Introduction
Vietnam has indeed become one of Asia’s most vibrant markets, characterized by its political stability, strategic geographical location, youthful and dynamic workforce, and rapidly growing economy. For businesses aiming to expand their presence in Asia, setting up a subsidiary company in Vietnam presents a strategic opportunity with numerous long-term advantages.
Establishing a subsidiary allows companies to directly access the local market, adapt swiftly to market changes, and operate independently from the parent company. This independence is crucial for tailoring business strategies to local conditions and ensuring compliance with Vietnamese regulations.
The process of setting up a subsidiary in Vietnam is relatively straightforward and can be completed within a few weeks to several months, depending on various factors such as industry requirements and bureaucratic processes. This makes Vietnam an attractive destination for businesses eager to start operations swiftly and capitalize on the country’s economic potential.
4 Perks of a Subsidiary Company in Vietnam
1. Sustained Economic Growth and Stability
2. Strategic Geographical Advantage
3. Attractive Investment Climate
4. Young and Skilled Workforce
Sustained Economic Growth and Stability
Vietnam has demonstrated remarkable economic growth over the past decade, driven by robust exports, increasing domestic consumption, and substantial foreign investment. The World Bank forecasts that Vietnam’s GDP will grow in 2025, reflecting the country’s strong economic fundamentals and resilience.
This growth is further supported by Vietnam’s strategic economic policies and efforts to integrate more deeply into the global economy, enhancing its competitiveness and attractiveness to international investors.
Strategic Geographical Advantage
Vietnam’s strategic location, with access to major shipping routes and proximity to China and other ASEAN countries, positions it as a pivotal hub for regional trade and logistics. This advantageous location facilitates efficient trade and strengthens Vietnam’s role in the global supply chain.
Additionally, Vietnam’s ongoing investments in infrastructure, such as ports and highways, are enhancing its logistical capabilities, making it an even more attractive destination for businesses looking to optimize their supply chains.
Attractive Investment Climate
Vietnam offers a favorable environment for foreign investment, characterized by attractive tax incentives, well-developed industrial zones, and streamlined regulations. These measures are particularly beneficial in key sectors such as manufacturing, information technology, and renewable energy, making Vietnam an appealing destination for investors.
The government’s proactive approach to improving the business environment, including reducing bureaucratic hurdles and enhancing transparency, further boosts investor confidence and encourages long-term commitments.
Young and Skilled Workforce
The country benefits from a large, youthful population with a growing number of graduates in engineering, business, and technology-related fields. This young and skilled workforce is crucial for supporting Vietnam’s industrial and technological advancements, ensuring a steady supply of talent for various industries.
Moreover, Vietnam is investing in education and vocational training programs to enhance the skills of its workforce, aligning them with the demands of modern industries and emerging technologies, thereby fostering innovation and productivity.
Understanding Subsidiary Companies
A subsidiary in Vietnam is legally distinct from its parent company. This separation allows the subsidiary to function autonomously, enabling it to enter into contracts, hire employees, and manage its own liabilities. Such a structure provides significant legal protection for the parent company, as the subsidiary is solely responsible for its debts and obligations.
Additionally, this setup offers operational flexibility, allowing foreign investors to tailor their business strategies to the local market conditions and regulatory environment. Establishing a subsidiary in Vietnam can thus be a strategic move for businesses looking to expand their presence in the region while minimizing risk and maximizing control over their operations.
6 Essential Steps to Establishing a Subsidiary Company in Vietnam
1.Selecting the Appropriate Legal Structure
2. Compiling Necessary Documentation
3. Securing the Investment Registration Certificate (IRC)
4. Obtaining the Enterprise Registration Certificate (ERC)
5. Establishing Tax and Banking Arrangements
6. Securing Office Space and Hiring Employees
Selecting the Appropriate Legal Structure
When establishing a subsidiary in Vietnam, the most prevalent structure is a 100% Foreign-Owned Enterprise (FOE) configured as a Limited Liability Company (LLC). This setup offers the advantage of complete control over the subsidiary while ensuring limited liability for the parent company. This structure is particularly favored due to its flexibility and the protection it affords to the parent company’s assets.
Compiling Necessary Documentation
Setting up a subsidiary involves carefully preparing essential documents. These typically include the incorporation documents of the parent company, the charter of the new subsidiary, and appointment letters for the legal representatives. Obtaining an IRC and ERC is essential for business setup. These documents collectively establish the legal foundation for the subsidiary’s operations in Vietnam.
Securing the Investment Registration Certificate (IRC)
The Investment Registration Certificate (IRC) authorizes a subsidiary to invest in Vietnam. The application process for the IRC generally takes around 15 working days. This certificate is a prerequisite for further steps in the establishment process, ensuring that the subsidiary’s investment activities are legally recognized.
Obtaining the Enterprise Registration Certificate (ERC)
Once the IRC is approved, the next step is to apply for the ERC, which legally recognizes the subsidiary in Vietnam. This certificate is crucial as it formally registers the subsidiary with the Vietnamese authorities, allowing it to commence business operations.
Establishing Tax and Banking Arrangements
To comply with Vietnamese regulations, the subsidiary must be registered for various taxes, including value-added tax (VAT) and corporate income tax. Additionally, opening a local bank account is necessary for managing the subsidiary’s financial transactions. These steps help the subsidiary stay compliant and maintain accurate financial records.
Securing Office Space and Hiring Employees
To operate legally, a subsidiary is required to have a physical office address in Vietnam. This requirement is not only a legal obligation but also facilitates the subsidiary’s operations. Furthermore, the subsidiary must adhere to local labor laws when hiring employees, ensuring compliance with regulations regarding employment contracts, working conditions, and employee rights. This step is crucial for creating a stable and compliant business presence in Vietnam.
3 Critical Factors to Consider When Setting Up a Business in Vietnam
Capital
In Vietnam, while there is no fixed minimum capital requirement for establishing a company, the capital should be realistic and adequate to support the intended scope of operations. This ensures that the business can effectively meet its operational needs and comply with regulatory requirements.
Compliance
Adhering to local regulations is essential for businesses in Vietnam. Companies must regularly file tax returns, submit labor reports, and undergo audits to maintain transparency and accountability, ensuring compliance with Vietnamese legal standards.
Support
Partnering with local legal or consulting firms can greatly expedite the company establishment process. These firms have extensive knowledge of local regulations and procedures, helping businesses navigate the complexities of setting up operations in Vietnam. Their expertise provides valuable support, making the process smoother and more efficient.
What Sets Premia TNC Vietnam Apart
Premia TNC Vietnam offers a seamless, one-stop solution for businesses expanding into Vietnam through a Singapore holding company for a smoother venture further into Southeast Asian markets. With deep expertise and a strong presence in both jurisdictions, we manage all aspects of the setup, from company formation and registration to legal and tax advisory, ensuring full compliance and operational efficiency.
Clients benefit from numerous strategic advantages, including tax savings and no withholding tax on dividends. Our integrated services and local networks in Vietnam and Singapore provide valuable market insights and cost-effective support, enabling smooth cross-border operations and long-term business success.
To Conclude
Vietnam continuously attracts companies of all sizes. Setting up a subsidiary in Vietnam opens up a dynamic local market and serves as a launchpad for regional expansion. Whether your focus is on manufacturing, technology, or services, Vietnam provides a promising and cost-effective foundation for growth in Asia.
Frequently Asked Questions
1. How do branches and subsidiaries differ in Vietnam?
A subsidiary functions as a separate legal entity with its own obligations and liabilities, whereas a branch is considered an extension of the parent company and remains legally accountable under the parent’s company.
2. Is it a mandatory to have a local partner to set up a subsidiary?
No, most industries allow 100% foreign ownership. However, certain sectors like logistics, advertising, or education may require a joint venture with a local partner.
3. How long does it take to establish a subsidiary in Vietnam?
The process typically takes 30–45 working days. This includes around 15 days to obtain the Investment Registration Certificate (IRC), 5–10 days to receive the Enterprise Registration Certificate (ERC), plus additional time for tax registration, bank account opening, and office setup.
4. What is the corporate tax rate for subsidiaries?
The standard corporate income tax rate is 20%. Certain industries or zones may offer reduced rates or tax holidays.
5. Can a subsidiary remit profits to its parent company?
Yes, once tax obligations are fulfilled and an annual audit is completed, profits can be legally remitted under Vietnam’s foreign exchange regulations.
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