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Company Formation in Vietnam

Overview :

On the heels of its 2006 entry into the WTO, Vietnam’s economy continues to show high growth and is generally considered the second fastest growing economy in Asia behind China. High technology companies have pegged Vietnam as having great potential as a research and development centre due to its excellent technical workforce and modern IT infrastructure. With regard to workforce, Vietnam produces many outstanding engineers at its excellent engineering colleges. Additionally, because Vietnam’s infrastructure is now just being developed, the telecommunications and IT infrastructure is more modern and superior to most countries in the region. High-tech firms such as Cisco, Microsoft, Oracle and HP have been very active in Vietnam for a decade, and the software outsourcing sector is also beginning to become a player internationally as wages for engineers in India continue to escalate. In the manufacturing sector, Vietnam has many Industrial Zones which offer streamlined investment procedures and attractive tax incentives. A number of Open Economic Zones are also being introduced. All of these factors contribute to an environment where manufacturing activities can flourish. In recent years, the garment industry in Vietnam has seen explosive growth, and clothes from Vietnam can be found at most retail clothing stores in the United States.

Advantages of Incorporating a Company
  • There are no minimum capital requirements with Vietnam Company formation except for a few specific business lines such as real estate, insurance, aviation services, banking and securities.
  • Vietnam company formation requires a minimum of one director, who need not be resident in Vietnam.
  • A Vietnam Joint Venture is an ideal way for foreign investors to gain ready access to local markets.
  • Vietnam joined the World Trade Organisation (WTO) in January 2007, obliging it to reform its legal system, strengthen intellectual property rights protection and lift trade barriers.
  • Foreign investors who incorporate a company in Vietnam can own 100% shares in the business in certain sectors.   
  • Vietnamese companies recording tax losses can carry them forward for up to 5 years.

Attractive Tax Regime :

Vietnam has a standard Corporate Income Tax rate of 28% applicable to both domestic and foreign investment entity with effective from 1st January 2004. Preferential Corporate Income Tax rates of 10%, 15% and 20% are available for investments in certain types of industries or designated locations encouraged by the local Government. Tax relief is also available for Corporate Income Tax exemption and reduction. Trading losses can be carried forward for five years subject to registration with the tax authorities. Carrying back of trading losses is not permitted.

Types of Entities

A Foreign investment project in Vietnam currently can be seen under the form of any of the following investment vehicles :

Limited Liability Company (LLC):

Under the Enterprise Law, an LLC may take the form of either an LLC with two or more members (Multiple Members LLC) or an LLC with one member (Single Member LLC). An LLC has its own charter and board of directors, known as the Board of Members (BOM), and has the right to establish dependent units such as branches or representative offices domestically or abroad.

An LLC has the status of a recognized legal entity and a member of an LLC is responsible for the debts and liabilities of the enterprise to the extent of the amount of capital that the member has contributed or committed to contribute to the enterprise. Unlike a JSC, an LLC cannot issue shares.

Multiple Members LLC

A Multiple Member LLC is an enterprise that has more than one but no more than fifty members, which may be organizations, individuals, or a combination of both.

Single Member LLC

A Single Member LLC is owned by one organization or individual member (Company Owner) who is liable for the debts and liabilities of the company to the extent of the amount of the charter capital of the company. A Single Member LLC has the same legal status as a Multiple Member LLC.

Joint Stock Company (JSC) :

A JSC is an enterprise whose charter capital is divided into shares held by three or more organizations or individuals. A JSC is a recognized legal entity under Vietnamese law and shareholders are responsible for the debts and liabilities of the enterprise to the extent of the amount of their contributed capital. A JSC has the right to issue securities in order to raise capital and it may list on the Securities Exchange.

Partnership Company :

Partnership companies must have at least two individual owners. These owners are jointly liable for the company’s obligations (they have unlimited liability). The company may also have limited liability owners who are only liable for the company’s debts to the extent of the amount of capital they have contributed. Partnership companies are not allowed to issue securities to the public.

Business Cooperation Contract (BCC) :

A BCC is a contractual relationship akin to a partnership which does not create a new legal entity but which is licensed to engage in business activities in respect of a specific project in Vietnam. BCCs are most commonly used in the oil industry, where production sharing contracts have traditionally been structured as BCCs, and in telecommunications and advertising projects. This is changing as LLCs and JSCs are being allowed into these fields.

Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO) and Build-Transfer (BT) projects :

BOT contract means a form of investment whereby a competent State body and an investor enter into a contract to construct and operate an infrastructure facility for business purposes for a fixed duration; and, upon expiry of the duration, the investor transfers such facility, without compensation, to the State of Vietnam.

BTO contract means a contract entered into by a competent State body and an investor for the construction of an infrastructure facility upon the completion of which the investor will transfer such facility to the State of Vietnam. The Government will grant the investor the right to commercially operate such facility for a certain fixed period of time in order to recover the investment capital and earn profit.

BT contract means a contract entered into by a competent State body and an investor for the construction of an infrastructure facility upon the completion of which the investor will transfer such facility to the State of Vietnam. The Government will facilitate implementation of another project by the investor in order to recover investment capital and earn profit, or will make payments to the investor under the agreements in the BT contract.

BOT, BTO and BT contracts (referred to as “project contracts”) are encouraged for a number of projects relating to constructing, operating, renovating, expanding, modernizing or managing infrastructure facilities such as roads, bridges, tunnels, railways, airports, seaports, river-ports, ferry-landings, waste water treatment facilities, power plants, etc.

Time Period

Usually, Incorporating a Company takes about 14-16 days in Vietnam.