Economic reforms since the launch of Đổi Mới in 1986, coupled with beneficial global trends, have helped propel Vietnam from being one of the world’s poorest nations to a middle-income economy in one generation. Between 2002 and 2021, GDP per capita increased 3.6 times, reaching almost US$3,700. The economic growth is expected to rebound to 6.5 percent in 2024, which makes Vietnam one of the most attractive destinations for foreigners who want to invest in the country.
How to set up in Vietnam?
Foreign Direct Investment (FDI) in Vietnam significantly increased over the past three decades, rising from 180,000 USD in 1990 to 15.7 billion USD in 2021. Depending on the degree of involvement, a foreign investor may have 3 possibilities to set up a business in the country: wage portage or staffing, opening a representative office or a Limited Liability Company.
- Wage portage or staffing
This option requires the lowest degree of involvement. It is particularly suitable for investors who need a quick and easy installation with limited risks. However, wage portage and staffing often incur significant costs (net salary, social charges, personal income tax, service provider fees, possible costs of relocation). The business development is also limited as it does not create a legal entity in Vietnam (impossibility of contracting, no bank account, etc.).
- Opening a Representative Office (RO)
Opening a RO requires lower costs of incorporation and operation (limited accounting, no need for auditing) than a traditional company. It does not need a specific sub-license either.
This option presents many advantages for the investor as there is no capital investment to unlock initially and no corporation tax to pay. The RO will be able to open a Vietnamese bank account, to transfer or receive funds from the mother company and to hire and sponsor employees. However, its activity will be limited to market research, and it will not be able to invoice or make profits.
The duration of a RO is limited to 5 years, renewable. Once the activity is completed, the RO must be closed.
- Opening a Limited Liability Company (LLC)
Depending on the activity carried out, a LLC can be up to a 100% foreign capital company. Opening a LLC presents the most advantages for a foreign investor who wants to have a customer base in Vietnam. Among others, the company will be able to open a Vietnamese bank account, to invoice, to hire and sponsor employees. Nevertheless, this option requires the most formalities from the opening (need to apply for IRC, ERC and sub-licenses depending on the activities carried out) to the operation (quarterly/annual reports, annual audit, etc.).
How to come and stay in Vietnam?
In August 2023, the Government extended stay duration for tourist visa exemption from 45 days and for tourist e-visa from 90 days. Vietnam’s visa policy is therefore evolving and tends to contribute to the economic growth of the country.
Investors and workers must apply for specific visas or exemptions, depending on their activity.
Meanwhile spouses and children of expats having a valid visa or resident card in Vietnam can stay in Vietnam under a family visa or a family TRC.
Contact our team at RBA to discuss of your investment project and receive advice on the more suitable option for you to set up a business in Vietnam.
