Tips on Starting a Business in Vietnam
Whether you want to start an LLC, JSC, franchise or any other sort of local entity in HCMC, there are myriad problems – from cultural precautions to transparency to taxes – that ultimately drive away the uninitiated.
How do you even begin to enter this exciting, yet wild territory?
LLC or JSC?
For the purposes of brevity, we’ll look at two particular local entities: the jointly-owned foreign-Vietnamese LLC, and the JSC. The following information has been gathered with the aid of the Healy Consultants PLC website.
Joint-venture LLC – There are two shareholders in a joint-venture limited liability company: a foreigner and a local. This entity allows entry into many industries and foreign ownership can range from a maximum of 49% to 99%. These companies are required to have an appointed local legal representative, a capital account at a local bank, and a Foreign Investment Certificate (FIC).
Also required is a registered local address, a certificate of deposit from a local bank for the share capital ($50,000), and yearly audited financial statements.
This entity is best for foreign business owners who want access to partially restricted industries, and when the business owner has a local partner they trust. It takes about three months to set up.
JSC – For a joint stock company, there must be three shareholders of any nationality, although one of them must be appointed as the legal representative of the business. If that representative is a foreigner, they will be required to get a work permit and show proof of at least one year of management experience.
In addition, requirements include a bank certificate as proof of the funds available for investment ($10,000), the opening of a capital account with a local bank, an FIC, and annual submission of audited financial statements.
A JSC is a useful entity for anyone looking to start a business with more than two partners. The lower investment requirements are also a plus. It takes about two months to set up.
Labour and Tax
Kenneth Atkinson, the Executive Chairman at Grant Thornton Vietnam, pointed out two big factors to keep in mind:
The tax regime and labour laws are the two most important things to keep in mind. Both are quite complex. In the context of taxes, structuring your investments from a tax-planning perspective is very important. You have to ask yourself questions like, are you investing from your personal name? Are you investing through a corporate structure? What double tax treaties exist that make it beneficial to invest from, say, Singapore, instead of Hong Kong or the U.K. What is the impact of those regulations if you exit the business through a sale?
A thorough read of the Labour Code (vietnamlegal.com.vn is a useful resource) is a must, and when it comes to local taxes, Grant Thornton’s 2016 Doing Business in Vietnam report has a great overview of tax requirements.
If you’re coming from an Asian country, you’re likely to understand the cultural ways here better than Westerners. Gone are brash negotiations, rapid-fire contracts and cutting to the chase. Vietnam in general is a long-term game that requires patience above all else.
The client meetings at karaoke bars (now slowly being overtaken by beer club meetings), the formal business cards exchange, the contract-over-drinks approach, the sheer politeness of it all – it’s all part of getting to know you as a person. People do business with whom they trust, and foreigners here seem to like these practices enough to uphold the local business culture. As Mr. Atkinson points out: “I actually prefer being handed a business card rather than some American guy flicking it across a table at me.” A final story from Mr. Atkinson:
In 1999, we had a fairly big project with the Asian Development Bank and the Ministry of Finance. I first went to dinner with these guys at the introduction of a Vietnamese friend. We had an enjoyable dinner and a few bottles of wine. Once it ended, my friend said they liked me, but they didn’t know Grant Thornton. So I said to one of the guys, What football team do you support? He said, Manchester United. I said, That’s great because we’re the auditors to Manchester United. Then two bottles of brandy appeared on the table and we stay there for another hour and a half. In the end we actually got the job.