Vietnam has emerged as one of the most attractive destinations for foreign investors due to its stable economy, strategic location, and business-friendly policies. If you are considering establishing a company in Vietnam, this guide will provide you with an in-depth understanding of the process, requirements, and key considerations from an accounting perspective. 1. Choosing the Right Business Structure Selecting the appropriate legal entity is crucial for business success. In Vietnam, foreign investors can choose from several structures, including: Limited Liability Company (LLC) – The most common structure, suitable for small to medium enterprises (SMEs). It can be single-member or multi-member. Joint Stock Company (JSC) – Ideal for businesses seeking to raise capital through shares. A minimum of three shareholders is required. Representative Office (RO) – Suitable for foreign companies looking to explore the Vietnamese market without engaging in commercial activities. Branch Office – A foreign entity’s extension that can engage in business but has stricter requirements. 2. Legal and Licensing Requirements To legally operate in Vietnam, businesses must obtain specific licenses and approvals: Investment Registration Certificate (IRC): Required for foreign investors before setting up a business. Enterprise Registration Certificate (ERC): Necessary for company incorporation. Business License: Required for certain industries such as trading, retail, and education. Additional Permits: Depending on the business sector, companies may need specialized licenses (e.g., construction permits, food safety certificates). 3. Capital Requirements and Bank Account Setup Minimum Capital: While Vietnam does not enforce a universal minimum capital requirement, certain industries (e.g., banking, education, real estate) have specific capital requirements. Bank Account Opening: After incorporation, businesses must open a local bank account to deposit their capital and conduct transactions. 4. Taxation and Compliance Vietnam has a structured tax system that businesses must adhere to. Key taxes include: Corporate Income Tax (CIT): The standard rate is 20%, though some industries may have preferential rates. Value Added Tax (VAT): Typically 10%, with exemptions and lower rates for specific goods and services. Personal Income Tax (PIT): Applied progressively for employees, ranging from 5% to 35%. Foreign Contractor Tax (FCT): Applicable to payments made to overseas service providers. 5. Accounting and Reporting Standards Vietnamese enterprises must comply with the Vietnam Accounting Standards (VAS) and adhere to periodic tax filings: Monthly/Quarterly VAT and PIT Declarations Quarterly CIT Prepayments Annual Financial Statements Submission Audit Requirements: Mandatory for FDI enterprises, JSCs, and large-scale LLCs. 6. Hiring Employees and Payroll Management Foreign investors must comply with local labor laws when hiring employees: Employment Contracts: Must be in writing and comply with the Labor Code. Social Insurance Contributions: Employers must contribute to social, health, and unemployment insurance funds (approximately 21.5% of gross salary). Work Permits for Foreign Employees: Required unless exempted under specific conditions. 7. Common Challenges and How to Overcome Them Regulatory Changes: Vietnam’s legal framework is evolving; staying updated with local legal advisors is recommended. Cultural and Language Barriers: Hiring local experts can help navigate administrative processes. Tax and Compliance Burdens: Engaging professional accounting firms ensures compliance and minimizes risks. Setting up a company in Vietnam involves multiple steps and regulatory requirements. By understanding the legal framework, tax obligations, and compliance needs, investors can establish a successful business with minimal obstacles. Consulting an experienced accounting professional can further streamline the process and ensure regulatory adherence.
