Generally Speaking
This article’s goal is to provide brief insight on the legal issues surrounding foreign investment in Vietnam. A few fundamental elements need to be examined:
I. The establishment of foreign-owned businesses in Vietnam;
II. Brief notes on the principal taxes that must be paid;
III. Brief notes on the Social-Health-Unemployment Insurance (SHUI) that must be paid;
IV. Brief notes on the Trade Union Fund that must be paid.
I. THE ESTABLISHMENT OF FOREIGN-OWNED BUSINESSES IN VIETNAM:
The majority of industries don’t have minimum capital requirements. So, depending on your plan, you can adjust your starting capital. The majority of business classifications allow for 100% foreign investment and ownership and don’t need any specific authorization or license.
Limited Liability Company (LLC)
The most popular form of legal entity in Vietnam is a Limited Liability Company (LLC), which is a great option for small and medium-sized businesses (SMEs). Its straightforward company structure, which only requires a single founder, is advantageous for single investors. LLC cannot publish its listing on the Vietnamese stock exchange or issue public shares.
Joint-Stock Company (JSC)
JSC is suggested for medium and large-sized companies because of its complicated organizational structure and need for at least 3 founders. Furthermore, because of the more stringent standards, the registration procedure is sometimes delayed. A shareholding corporation of this nature enables its owners to issue shares and list them on a stock exchange.
Representative Office (RO)
For foreigners looking to observe the local market and establish a footprint before expanding, RO is suitable. An RO is not permitted to engage in profitable business operations or function like a typical corporation. If authorized by the foreign company’s legal representative and the power of attorney is present, the RO’s head office may sign, amend, or supplement contracts on the company’s behalf.
* Licensing Steps:
Determine:
– What model of company: LLC, JSC, etc.
– Who is the legal representative, what constitutes ownership (e.g., is the owner a single person, a company, etc.);
– The company’s plans for Vietnam: Sectors of the Company’s business
Prepare:
– Office lease contract;
– A list of the investors’ supporting documents (such as their passports, bank balance confirmations, owner company business licenses);
– Forms that are prescribed in accordance with Vietnamese laws.
– Registration for Investment Registration Certificate (IRC)
– Submit documents to Department of Planning and Investment (DPI)
– 14 to 20 working days from the date of submission.
– Registration for Enterprise Registration Certificate (ERC)
– Submit documents to Department of Planning and Investment (DPI)
– 5 to 10 working days from the date of submission.
– Make the Company Stamp
– Initial registration for Tax & Accounting.
– 5 to 10 working days from the submission date
* Next steps of initial registration:
1-Registration for the fiscal year’s accounting system;
2-Registration for fixed assets depreciation method;
3-Information on opening bank accounts and registering for them;
4-Purchase the digital signature Token (used to sign Tax Returns online and SHUI registration online);
5-Declaring for the first time and paying the annual business licensing fee;
6-Registration for e-invoice;
7-Initial declaration on labor usage;
8-Account registration for FDI website account to submit periodic reports;
II. BRIEF NOTES ON THE PRINCIPAL TAXES THAT MUST BE PAID:
1) VAT (Value Added Tax): You will be subject to the regular rate of 10%. There are also additional rates of 5% and 0%, as well as a VAT exemption. Payment is due every quarter (the last day of the following month of quarter).
2) CIT (Corporate Income Tax): The taxable income is subject to a standard rate of 20% CIT. The final day of the month after the end of each quarter is when payments are due, and there are 90 days for year-end finalization.
Expenses that satisfy the following criteria are CIT deductible:
– relevant to company operations;
– having enough valid invoices;
– settlement of transactions exceeding VND 20,000,000 using non-cash payment methods;
– using the registered bank account to make payments; and- not specifically stated to be non-deductible.
3) BLF (Business license fee):
The annual payment deadline is January 31.
4) PIT (Personal income tax):
a) 20% for non-resident employees
b) For residents with labor contracts:
III. BRIEF NOTES ON THE SOCIAL-HEALTH-UNEMPLOYMENT INSURANCE (SHUI) THAT MUST BE PAID
Expats’ mandatory insurance rates:
Insurance rates that Local Employees must pay:
The payment plan is monthly (the last day of each month).
IV. BRIEF NOTES ON THE TRADE UNION FUND THAT MUST BE PAID
Employers contribute to trade union funds at a rate of 2% on salary funds based to pay social insurance for employees. The payment plan is monthly (the last day of each month).