Applying for a License to Establish a Foreign-Invested Company in Vietnam

Establishing a foreign-invested company is currently one of the most prominent topics, as Vietnam has recorded the fastest economic growth rate in Southeast Asia for two consecutive years (2022: 28%, 2023: 19%), which is 3.5 times higher than GDP growth. Vietnam is now the most attractive investment hub in the region.

However, the legal process involved remains quite complex. In this section, BKC Law provides additional information on the procedure for establishing an enterprise in Vietnam, along with legal advice to guide companies in carrying out the steps in compliance with current legal regulations.

I. Procedure for Obtaining a License to Establish a Foreign-Invested Company in Vietnam

Typically, the process of establishing a foreign-invested company takes an average of 3–4 months. Below is a summary of the 4 main steps:

Step 1 – Obtain Investment Policy Approval

For large-scale investment projects, enterprises must obtain approval from the competent Vietnamese authority before proceeding with the procedure for establishing a foreign-invested company. In cases where investment policy approval is required, the investor must complete this step prior to applying for the Investment Registration Certificate.

Step 2 – Application for Investment Registration Certificate

The next step in the procedure for establishing a foreign-invested company in Vietnam is to submit an application for an Investment Registration Certificate (IRC). This is a mandatory requirement for all foreign investment projects and establishes the rights of the foreign enterprise investing in Vietnam.

At this stage, the investor must prepare:

• Enterprise Registration Certificate / Legal documents of the legal entity that is a member / owner / contributing shareholder
• Citizen ID / Passport of the legal representative, contributing members / individual owners / contributing shareholders / representative of the contributing legal entity
• Lease agreement for the project implementation location / office lease agreement
• Financial statements for the last 2 years or one of the following documents: bank statements for the last 3 months; financial capacity guarantee from the investor or explanation of financial capacity;
• Joint venture contract / Business cooperation contract among members (if any);
• Documents proving the origin of contributed assets: Land use rights certificate…

Processing time: 30–35 working days

Step 3 – Submission of Application for Enterprise Registration Certificate

The Enterprise Registration Certificate (ERC) is mandatory for all projects wishing to establish a new legal entity in Vietnam.

To obtain the ERC, the investor must prepare the following documents:

• Enterprise registration application;
• Company charter;
• List of all members of the Board of Members / Board of Directors;
• List of legal representatives; and
• Appointment letter and power of attorney.

Processing time: 03–05 working days

Step 4 – Additional Procedures After Obtaining the License to Establish a Foreign-Invested Company

After the IRC and ERC are issued, the following supplementary steps must be completed to finalize the procedures and commence business operations:

• Seal engraving and seal specimen disclosure
• Opening of investment capital account;
• Capital contribution: The investor transfers funds from the personal account to the opened investment capital account;
• Opening of corporate bank account: to conduct transactions during business operations;
• Quarterly tax reporting: 4 quarters/year;
• Annual financial statements: As a foreign-invested company, the annual financial statements must be audited as required;
• Periodic reporting on project implementation status: online reporting via the FDI portal (4 quarters/year) and supervision reports (every 6 months and year-end);
• Social insurance registration and payment if the company employs labor.

II. Taxes Applicable to Business Operations in Vietnam for Foreign-Invested Companies

License Tax: Paid annually, the rate depends on the registered charter capital of the company (Charter capital below VND 10 billion: VND 2,000,000/year)

Corporate Income Tax:

Corporate income tax is one of the taxes foreign-invested enterprises must pay. Pursuant to Article 17 of Circular 151/2014/TT-BTC, based on production and business results, enterprises must make provisional corporate income tax payments for the quarter no later than the 30th day of the following quarter. Enterprises are not required to declare provisional corporate income tax quarterly.

Formula: Corporate income tax payable = Taxable income × Corporate income tax rate

Tax rate: 20%

Value Added Tax (VAT):

Value Added Tax payable is calculated as the value of goods/services sold multiplied by the VAT rate, minus input VAT eligible for deduction. Depending on the type of goods/business, the corresponding VAT rate applies. The VAT Law provides three current VAT rates: 0%, 5%, and 10%.

Formula: VAT payable = (Selling price of taxable goods/services × VAT rate) – Deductible input VAT

Import/Export Tax:

For goods subject to percentage-based tax, import/export tax payable is calculated as the actual quantity of each item exported/imported × taxable value × tax rate.

Formula: Import/export tax payable = Actual quantity of each item × Taxable value × Tax rate

For goods subject to absolute tax, import/export tax payable is calculated as the actual quantity of each item exported/imported × absolute tax rate × applicable exchange rate.

Other taxes include: Personal income tax, special consumption tax, environmental protection tax

III. Repatriation of Profits Abroad

Transfer of capital, profits, and other legitimate income abroad

Foreign investors must transfer funds abroad through the direct investment capital account.

Profits may be repatriated annually or after the completion of investment activities.

Legitimate profits may only be distributed or derived from direct investment activities in Vietnam in accordance with the Investment Law after fulfillment of financial obligations to the Vietnamese State as prescribed.

Profits distributed to or earned by foreign investors during the fiscal year from direct investment activities are calculated based on audited financial statements and the corporate income tax finalization declaration of the enterprise in which the foreign investor has contributed capital, plus (+) other income such as undistributed profits carried forward from previous years; minus (–) amounts the foreign investor has used or committed to use for reinvestment in Vietnam, and profits used by the foreign investor to cover expenses related to production/business activities or personal needs of the foreign investor in Vietnam.

Tax on profit repatriation:

In cases where the investor is a foreign organization, the company is not required to pay tax on profit repatriation when distributing profits.

In cases where the investor is a foreign individual, when repatriating profits abroad, the company in which the foreign investor contributed capital is obligated to withhold 5% of the distributed profits and remit it to the State budget.

IV. Foreign-Invested Company Establishment Support Service in Vietnam by BKC Law

With a team of seasoned lawyers with extensive experience, solid legal knowledge, and excellent bilingual consultation capabilities, BKC LAW is confident in being one of the best legal partners in the market to support foreign enterprises wishing to commence business operations in Vietnam.

In addition, BKC LAW also provides the following services:

• Litigation

• Post-Incorporation Enterprise Services

• Comprehensive Accounting and Tax Services

• Services for Foreigners in Vietnam