Vietnam’s booming economy has seen huge numbers of foreign firms enter the market. More often than not, they are looking for a low-cost manufacturing base to make their goods or a rapidly emerging consumer market in which to sell their goods, for both of which Vietnam ranks highly.

Starting a business in Vietnam, however, can be tricky. There can be a lot of red tape and requirements and working with certain authorities, to be frank, can be challenging. That said, firms and entrepreneurs can ease the stress and tension that comes with establishing a business in Vietnam by understanding the process and its nuances ahead of time.

In this light, this article discusses the key steps and procedures that should be understood when starting a business in Vietnam.

Vietnam’s business culture

Vietnamese business culture has changed a lot in a very short amount of time. Whereas there are distinct business customs, cultures, and traditions most Vietnamese understand that foreign business persons may not be familiar with and are unlikely to hold it against an individual that follows a more Western approach to business. In fact, Vietnamese business persons are usually very familiar with Western business culture and tradition, particularly in the south, and therefore the following is simply advice and recommended, but not really necessary.

Introductions

Introductions are possibly the most important part of establishing a business relationship in Vietnam. It is common for phones to go unanswered and emails ignored, even at bigger companies. Instead, Vietnamese business persons, generally, have a strong preference for personal introductions through third parties. 

When meeting a Vietnamese business person for the first time, it is customary to exchange business cards. Handing over a business card using both hands is considered a sign of respect and this is usually followed by a handshake, bit sometimes it happens in reverse order. Vietnamese people are generally pretty loose with the rules.

Communication

Communicating with business partners and associates can often be quite informal. Whereas initial introductions can be difficult via means other than meeting in person, it is quite common once a relationship is established to use text messaging and social media applications. 

In Vietnam, the two keen means of communicating in both life and business are Facebook and a local messaging app called Zalo. The use of emojis is also common at all levels of professional communication–replying with a love heart to good news is common though may be a little surprising to foreign business persons. This is also true of communicating with government departments.

Coffee money

The concept of coffee money is known in many other places around the world as a bribe. This is a normalised practice in Vietnam and can be very effective at greasing the wheels. The processes and procedures for paying coffee money often vary as does the amount to be paid but most Vietnamese workers will very quickly be able to determine exactly what needs to be paid and to whom. Firms, however, should pay particular heed as to how this may appear to persons outside of Vietnam and keep in mind there are laws against these practices in a number of countries that apply even if they are carried out in other parts of the world, the Foreign Corrupt Practices Act in the United States for example.

Getting started

The process of establishing a business in Vietnam can be time-consuming. That said, foreign individuals and firms looking to invest in Vietnam can pre-empt some of the challenges they may run into by considering regulations attached to the business they wish to operate first.

Foreign ownership limits

Before a firm or individual starts the business establishment process, they first need to ensure the business they intend to set up or the sector they intend to invest in allows for foreign ownership.

At least 25 sectors prohibit foreign investment altogether and a further 59 sectors have at least some form of foreign ownership limit or restrictions. These can take the form of a set percentage of the share of ownership a foreign entity can assume and/or additional oversight in the form of approval procedures and documentation. Making sure that the sector a foreign entity intends to invest in is open to foreign investment is a crucial first step.

See: Vietnam’s Foreign Ownership Limits: Quick Guide 2023

Establishment procedures for businesses in Vietnam

Businesses 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.

Wholly foreign-owned businesses in Vietnam

A wholly foreign-owned business 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 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 businesses 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.

Franchises in Vietnam

Franchises in Vietnam are common. There are a number of franchises spread out around the country–KFC and McDonald’s for example. Buying into a franchise is an option for foreign investors but foreigners should be mindful that establishing a business via a franchise has its own governing regulations specific to them.

Those regulations are covered in Decree 35/2006/ND-CP and Decree 120/2011/ND-CP.

In order to open a franchise in Vietnam approval must be granted by the Ministry of Industry and Trade. Said approval requires traders to compile an application including the following:

• A franchise brochure containing the full details of the agreement to be entered into between the franchisor and the franchisee.
• Documentation proving the existence of the foreign trader as a legal entity.
• Documentation outlining the protection titles of any industrial property rights.
• Audited financial statements of the franchisor for the previous year.
• Evidence of sub-franchise approval (if applicable).

According to Decreed 35/2006/ND-CP after submitting a franchising application to either the Ministry of Industry and Trade or the provincial Department of Industry and Trade, applicants should receive a response in five working days.

For a step-by-step technical guide see: How to Form a Company in Vietnam: Technical Guide 2024

Visas for foreign business owners in Vietnam

Foreign business persons who establish a business in Vietnam will likely qualify for an investor visa. The length and cost of an investor visa will depend on the value of the investment.

Vietnam investor visas

Investor visas in Vietnam are known as DT visas. There are four types of investor visas which vary in length depending on the value of the investment.

Investor visas in Vietnam 2023

Source: Law on Entry, Exit, Transit, and Residence of Foreigners in Vietnam

Choosing a location for a business in Vietnam

Choosing the right location for any business can be the difference between success and failure. Firms and individuals looking to establish a business in Vietnam should consider the best market for their products and services. That said, future business proprietors, wherever they choose to establish themselves, will very likely have to sign on to a commercial lease. 

Market research

Market research is essential when choosing a location for a new business in Vietnam. Given the number of businesses in Vietnam’s biggest cities and the propensity for consumers to frequent establishments closest to their home or place of work, the right location depends greatly on the individual establishment and therefore offering broad advice can be difficult.

It should be noted, however, that in both Hanoi and Ho Chi Minh City there are specific enclaves in which the bulk of foreigners live. In Hanoi that area is known as West Lake (Tay Ho) and in Ho Chi Minh City it’s District 1. Foreign businesses may find these areas easier to penetrate with Western products or services. In other areas, businesses may need to double down on products catering more to local tastes.

E-commerce

The e-commerce market in Vietnam is among the fastest growing in the region. Low-cost delivery apps like Grab have made it very cheap and easy to transport goods around Vietnam’s cities. When selecting a location firms should keep in mind that for many products Vietnamese will make their purchases online rather than in-store. A strong online presence can therefore negate at least some of the need for a prime real estate location.

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.

Key regulations for businesses in Vietnam

In Vietnam, almost every type of business is regulated in some shape or form. How it is regulated will depend largely on what type of business it is.

Hospitality businesses

Food safety certificates

Most hospitality businesses will need, at the very least, a food safety certificate. A food safety certificate ensures the proprietor is well aware of hygiene and food safety standards and that their premises meet these standards. These are outlined in the Law on Food Safety.

Businesses in Vietnam that trade without a food safety certificate may be hit with a fine of up to VND 40 million (US$1,662).

Liquor licences

Businesses in Vietnam that wish to sell alcohol will need to apply for a liquor licence. 

The sale and production of alcohol in Vietnam are generally covered by the Alcohol Law. Specific licensing requirements for bars that wish to sell alcohol in Vietnam are outlined in Article 23 of Decree No: 105/2017/ND-CP (with some amendments in Decree 17/2020/ND-CP . New businesses need to apply to the Economic Department or the Economic and Infrastructure Department of the district People’s Committee.

An application for a liquor licence in Vietnam attracts an appraisal fee of VND 1,200,000 (US$49). There is also an issuing fee of VND 200,000 (US$8). This is outlined in Circular 168/2016/TT-BTC.

Tobacco licences

If a business wishes to sell tobacco products, it will need a tobacco licence. These are governed by Decree No: 67/2013/ND-CP with a series of amendments in subsequent decrees.

An application for a licence to sell tobacco in Vietnam attracts an appraisal fee of VND 1,200,000 (US$49). There is also an issuing fee of VND 200,000 (US$8) per Circular 168/2016/TT-BTC. 

Sports businesses

Gym equipment and facilities

Gyms in Vietnam, including their equipment, facilities, and staff are regulated by Circular 10/2018/TT-BVHTTDL and Circular 07/2021/TT-BVHTTDL. This includes technical requirements for facilities and equipment as well as staffing requirements and training.

Hiring staff in Vietnam

Entry-level staff in Vietnam who do not have university degrees or some form of higher education are generally paid around minimum wage. Minimum wages in Vietnam are different for each of one of four key regions. These are outlined in Decree 38/2022/ND-CP. 

Regional minimum wages, current as of June 2022

See also: Minimum Wage in Vietnam 2024: Your Questions Answered 

Wages in key foreign-invested sectors in Vietnam

Wages vary across sectors in Vietnam. That said the General Statistics Office of Vietnam publishes quarterly labor market updates that average wages in several sectors. In the third quarter of 2023, the GSO found that:

• Accommodation and food service workers received an average monthly income of VND 6.9 million or roughly US$280;
• Processing and manufacturing workers received an average monthly wage of VND 7.8 million or US$317; and
• Mining sector workers receive VND 10.4 million or US$423 per month on average

See also: Average Salary in Vietnam 2024: Quick Guide

Intellectual property protection

Protecting intellectual property in Vietnam can be challenging. It is common for local businesses to use brand names and logos of other more well-established businesses. As of 2022, Vietnam remained on the Office of the US Trade Representative’s Special 301 Report which labelled IP enforcement as ‘a serious challenge’ for the burgeoning nation. That said, it is a signatory to most international intellectual property treaties and it has made a number of key reforms in recent years to strengthen IP protections.

Trademarking a business’s intellectual property in Vietnam

With respect to establishing a business, there are a number of items of intellectual property that business owners may want to consider trademarking. A unique product name, a brand name, or a company logo could all be the subject of a trademark application.

Note that Vietnam is a signatory to the Madrid Agreement and therefore, firms with trademarks approved in other countries that are also party to the agreement will automatically have their trademarks recognised in Vietnam.

Likewise, businesses that register a trademark in Vietnam will automatically have protection in the other countries party to the agreement.

Filing a trademark application in Vietnam

In order to apply for a trademark a firm must first complete an application that includes:

• A trademark registration declaration,
• An image of the trademark between 3cm x 3cm and 8cm x 8cm,
• A list of products and services that are to be registered;
• A power of attorney, if necessary, and
• Proof of payment of all necessary fees and charges.

Trademarks in Vietnam are then filed with the Intellectual Property Office of Vietnam (IPVN). It can take 12 to 18 months for a trademark application in Vietnam to be approved.

Fees and taxes for businesses 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 that new business owners in Vietnam 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 specifics of the VAT are outlined in Law No. 13/2008/QH12. Broadly, this is a consumption-based tax on goods and services in Vietnam. It is generally charged at the point of sale for retail businesses. 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)

PIT 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. The PIT is governed by Law No. 04/2007/QH12.

Corporate Income Tax (CIT)

CIT 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. The CIT is governed by Law No. 14/2008/QH12

Getting help starting a business in Vietnam

There are 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 establishing a business in Vietnam. Let us connect you with an expert.

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