VietnamUnderstanding Vietnam Company Foreign Ownership Policies: A Guide for Companies

August 8, 2023by Tetra Consultants0
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  • Vietnam is an attractive destination that is particularly designed for foreign investment. The Vietnamese government is also offering a wide range of exemptions on tax and investment for foreign entities and also for the prioritization of domestic infrastructure improvements along with the expanded real estate available for new development. Any foreign entity needs to register company in Vietnam before obtaining Vietnam company foreign ownership. The country has been a very attractive investment place because of its growing domestic market, young and educated workforce, and stable political system. 
  • Many foreign entities get attracted to Vietnam because of the Vietnamese government’s offering of a range of investment and tax incentives schemes, prioritizing domestic infrastructure improvements health Vietnam to improve its infrastructure economically and to attract many more investors in the future. Moreover, many foreign companies are looking to conduct business in Vietnam they should be aware of the challenges and complexities of the local business environment which can be harmful to the company’s expansion and growth. 
  • The World Bank report on ease of doing business 2020 has ranked Vietnam on 71th rank out of 190 which is a big achievement for a small country who have been through so much. This ranking indicates that there is still an ample amount of improvement in the country’s business environment which can be potentially used and explored. This rank has been increased from 99 in 2013 which is a great achievement for a small country with limited resources and financial instability. The business-friendly policies formulated by the Vietnamese government stand out among the other Asian country’s policies and also encourage a healthy influx of foreign capital in the country. 
  • Many foreign industries are shifting their manufacturing unit from China to Vietnam as a second safer option for investments in Asia. Vietnam has been an attractive location for many industries and business sectors such as manufacturing, product assembly, and other downstream services industry. The country has a positive 2.58% of growth rate in 2021, despite being hit by the COVID-19 pandemic. After to which the country has been reporting a 6% of stable annual growth in 2022 which makes Vietnam’s economy outperform most emerging countries of its scale and attractiveness and offer a solid business climate and vision for its future. 

Vietnam company foreign ownership policies

Ownership

  • Vietnam company foreign ownership policies are restricted or prohibited under domestic law or international treaties. In various sectors, foreign investors are required to comply with the laws and regulations for setting up a joint venture. The laws have made Vietnamese companies subject to a maximum of 49% of the ownership of the company. For public companies, the maximum limit set is 50% or above or the limit can be removed with the consent of the State Securities Commission (SSC). There is a list of 25 business lines in which foreigners are not permitted to invest, including goods and services subject to the state monopoly, press business, and many more. These businesses have been specified under the Decree 31/2021/ND-CP of the government dated 26th March 2021. Foreign ownership is thus, limited to the applicable limit in various industries.

Corporate structure

  • There are certain types of foreign companies’ business structures in Vietnam which include limited liability companies (LLCs), representative offices (ROs), branch offices (BOs), and joint stock companies (JSCs). Before choosing which business structure is to be established it is important for the companies to analyze different aspects of the Vietnam economy and factors such as legal liability, statutory compliances, requirements, and time to be established. These factors can help in analyzing the type of corporate structure which is required by a company to form. The different corporate structure have their own statutory requirement which may vary accordingly and thus, the company requires to research about the corporate structure which the company is choosing is suitable for proper functioning or not. 

Registered Capital

  • The amount of capital required depends on various factors such as the size of the company’s operation, corporate structure chosen, place of business operations, and many more internal and external factors depending on the operations of the companies. Vietnam company’s foreign ownership policies define the amount of registered capital that might be required to establish a business structure depending on the shareholding pattern and the minimum capital required designed by the legislative framework of Vietnam. Majorly the capital required depends on the industry and sector in which the foreign company is going to operate its functions. If the foreign company has got the approval of investing in a company up to a certain amount then the charter capital amount cannot be increased or decreased without the prior approval of the local licensing authority. 

Business activities

  • The Vietnamese local laws have put restrictions on various business activities which cannot be operated by foreign companies. Many Vietnam company’s foreign policies are formulated on the basis of such local laws as the business activities exempted from the local laws. Thus, before location selection, foreign investors and managers need to opt for a comparative approach and identify the best suitable location for the business to be commenced and has potential, and opportunity, and optimally suits their needs. The business activities in some cases may require a rigorous location selection process and this may include market studies, comparison of markets, and due diligence while choosing the right location. The due diligence process includes the understanding of by-laws so that the business does not get affected adversely.   

Foreign investment regulations

  • Vietnam company foreign ownerships need to comply with the market access conditions which are imposed by the legislative framework of the state or the country. The conditions may include ownership limit on the foreign investors, forms and scope of the investment, criteria to be followed by the investors and business partners in order to operate the business, and various other conditions as may be specified under the local state laws which may vary according to the state. Tetra Consultants might be of a great help to you in knowing more about the investment regulations. 

Approval process

  • Vietnam company foreign ownership guidelines specify that the investors are needed to follow the investment guidelines and regulations specified under Vietnamese law. If that foreign investor wants to acquire shares and ownership in a Vietnamese company the foreign investor needs to obtain written approval from this Acquisition Department of Planning and Investment or from the Industrial zone’s management authority. The permission from the authority can enable the investor to become an owner of the Vietnamese company. 

Taxation

  • For getting into a Vietnam company with foreign ownership the foreign investor needs to pay the tax on the earnings from Vietnam. The tax might be applied according to the business structure, number of shares held, earnings made, and the type of industry the business operate in. These factors may decide the tax regime and policy for foreign personnel. Tetra Consultants can help you with the understanding and knowledge of the taxation statute of Vietnam. 

Conclusion

  • The Vietnamese company foreign ownership can be attained through various foreign investment but there present many local laws and regulations which are needed to be followed before investing in the company. The Vietnam company’s foreign ownership is subjected to various legislative frameworks which are directed by central as well as state local laws. There present many laws and regulations which ban foreign investments and companies to enter into that industry or business. The ban has been made in order to promote the domestic economy and domestic businesses. 
  • Contact us to know more about the Vietnam company’s foreign ownership and also for registering a company in Vietnam our team of experts will revert within the next 24 hours. Tetra Consultants are always ready to assist and administer you by helping you to develop, commence, or execute your business in a more hassle-free way. We have dedicated team of staff members who are highly qualified and experienced which can help in hassle-free incorporation. Tetra Consultants also provide various other ancillary services such as offshore company incorporation, corporate bank account opening, nominee director services, offshore financial licenses, international trademark registration, and many more ancillary services.

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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