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Data centres in Vietnam are becoming more and more common. This is a result of a broader move to digitise the economy as well as several key regulations that require businesses to store the data of Vietnamese users in Vietnam.

Opening a data centre in Vietnam for foreign firms or individuals, however, is not always easy. Not only are there several technical requirements that need to be met, but there are also a broad number of considerations that need to be made–choosing the right location, the right business structure, and finding the right workers, for example.

Understanding the nuances of opening a data centre in Vietnam and the complexities of business establishment procedures in advance of entering the market can therefore be crucial to the success of a new data centre in Vietnam.

Data centres in Vietnam: Overview

The internet is widely available in Vietnam and has become integral to life in one of the world’s fastest-developing economies. Social media, e-commerce, and entertainment services are all being accessed all over Vietnam through home broadband internet connections, smartphones, televisions, and laptops and this is all creating huge volumes of data. That data, however, needs to be stored somewhere and for a long time that has been overseas, however, in recent years the government has moved to try and get that data stored in Vietnam. To do this it has taken a number of initiatives.

No foreign ownership limits on data centres.

Vietnam’s data centre development was given a significant boost last year when a revised Law on Telecommunications was approved. This law effectively opened the market for data centre development to foreign investment by allowing for full foreign ownership of data centres, cloud computing services, and telecommunications OTT services.

Data localisation in Vietnam has been legislated.

Vietnam’s Cybersecurity Law contains provisions that compel foreign firms to store the data of their Vietnamese clients in data centres in Vietnam. Furthermore, Vietnam’s Personal Data Protection Decree dictates that firms looking to transfer the data of Vietnamese clients outside of Vietnam must seek permission from the Personal Data Protection Commission further encouraging firms to keep data stored in Vietnam. Of note, this conflicts with provisions in the CPTPP which states that countries cannot require firms to store their data locally but this is still to play out–Canada in particular has taken issue with this.

Data security in Vietnam is a challenge.

That said, Vietnam is not known for being a particularly data-secure place. In fact, it was the worst impacted by cyber threats in Southeast Asia in 2023, according to Kaspersky. In this light, firms may wish to consider opening their own data centre in Vietnam. This can give them greater ability to take more stringent security protocols that they can tailor to their specific needs. On top of that, this can also improve data access speeds and possibly reduce costs over the long term in that firms will not need to rent data centre space. 

Establishment procedures for data centres in Vietnam

Data centres in Vietnam with foreign ownership are generally established as a limited liability company either as a wholly owned foreign enterprise or a joint venture with a Vietnamese partner. This article provides a broad overview of establishment procedures with a more thorough, detailed technical guide available here: How to Form a Company in Vietnam: Technical Guide 2024

Wholly foreign-owned data centres in Vietnam

A wholly foreign-owned data centre in Vietnam allows a foreign investor complete control over a company’s operations. It is, however, generally more costly and time-consuming.

Specifically, before they can apply to register a business, foreign entrepreneurs who want to set up a wholly foreign-owned company will need to first apply for an Investment Registration Certificate (IRC) which they do not have to do with a local partner.

An IRC is basically required to ensure that foreign firms are not engaging in business in restricted or forbidden business lines. The conditions for approving an IRC are outlined in the Law on Investment which also states that IRCs should be issued in between 5 to 15 days. In reality, however, it is usually around 30 to 45 days.

Joint venture data centres in Vietnam

With a local partner foreign business persons do not need to file for an Investment Registration Certificate, but rather the Vietnamese partner establishes the company and the foreign investor buys a share. In this sense, working with a local business partner can considerably reduce setup costs and application processing times. 

Joint ventures, however, can be risky. A mismatch in work ethics and management styles can cause conflict in the workplace, particularly in cross-cultural settings. For example, whereas in Vietnam it is common to financially penalise staff for arriving late or for using their phone during work hours, in Western countries, this would be unacceptable. Understanding these little nuances of cross-cultural communication, in a joint venture environment, may be crucial to a business’s success.

Using local data centres

A third option worth considering is not setting up a data centre at all. This involves engaging a data centre that already exists on a contractual basis. Most of Vietnam’s key telecommunications firms operate data centres at various locations around the country and they can be relatively cheap. That said, these firms are generally well connected with the authorities–Viettel, for example, is owned by the army–and in this respect, there could be challenges with unauthorised access to user data.

Visas for foreign data centre owners in Vietnam

Foreign business persons who establish a data centre in Vietnam are likely to qualify for investor visas. The length and cost of an investor visa will depend on the value of the investment. There are four categories of investor visas. They are:

Vietnam investor visas

Investor visas in Vietnam are known as DT visas (DT stands for đầu tư which translates to investor). There are four types of investor visas which vary in length depending on the value of the investment.

Investor visas in Vietnam 2023

Source: Vietnam Visas for Doing Business in Vietnam: Quick Read 2024 

Choosing a location for a data centre in Vietnam

Choosing the right location for any business can be the difference between success and failure. Firms and individuals looking to establish a data centre in Vietnam should consider things like infrastructure, tax incentives, and industrial real estate rents to name just a few of the many factors that go into choosing a location for a new data centre. 

Tax incentives

Foreign-invested enterprises in Vietnam have historically been able to receive a number of corporate income tax incentives. The extent of these incentives largely varies depending on several criteria, however, most tech firms generally qualify for a 10 percent CIT rate for the first 15 years. 

That said, many foreign firms also often qualify for a 50 percent CIT reduction for the first four years which can be extended up to 9 years in some circumstances.

Furthermore, it is not unusual for individual provinces to provide their own tax incentives as well and the national government often affords foreign firms additional tax discounts on an ad-hoc basis.

Top-up Tax

All of that said, in 2023, a top-up tax was approved by Vietnam’s National Assembly in response to the OECD’s Global Minimum Tax initiative. This will see multinationals paying less than 15 percent tax, required to make up the difference in Vietnam. This is only a relatively new development and will likely have a substantial impact on the tax incentives outlined below. That said, the government has said that it intends to use the additional tax revenue to provide foreign firms with other benefits. As of December 2023, it was unclear what those alternative benefits might be.

Industrial real estate prices

Industrial real estate prices in Vietnam vary depending on the region. Typically in and around Ho Chi Minh City is the most expensive and then in and around Hanoi. These two cities have substantially more of the infrastructure necessary for a data centre than other parts of the country. They are large population centres with higher rates of education than many other parts of the country. This includes the human resources required to run a data centre.

Industrial land rents in Vietnam, per square metre

Source: CBRE Insights and Research

Commercial leases in Vietnam

The Law on Real Estate Business 2014 regulates leases broadly and this includes commercial leases. A typical lease agreement in Vietnam will have several key features:

• The length of the lease: In Vietnam a commercial lease typically runs for about five years;
• The payment terms: How often rent payments will be made and how. Typically, rent payments are made quarterly, however, they can also sometimes be monthly, every six months, or yearly; and
• The division of responsibilities: who is responsible for what and when between the landlord and the tenant.

These are just the broad strokes but are also the most pivotal components of the agreement. Other aspects of the agreement can generally be negotiated between the landlord and the tenant without too much direction from the real estate law.

Hiring data centre workers in Vietnam

Data centre workers are generally paid much higher than the minimum wage in Vietnam or even the average wage in Vietnam for that matter. This is on the back of much higher demand for workers in the sector yet a limited number of professionals skilled in data centre deployment.

Data centre technician wages in Vietnam

The wages of senior data centre technicians in Vietnam can often be substantially higher than those of entry-level workers. According to Salary Expert, the average wage of a data centre technician in Vietnam is around VND 26.6 million a month or US$1,046.11. A data centre technician with more than 8 years of experience, however, can command a salary of up to VND 32.2 million per month or US$$1,266.35.

Employee entitlements and benefits in Vietnam

A standard work week in Vietnam is 48 hours. An employee can work up to 40 hours of overtime in a month not exceeding 200 hours of overtime in a year. There is, however, an exception for some workers in fields like manufacturing whereby they can work up to 300 hours of overtime in one year.

Workers in Vietnam are entitled to 12 days of annual leave a year. There are also six public holidays in Vietnam that vary in length but all-up give workers an additional 11 days off. 

Employees in Vietnam are also entitled to social and unemployment insurance. Employers generally need to contribute the equivalent of 21.5 percent of a local employee’s wage to these two social safety nets whereas employees contribute 10.5 percent . For foreign employees it is only 20.5 percent and 9.5 percent.

See also: Vietnam’s Labour Law for Foreign Firms in 2024: Quick Read  

Electricity for data centres in Vietnam

Data centres need a huge amount of energy and electricity is relatively cheap in Vietnam. The average world electricity price is about 15.5 US cents per kilowatt-hour, however, electricity in Vietnam runs at about 7.2 US cents per kilowatt-hour. That said, power shortages and blackouts across northern Vietnam in 2023 cost the economy around US$1.4 billion by one World Bank estimate, and this can in large part be attributed to the low retail price of power versus the cost of producing it. In this light, prices will likely rise in the near future.

It’s also worth noting that, though Vietnam has said it intends to be net zero by 2050, the reality is its primary source of electricity is coal power plants. This could be problematic for foreign firms that are conscious of their environmental footprint.

There are, of course, alternatives. Rooftop solar for example is one option and direct power purchase agreements are, though very slowly, moving closer to becoming a reality.

See also: Electricity in Vietnam: Foreign Investor Cheat Sheet 2024 

Regulations for data centres in Vietnam

There are a few key regulations with respect to building and operating data centres in Vietnam. 

The key technical regulations and standards for data centres in Vietnam are outlined in Circular 03/2013/TT-BTTTT. These requirements cover fire safety, lightning protection, grounding of telecommunications stations, and technical infrastructure requirements. 

Furthermore, the Law on Network Security also details requirements and regulations for the import of encryption equipment. Technical equipment imported to develop local data centres may fall into this category. Briefly, this involves completing a dossier and submitting it to the Government Cipher Committee for approval.

Many of the regulations for data centre development in Vietnam are fairly straightforward and line up with standards around the world. Still, foreign firms looking to establish a data centre in Vietnam should make sure they review these regulations in detail and ensure they are compliant.

Fees and taxes for data centres in Vietnam

New businesses will need to register with the General Department of Taxation in order to pay their taxes and ensure they are tax-compliant. There are also a number of recurring fees and taxes in Vietnam that new data centre operators should be aware of.

Business licence fees

Limited liability companies in Vietnam are required to pay a business licence fee annually. This must be paid by January 30. These fees depend on the registered capital of the firm.

Business licence fees, 2023

Source: Decree No. 20/VBHN-BTC

Value Added tax (VAT)

The Value Added Tax in Vietnam is a consumption-based tax on goods and services in Vietnam. It is generally charged at the point of sale for retail businesses–this would really only apply to a data centre that intends to lease space on its servers in Vietnam to third parties. 

There are some exceptional circumstances in which VAT declarations and payments can be made quarterly, however, payments are usually made to the General Department of Taxation each month. VAT is generally charged at 10 percent of the sale price, though for select specialty items, it is only 5 percent, and some items are also exempt.

Personal Income Tax (PIT)

Vietnam’s Personal Income Tax is levied on a worker’s wages in Vietnam. The amount to be collected is on a sliding scale, the more a worker earns the more PIT they pay. Employers are required to collect PIT on an employee’s wages and pay said tax to the General Department of Taxation each month. If approved by the authorities an enterprise may be able to make tax payments quarterly instead.

Corporate Income Tax (CIT)

Corporate Income Tax in Vietnam is the tax a company pays. The standard CIT payment is 20 percent of assessable income, however, on large investments foreign firms have been known to receive tax breaks. This tax is paid yearly though firms can make payments quarterly.

Getting help opening a data centre in Vietnam

There is a broad range of tax agents, lawyers, market research firms, human resource professionals, and all-in-one consultancies in Vietnam that can assist entrepreneurs in opening a data centre in Vietnam→Let us connect you with a market entry expert.

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Last updated

• June 11, 2024: Added section on employee entitlements and benefits in Vietnam