How to Set up a Company in Vietnam

Lorenz & Partners 

Legal, Tax and Business Consultants 

Office-Information No: 33 (EN) 

How to Set up a Company in Vietnam 

December 2010 

All rights reserved © LORENZ & PARTNERS 2010

How to setup a company in Vietnam 

© Lorenz & Partners December 2010 Page 2 of 19 

Vietnam: Tel.: +84 (0) 8 822 623 0 Fax: +84 (0) 8 824 844 1 e-mail: vietnam@lorenz.co.th 

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TABLE OF CONTENTS 

Introduction 3 

1. Main Principles 3 

1.1 Forms of direct investment 4 

1.2 Forms of indirect investment 5 

1.3 Investment Sectors 5 

1.4 Licensing 5 

1.5 Term of investment projects 6 

1.6 Dispute resolution (Art. 12 LOI) 6 

1.7 Accounting System 7 

2. Possible legal forms 8 

2.1 Representative Office 8 

2.2 Branch Office 9 

2.3 Limited Liability Company (LLC) 10 

2.4 Partnerships 11 

2.5 Public Limited (“Shareholding”) Company 11 

3. Business Co-operation Contract (BCC) 12 

4. Post-Licensing Procedures 12 

4.1 Tax Registration 13 

4.2 Financing 14 

4.3 Annual Financial Reports 15 

4.4 Labour 15 

5. Foreign owned trading company 16 

5.1 Import and Export 16 

5.2 Distribution 17


Introduction 



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Vietnam is getting more and more into the focus of Western and Eastern investors. 

Its GDP growth over the last decade was one of the highest worldwide. Even now, 

during the downturn of the world economy, Vietnam is one of the few countries 

expecting moderate growth rates for 2010 amounting up to 6.7%. Investment into 

Vietnam has become even more attractive since Vietnam was granted accession to 

the World Trade Organisation (WTO) on 11 th of January 2007, after a waiting pe- 

riod of 12 years. In order to become a member of the WTO, Vietnam had to pass a 

law on investments (“LOI”), that would grant the same rights to foreign investors 

as to domestic investors. According to the new LOI, domestic and foreign inves- 

tors shall in general be treated equally. 

However, doing business in Vietnam is still sometimes complicated. The following 

chapters highlight some of the most important aspects to be considered in connec- 

tion with structuring a business in Vietnam. 

Particularly, this brochure will stress the major points to be considered under the 

new LOI when investing either directly or indirectly into Vietnam. It will also out- 

line the requirements for setting up a company according to the new Law on En- 

terprises (LOE), in force since 1 st of July 2006. 

In the Appendices to this brochure you will find terms, definitions and application 

forms as well as a detailed list of mandatory procedures for pre- and post-licensing 

processes. 

1. Main Principles 

The main principles that govern foreign investment activities in Vietnam are, as 

mentioned above, now stated in the LOI. The law provides a wider range of in-




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vestment methods, distinguishing between direct investments and indirect invest- 

ments. 

1.1 Forms of direct investment 

• Establishment of companies, being 100% domestic or foreign owned; 

• Joint ventures between domestic and foreign investors; 

• Investment in the following contractual forms: 

- Business Co-operation Contract (BCC): A contract signed between investors 

to co-operate in business and to share profits or products without creating a 

legal entity. 

- Build-Operate-Transfer Contract (BOT): a contract between a competent 

State body and an investor. The investor shall construct and operate an infra- 

structure facility for a fixed period of time. After expiration of this period, the 

facility has to be transferred to the State of Vietnam. 

- Build-Transfer-Operate Contract (BTO):In contrary to the BOT, the facility is 

transferred to the State of Vietnam after completion. The investor is granted 

the right to operate the facility for a fixed period of time to recover the in- 

vested capital and to gain profit. 

- Build-Transfer Contract (BT): In contrary to BOT and BTO, the investor does 

not get the right to operate the facility. The Government, however, creates 

conditions for the investor to implement another project, so that he can re- 

cover the invested capital and gain profit. 

• Investment in business development; 

• Purchase of shares or contribution of capital in order to participate in the 

management of investment activities; 

• Investment in carrying out merger and acquisition of an enterprise; 

• Other forms of direct investment.


1.2 Forms of indirect investment 

• Purchase of shares, bonds and other securities; 

• Indirect investment through securities investment funds; 



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• Indirect investment through other intermediary financial institutions. 

1.3 Investment Sectors 

According to Art. 4 Sec. 1 LOI, investors are permitted to invest in all sectors 

and industries not prohibited by law. Under the new law, Vietnam’s economy 

is still divided in three sectors: encouraged sectors, conditional sectors and 

prohibited sectors. 

Conditional sectors, under the old law only accessible to those foreign inves- 

tors willing to cope with the respective conditions (restrictions on investment 

forms, foreign participation etc.), are in general now accessible for both do- 

mestic and foreign investors under the same conditions. However, according 

to Art. 29 Sec. 3 LOI, equality in conditions shall follow the schedule for im- 

plementation of international treaties, into which Vietnam has entered. Total 

equality between domestic and foreign investors will therefore still take some 

time. 

1.4 Licensing 

According to Art. 46 LOI, all foreign invested projects require an investment 

certificate. For domestic invested projects such investment certificate is only 

needed if the project exceeds an invested capital of approx. 790,000 USD (15 

Billion. VND) (Art. 45 LOI). The process to obtain the aforementioned in- 

vestment certificate differs between registration and evaluation procedures.




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Foreign invested projects, where invested capital is below an amount of 

approx. 16 Mio. USD (300 Billion. VND) and not included in the list of sec- 

tors subject to conditions, are only subject to registration procedures. All 

other foreign invested projects are subject to registration and evaluation pro- 

cedures. The significant difference is, that in cases which require registration 

procedures, the respective investment licence must be granted if the dossier is 

complete and true, whereas evaluation procedures comprise an assessment of 

the whole investment project by the license issuing body. 

1.5 Term of investment projects 

In contrary to domestic invested projects, foreign invested projects are re- 

stricted in investment duration. The maximum term for a foreign invested 

project is 50 years (Art. 52 LOI). This period can be extended by the Gov- 

ernment, if such extension is deemed necessary. However, the total maximum 

shall not exceed 70 years. 

The operational duration will be recorded in the investment certificate. 

1.6 Dispute resolution (Art. 12 LOI) 

If one or both of the disputing parties is a foreign investor or an enterprise 

with foreign owned capital, the dispute shall be resolved by one of the follow- 

ing tribunals and organisations: 

• A Vietnamese Court; 

• A Vietnamese arbitration body in accordance with the agreement of the 

disputing parties; 

• An arbitration tribunal established in accordance with the agreement of 

the disputing parties.




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If the dispute arises between a foreign investor and a State administrative body 

of Vietnam, relating to investment activities in Vietnam, the dispute has to be 

resolved by a Vietnamese Court or a Vietnamese arbitration body, if not stipu- 

lated otherwise in the contract of the parties, signed by a representative of a 

competent State body of Vietnam and the foreign investor or stipulated in an 

international treaty of which Vietnam is a member. 

Recently in 2010, Vietnam has issued a new law on arbitration replacing the 

old legislation “Ordinance on Arbitration”. Foreign arbitrators are permitted 

to practice in Vietnam; representative office of international arbitration will 

also take the chance to be in Vietnam sooner or later. The main implementa- 

tion however, might be that from now on, the English language can be agreed 

on in an Arbitration. While waiting the guidance for implementation, the new 

arbitration law is therefore a step forward to putting Vietnam into the Global 

market and making it a recognisable part of it. 

1.7 Accounting System 

Vietnam has created its own accounting regime. Foreign companies that es- 

tablish a legal entity in Vietnam as well as foreign parties to a business co- 

operation contract are obliged to adopt the Vietnamese Accounting System 

(VAS). In theory, any other accounting regime could be used. However, there 

has to be a specific need for such a “deviating” practice, which has to be ap- 

proved by the Ministry of Finance. Approvals are rare. 

Consequently, it seems advisable to adopt the VAS to ensure smooth co- 

operation with the local authorities and in particular to minimise future mis- 

understandings.


2. Possible legal forms 



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Since the enactment of the LOI and the new Law of Enterprises (LOE), foreign 

investors are no longer limited to certain legal forms. According to Art 13 of the 

LOE, all Vietnamese and foreign organisations as well as individuals shall have the 

right to establish and manage enterprises in Vietnam. Exceptions are made in Art 

13 Sec. 2 e g for State officials and State bodies as well as for minors, persons serv- 

ing prison sentences or in case of bankruptcy. 

The following shall give an overview over the most common legal forms chosen to 

carry on business: 

2.1 Representative Office 

This is the simplest way to be present in Vietnam as an entity. The LOE pro- 

vides a definition of the term representative office (rep. office) in Art 37 Sec. 

1. Accordingly, a rep. office is a dependent unit of the enterprise, acting as the 

authorised representative in the interest of the enterprise and protecting such 

interests. 

Any foreign business entity or Vietnamese entity, which is lawfully established 

and has been operating for at least one year, can be licensed to establish a rep. 

office in Vietnam. 

Rep. offices shall only be used to evaluate the Vietnamese market and to pre- 

pare a market entry for activities of the foreign parent company. Direct busi- 

ness activities of the rep. offices themselves are not allowed. The head of the 

rep. office is, in this function, only entitled to sign contracts with regards to 

the employment of the rep. office’s staff and its premises. However, the head 

of the rep. office can be authorised to sign contracts on behalf of the foreign




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entity. But it should be taken into account that such authorisation can also 

lead to a possible tax exposure of the rep. office with regard to corporate in- 

come tax as a permanent establishment might be constituted by doing so. 

Representative offices in specific sectors such as banking, finance, legal ser- 

vices, culture, education or others must comply their specific laws thereof. 

2.2 Branch Office 

A branch is a dependent part of a foreign entity which is permitted to conduct 

activities being purchase and sale of goods and activities in accordance with 

the Commercial Law and the international treaties of which Vietnam is a 

member. It is not a juristic person itself but the registered office of a foreign 

legal entity registered in Vietnam which is taxed separately from its headquar- 

ters as an independent business entity. 

To open a branch, an enterprise must be operating for at least five years. 

According to Art, 37 Sec. 5 of the new Law of Enterprises, every enterprise 

has the right to establish branch offices in Vietnam and overseas. 

Overseas enterprises may establish branches in Vietnam in accordance with 

international treaties to which Vietnamese is a member and with domestic law. 

The key difference between a branch and a representative office is that a 

branch is entitled to engage directly in business to generate profit in Vietnam 

while a rep. office is not entitled to do so. 

Branch offices in Vietnam are not being taxed with a branch tax. In general, a 

branch is only subject to corporate income tax (currently 25%). This tax is cal- 

culated separately from its mother company. 

The Licensing body is the Ministry of Commerce and Industry which adminis- 

ters branches and offices via the Department of Commerce and Industry at 

each city or province. Branches in specific sectors such as banking, finance,


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legal services, culture, education or others must comply their specific laws 

thereof. 

2.3 Limited Liability Company (LLC) 

LLC is the most common form of investment in Vietnam. Under the LOE, 

LLC is an enterprise, in which its members are liable for the debts and other 

property obligations of the enterprise only with the capital they contributed to 

the enterprise. A minimum capital is only required when conducting special 

businesses (real estate, banking etc). The amount is stipulated in the respective 

law. The number of its members is limited to a maximum of fifty. If members 

are more than fifty, the LLC must be converted into a shareholding company 

(joint-stock company). 

An LLC is a legal entity. It obtains this status from the day of issuance of the 

business registration certificate. 

An LLC cannot issue shares. However, when a member has fully paid his 

share of capital contribution, he will receive a capital contribution certificate. 

It is also possible for an LLC to raise its charter capital through a contribu- 

tion of additional capital from the members or admission of new members to 

the company. Under the LOE, an LLC can be formed by multi-members 

(multi-members limited liability company or MMLLC) or a single member 

(single member limited liability company or SMLLC). “member” can be any 

person or an organisation. 

The SMLLC generally follows the rules of MMLLC. Concerning structure and 

required documents there are, however, some differences. 

The highest decision-making body is the Members’ Council for a MMLLC 

and the Owner of a SMLLC. The Legal representative of the enterprise has 

signing authority or authorises one or more person(s) to carry out his power.



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He is responsible to run the day – to - day business and report to the highest 

making decision body of the enterprise. 

Any form of an LLC has to hire a Chief Accountant. For the purpose of mak- 

ing the set – up of a company easier, in the first year, any enterprise is permit- 

ted to outsource the accounting services. 

2.4 Partnerships 

A partnership is an enterprise, in which two or more persons are united under 

one common name for a common purpose with the intent of sharing the 

profit thereof. Therefore, partnerships are appropriate for professional organi- 

sation (e.g. law firm, accounting and auditing firm etc.).The Vietnamese law 

regulates unlimited partnerships and limited partnerships. In an unlimited 

partnership, the partners are liable for the obligations of the company to the 

extent of all their assets. 

Partners in limited partnerships are liable for the debts of the company only to 

the extent of the amount of capital they have contributed to the company 

(similarly to members of LLC). A partnership under the Vietnamese law is a 

legal entity. It will enjoy this status from the date of issuance of the business 

registration certificate. 

There are no specific rules for partnerships. Accordingly, partnerships are 

treated similar to other forms of enterprises. 

2.5 Public Limited (“Shareholding”) Company 

The procedure for setting up a public limited or “shareholding” com- 

pany is similar to that of a limited liability company. The major differ- 

ence is that a limited liability company is prohibited from offering 

shares to the public.


3. Business Co-operation Contract (BCC) 


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Besides the possibility of co-operation in the form of a joint venture, the Vietnam- 

ese law offers with the BCC a special co-operation on a contractual basis. Partici- 

pating entities remain independent (tax and liability). In order to reduce possible li- 

abilities, the founding of a separate entity, which becomes party to the BCC, is ad- 

visable. Obligations and duties of the BCC-parties have to be regulated in the BCC- 

contract. 

4. Post-Licensing Procedures 

The issuance of the business registration certificate respectively the investment cer- 

tificate is the first step to commence operations. However, even after the changes 

in the Vietnamese investment law, there are still some post-licensing procedures, as 

listed below, which can be time consuming and therefore should be kept in mind. 

The following should be considered: 

General post-licensing 

• Notification to the investment certificate issuing body on the commencement 

of the operations of the company within 15 days from the date of issuance of 

the investment certificate 

• The establishment of the company must be published in three consecutive is- 

sues of daily newspaper within 30 days. 

• The official seal of the company has to be produced and registered with the 

provincial police department. 

• A tax registration must be applied for. A bank account must be opened.


• A chief accountant must be nominated. 


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• Once an investor has fully paid up its capital contribution, the company is re- 

quired to issue a certificate of capital contribution 

4.1 Tax Registration 

Within 10 days after the issuance of an investment licence, the company (and 

affiliated establishments, if any) have to register with the local tax authorities. 

The business registration body has to notify the contents of the business regis- 

tration certificate to the tax office within 7 working days from the date of is- 

suance of such certificate. 

In time of steady operations the following tax related issues should be moni- 

tored and dealt with. 

• In case of significant changes, a respective supplementary registration 

with the local tax authorities must be made at least 5 days in advance (if 

different VAT rates apply each group of goods or services must be de- 

clared separately).Within 30 days from the tax authorities registration, the 

company must submit the vouchers with respect of transactions with re- 

lated parties, to the tax authorities 

• VAT payments have to be made according to the date stated in the tax 

notices, but not later than the 20 th day of the following month. 

• Within 10 days of the following month, VAT returns have to be submit- 

ted. 

• In case of the use of foreign service providers, foreign contractors´ with- 

holding tax must be withheld and declared. 

• In case of import of goods, VAT must be declared with the customs of- 

fice.



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• Within 90 days of the following calendar year, the annual VAT return has 

to be submitted. The respective deficient payments have to be made 

within 10 days. A surplus has to be set off with the VAT payable for the 

following period. 

• The company shall calculate, declare and withhold the Personal Income 

Tax ("PIT") of salaries paid to its employees on a monthly basis. 

• The company shall calculate, declare and pay import tax to the customs 

and tax authorities. 

• Chief accountant must be employed or arranged. For the first fiscal year, 

the accounting services may be outsourced to an external service pro- 

vider. 

• In case the company ceases to exist, a final VAT report has to be filed. 

• The annual provisional CIT return has to be submitted not later than 25 

January of each year to the local tax authorities. 

• In case of fluctuations in business results in the first six months of the fi- 

nancial year, such changes have to be reported to the local tax authorities 

in order to adjust the provisional CIT return. 

• In case of quarterly CIT payments, the respective payment has to be 

made not later than the 30 th day of the respective next quarter. 

• Within 90 days of the fiscal year, the CIT return must be submitted to 

the local tax authorities. 

4.2 Financing 

• After establishment, the company has to open a specialised capital de- 

posit account with a bank in Vietnam; any capital contribution by the 

members of the company is required to be paid in on the company's



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capital deposit account. The bi-annual report on implementation of the 

company's invested capital and offshore profit remittance must be sent to 

State Bank of Vietnam ("SBV") no later than 15 July of each year. The 

annual report must be sent to SBV no later than 15 January of each year. 

• When the company wishes to open an offshore bank account, it is re- 

quired to obtain the approval of the SBV. 

• The company is required to register any offshore loans with the SBV 

within 30 days from the date of signing or before the date of first dis- 

bursement. The periodical re-ports to the provincial branch of the SBV is 

also required 

4.3 Annual Financial Reports 

Within three months of the end of each financial year, financial reports have 

to be sent to the Ministry of Planning and Investment, the Ministry of Fi- 

nance, and the General Department of Statistics. 

4.4 Labour 

• Before recruitment, the company must submit an application to the local 

Department of labour, Invalids and social affairs ("DOLISA") for work 

permits for expatriates. 

• No later than seven days prior to the date of commencement of work for 

the company, the company must report to DOLISA the list of the expa- 

triates exempt from work permit (if any). Prior to 5 January each year, an 

annual report to DOLISA on employment of expatriates must be filled. 

• Within seven days of the recruitment completion, it is required to send a 

notice to DOLISA regarding the list of recruited employees



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• Should the legal representative of the company be a foreign national; 

he/she is required to obtain the temporary residence card 

• Within six months from the incorporation of the company, a Trade Un- 

ion or an Interim Trade Union Board must be established 

5. Foreign owned trading company. 

On 12 February 2007 a new decree (Decree 23) was signed by the Prime Minister, 

dealing with enterprises having foreign owned capital, which want to become active 

in the field of purchase and sale of goods or undertake activities directly related 

thereto. To guide the implementation of Decree 23, the Government issued Circu- 

lar No. 09-2007-TT-BTM dated 17 July 2007 Guiding implementation of Decree 

23 (“Circular 09”) and Circular No. 05-2008-TT-BCT dated 14 April 2008 Amend- 

ing and Adding to Circular 09. These legislations clarified certain issues regarding 

the conditions and procedures for issuance of distribution license to foreign inves- 

tors, however some matter still remain unclear. 

5.1 Import and Export 

Foreign investors may engage in import and export activities by establishing a 

100% foreign-invested enterprise or a joint venture with local partners. Production 

enterprises with foreign capital investment are permitted to export their products 

and imported goods/services for its business purposes. 

The import/export shall be conducted in accordance with WTO’s rules which 

Vietnam has committed. It should be noted that there are certain goods that are 

not permitted and/or restricted to be imported or exported. This list of goods may



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be reviewed from time to time in accordance with the schedule issued by Ministry 

of Commerce and Industry. 

A foreign-owned enterprise must obtain the license for import/export activities is- 

sued by the provincial committee. Under Decree 23, a foreign-owned enterprise is 

only permitted to resale (wholesale) the imports to the registered local companies 

and not retail the imports directly to the end users. 

Furthermore, foreign-owned export companies are only permitted to buy goods 

from local registered companies for export. 

The law prevents foreign-owned companies from buying goods directly from pro- 

ducers. 

5.2 Distribution 

Decision No. 10-2007-QD-BTM announcing the Schedule for Implementation of 

Trading and Distribution Activities (“Decision 10”) provides that distribution 

rights comprise of: 

• agent for purchase and sale; 

• wholesale, 

• retail and 

• franchise. 

Since 1 January 2009, 100% foreign-owned company can engage in distribution ac- 

tivities in Vietnam. Previously, only joint-ventures were allowed.



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When the foreign-owned company is licensed to distribution rights, it is only enti- 

tled to have a single retail sale outlet (which is normally the registered address of 

the company). Any other additional retail sale outlet will be additionally licensed on 

a case by case basis. 

Vietnam further stipulates certain conditions on establishment of additional retail 

outlets based on “Economic Needs Test” (“ENT”). The criteria for ENT include 

(i) the number of retail outlets; (ii) the market stability; (iii) population density in 

the province or city where the retail sales outlets are to be set up; and (iv) consis- 

tency of the investment project with the master plan of such province or city. 

People’s committee at provincial level will issue the distribution (trading) license af- 

ter obtaining the written opinion of Ministry of Commerce and Industry. 

Given above, Vietnamese law distinguishes import/export and distribution rights. 

The existing import/export companies may request distribution license in its lines 

of business.



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We hope that this information was helpful for you. For any further questions 

or additional information, please do not hesitate to contact us. 

LORENZ & PARTNERS (VIETNAM) CO., LTD 

3 Floor, Viconship Building, District 4 

Ho Chi Minh City, Vietnam 

Tel.: +84 (0) 8 62 61 82 31 

Fax: +84 (0) 8 62 61 82 18 

E-Mail: vietnam@lorenz-partners.com 

Although Lorenz & Partners Co., Ltd. always pays greatest attention on updating the in- 

formation provided in this brochure we cannot take responsibility for the topicality, com- 

pleteness or quality of the information provided. None of the information contained in this 

brochure is meant to replace a personal consultation. Liability claims regarding damage caused 

by the use or disuse of any information provided, including any kind of information which is 

incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly neg- 

ligent.

How to Set up a Company in Vietnam

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