of Southeast Asia, Vietnam serves as a gateway to major markets such as China, Japan, and ASEAN.
- Young workforceWith a population of over 100 million and an average age of around 32, Vietnam has a large and dynamic workforce.
- The consumer market is growing.The growing middle class creates a huge demand for goods and services.
- IncentivesThe Vietnamese government provides tax incentives and exemptions for strategic industries such as high technology, renewable energy, and infrastructure.
According to Jimmy Koh, Head of Network Partnerships and Strategic Marketing at UOB, “Vietnam attracts investors thanks to its large workforce, developing market, and growing middle class, making it an important destination as global supply chains diversify.”.
4.2. Challenges
Despite numerous opportunities, investors also face several challenges:
- Complex administrative proceduresThe licensing and compliance process can be time-consuming and require expert assistance.
- Language and cultural barriersDifferences in language and work styles can create difficulties in communication and negotiation.
- CompeteInvestors must compete with local companies and other foreign investors, especially in fast-growing industries such as manufacturing and technology.
- Regulatory environmentAccording to a report by the U.S. State Department, American investors often face difficulties in interpreting inconsistent regulations and an incomplete legal system..
Vietnam is ranked 70th in the index. Ease of Doing Business The World Bank's 2019 report indicated that the business environment had improved but still had areas for improvement..
5. Conclusion
Establishing a foreign direct investment (FDI) business in Vietnam presents a significant opportunity but also comes with challenges that require thorough preparation. By understanding the processes, costs, legal requirements, and business culture, investors can optimize their chances of success. Utilizing professional consulting services not only simplifies the process but also ensures the business operates efficiently and complies with the law. With its strategic location, young workforce, and growing consumer market, Vietnam continues to be an ideal destination for foreign investors seeking to expand their operations in Southeast Asia.
The role of consulting services
To overcome challenges and ensure compliance with legal requirements, investors should seek advice from experienced law firms or consulting companies in Vietnam. These services include:
- Legal supportPrepare and submit applications for IRC and ERC, ensuring compliance with the Investment Law and the Enterprise Law.
- Cultural counselingThis guide helps investors understand business practices and how to build relationships with local partners.
- Risk managementIdentify and mitigate legal, financial, and operational risks.
- Save time and moneyOptimize processes, minimize errors and unnecessary costs.