Legal Requirements for Setting Up a Business in Vietnam in 2024

Legal Requirements for Setting Up a Business in Vietnam in 2024: Vietnam has rapidly become a top destination for investors and entrepreneurs looking to set up new businesses. With its booming economy, young population, and increasing integration into global trade, Vietnam offers a fertile ground for business opportunities. However, to successfully establish a business in Vietnam, it’s essential to understand the legal requirements and regulations that govern the process.

This article provides a comprehensive guide to the legal steps involved in setting up a business in Vietnam in 2024, covering everything from choosing the right business structure to complying with local regulations.

Step 1: Choosing a Business Structure

The first legal requirement for setting up a business in Vietnam is to select the appropriate business structure. The structure you choose will influence your business’s tax obligations, regulatory requirements, and liability. Here are the common types of business entities available in Vietnam:

1. Limited Liability Company (LLC): The most popular form of business for foreign investors due to its flexibility. An LLC can have one or more members (owners) and offers limited liability protection.
2. Joint-Stock Company (JSC): Suitable for larger businesses with plans to raise capital by issuing shares. A JSC requires at least three shareholders and has more stringent regulatory requirements than an LLC.
3. Representative Office: A non-trading entity that allows foreign companies to establish a presence in Vietnam to conduct market research or promote their business without engaging in direct commercial activities.
4. Branch Office: Unlike a representative office, a branch office is permitted to conduct business activities such as sales and contracts, but it remains part of the parent company.
5. Partnership: Typically used by professional service firms, partnerships have at least two partners who share unlimited liability for the partnership’s obligations.

Step 2: Registering Your Business Name

Once you’ve chosen the appropriate structure, the next step is to register your business name with the Department of Planning and Investment (DPI) in the province or city where your business will be located. The name must meet the following criteria:

• Uniqueness: Your business name must not be identical or confusingly similar to any existing registered business name.
• Compliance with Language Rules: Business names must not violate public order, contain offensive words, or misuse protected terms.
• Non-Infringement: Make sure your business name does not infringe on any registered trademarks.

Conduct a thorough search in the National Business Registration Portal to ensure that your chosen name is available.

Step 3: Business Registration

After selecting your business name, you need to officially register your business with the DPI. The process involves submitting the following documents:

• Application Form: Completed application for enterprise registration.
• Company Charter: A document that outlines the company’s structure, operational procedures, and management.
• List of Members or Shareholders: Information on the individuals or entities involved in the company.
• Investment Certificate (if applicable): Required for businesses with foreign investment.
• Proof of Legal Capital (if required): Some industries in Vietnam require a minimum capital investment, known as legal capital, to operate.

Once your application is approved, the DPI will issue a Certificate of Business Registration, which confirms the establishment of your company.

Step 4: Obtaining Licenses and Permits

Certain business sectors in Vietnam require additional licenses or permits to operate. For instance:

• Import-Export License: Required for businesses engaged in the import and export of goods.
• Construction License: Necessary for construction and real estate development companies.
• Food and Beverage License: Needed for businesses operating in the food service industry.
• Tourism License: Required for travel agencies and other tourism-related businesses.

You must apply for these specific licenses with the relevant government agencies based on your business activities.

Step 5: Tax Registration and Compliance

In Vietnam, all businesses must register for tax purposes with the General Department of Taxation (GDT). This includes obtaining a Tax Identification Number (TIN) and registering for Value Added Tax (VAT), Corporate Income Tax (CIT), and Personal Income Tax (PIT) if your business has employees.

Here’s a brief overview of the key taxes in Vietnam:

• Corporate Income Tax (CIT): The standard CIT rate in Vietnam is 20%. However, businesses in certain sectors or regions may be eligible for reduced rates or tax incentives.
• Value Added Tax (VAT): VAT in Vietnam is typically charged at a standard rate of 10%, though reduced rates of 5% or exemptions apply to specific goods and services.
• Personal Income Tax (PIT): Employers are responsible for withholding PIT from employees’ salaries and remitting it to the GDT.

Failure to comply with tax regulations can result in significant penalties, so it’s advisable to work with a tax advisor to ensure you meet all obligations.

Step 6: Hiring Employees and Labor Compliance

If your business requires hiring employees, you must comply with Vietnam’s labor laws, which include the following requirements:

• Employment Contracts: All employees must have written contracts that outline their rights, responsibilities, and terms of employment. Contracts must comply with the Vietnam Labor Code.
• Social Insurance: Employers are required to contribute to employees’ social insurance, health insurance, and unemployment insurance funds.
• Work Permits for Foreign Employees: Foreigners who work in Vietnam for more than three months need a work permit. This permit can be obtained from the Department of Labor, Invalids, and Social Affairs (DOLISA).

Additionally, it’s important to establish workplace policies that comply with labor standards, such as working hours, leave entitlements, and safety regulations.

Step 7: Opening a Business Bank Account

Opening a business bank account is necessary for managing your company’s finances. Most banks in Vietnam will require you to present the following documents:

• Certificate of Business Registration
• Company Charter
• Tax Identification Number (TIN)
• Identity Documents of Company Directors

Choosing the right bank with a robust online banking system and international service is recommended for foreign investors.

Step 8: Annual Reporting and Compliance

Businesses in Vietnam must file annual reports with the DPI and submit financial statements to the tax authorities. This includes:

• Annual Financial Statements: Prepared in accordance with Vietnamese Accounting Standards (VAS).
• Tax Returns: Businesses must submit CIT and VAT returns periodically. The frequency of filing depends on the scale and activities of your business.

Failure to file reports or meet deadlines can result in fines and penalties.

Conclusion: Navigating Vietnam’s Business Landscape

Setting up a business in Vietnam in 2024 requires careful planning, a thorough understanding of the legal requirements, and compliance with local regulations. By following these steps—choosing the right business structure, registering with the appropriate authorities, obtaining necessary licenses, and meeting tax and labor obligations—you can successfully establish your presence in one of Asia’s fastest-growing economies.

As Vietnam continues to attract foreign investment, understanding the legal framework for business setup will ensure your venture thrives in this dynamic and promising market.