Vietnam has always been the top destination for foreign investment in the South East Asia region respectively and in Asia in general. One of the types of investment is through the opening of a company. However, there are some minor hindrances for a foreign entity to step into Vietnam and open their own company. In this article, ASL LAW will detail the legal way to open a company in Vietnam for foreign entities which would save time, cost, and effort.
Within the first 5 months of 2022, there were 79 countries and territories investing in Vietnam. Currently, Singapore is the leading country with a total investment of nearly 3 billion USD, accounting for 25.3% of total investment capital in Vietnam.
Korea ranked second with over 2.06 billion USD, accounting for 17.6% of total investment capital, up 12.6% over the same period last year.
Remarkably, Denmark continues to rank third in Vietnam's investment with a total registered investment capital of nearly 1.32 billion USD, accounting for 11.3% of the total investment capital.
China, Japan, Hong Kong, Netherlands, Taiwan, USA, and Thailand followed closely within the top 10 FDI countries in Vietnam in this period.
According to the number of projects, Korea is still the partner with the most investors interested in the Vietnam market and concurrently, making new investment decisions as well as expanding investment projects and GVMCP indication in the first 5 months of 2022 (accounting for 19.4% of new projects, 33.9% of adjustments and 36.7% of GVMCPs).
Reasons for attraction
One of the reasons that make the Vietnamese market attractive to foreign investors is that Vietnam is known as a country with a stable political system.
Presently, Vietnam has signed 15 free trademark agreements (FTAs) currently in effect with different countries and developed markets with another 2 FTAs under negotiation.
In addition, the Vietnamese market is also famous for the cheap labor costs which could be a good replacement for China.
Sectors legal eligible for foreign investors to open companies and conduct activities in
With the aim of encouraging foreign investment in Vietnam, Vietnam has amended the related laws on foreign investment and joined WTO, committed to equivalent treatment between domestic and foreign investors when doing business in Vietnam.
Consequently, the Vietnamese Government had committed to supporting and creating the most favorable conditions for foreign businesses to invest and operate in Vietnam.
According to the provisions of Article 22 of the Investment Law 2020, foreign investors, including both foreign individuals and foreign organizations, may open companies in Vietnam but must meet market access conditions for foreign investors.
Thereby, to open a company in Vietnam, foreign investors need to have an investment project, carry out procedures for granting and adjusting the Investment Registration Certificate before establishment.
Regarding the forms of companies, foreign investors can open their companies under the following forms:
Limited-liability company
A limited-liability company formed by foreign investors in Vietnam may be under the forms of either:
+ A foreign-invested joint-venture company between foreign investors and at least one domestic one; or
+ A 100% foreign-owned enterprise;
Joint-stock company
A joint-stock company must have at least three shareholders. The company may either be 100% foreign-owned; or a joint venture between both foreign investors and domestic ones.
Partnership
This form of foreign investment in Vietnam may be set up between a legal entity or an individual and the individual general partner. The partner has unrestricted liability for the operations of the partnership.
Branch
For investors who are foreign traders doing business in Vietnam, they can establish branches when they fully satisfy the conditions prescribed by law.
Each foreign trader may only establish a maximum of 1 branch within a province or centrally run city.
Other methods
In addition, there are some other methods by that foreign entities can open a company in Vietnam, including:
- Forming a Business cooperation contract (BCC);
- Creating a Build-operate-transfer ('BOT'), Build-transfer ('BT'), and Build-transfer-operate ('BTO') contracts;
- Making a Public and Private Partnership Contract;
Originally published OCTOBER 14, 2022.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.