Vietnam Subsidiary Entity Set Up
Vietnam Entity Set Up
Launching a subsidiary overseas will take more time than you imagined and eat up funds in a venture that has no guarantee of success. Vietnam is no exception, with procedural barriers in the way of making a swift and successful international expansion. The World Bank rates Vietnam 70th out of 190 nations for ‘ease of doing businesses, but outside the top 100 in four categories, including paying taxes.
Incoming businesses typically choose a Limited Liability Company (LLC), known as a Wholly Foreign-Owned Enterprise (WFOE).The subsidiary operates within Vietnamese Companies Law and must comply with registration legalities before being allowed to onboard staff and run payroll.
Expanding overseas is a major step. If the move fails, companies face the extra expenditure and stress of closing the business, selling property, and paying off employees. It is easy to stumble while chasing two objectives – advancing your company at home while moving into a new territory, maybe thousands of miles overseas.
How to set up a Vietnam Subsidiary
A Wholly Foreign-Owned Enterprise in Vietnam is typically set up as a Limited Liability Company (LLC) subsidiary and it should be established through capital investment from its founders or ‘members’, as the term shareholder is not used in this company context.
The founders have similar rights and responsibilities to shareholders with their liability restricted to their capital contribution recorded in the LLC’s company charter.
An LLC subsidiary needs to obtain licenses for its respective business activities either before or after registration, but all capital must be lodged within 90 days of the business registration certificate being issued.
Setting up a Wholly Foreign-Owned Enterprise (WFOE) as a limited liability company in Vietnam requires:
- A minimum one ‘member’ shareholder
- One resident director as the company’s legal representative
- A local business bank account
- Approval for a Foreign Investment Certificate (FIC) with a minimum investment, typically
US$ 10,000 - Bank document certifying deposit of capital
- Registered Vietnam address
The company also needs to have applied for:
- An Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI). If the company’s business falls outside World Trade Organization agreements, registration will take longer than the usual month and will involve applying for extra licenses
- A Business Registration Certificate (BRC) / Enterprise Registration Certificate (ERC) from the DPI. The certificate acts as the company’s tax number with the Vietnam Tax Department (Tong cuc Thue) and for mandatory procedures with the Vietnam Social Insurance Agency (SIA) and the Ministry of Labor
Benefits of setting up a Subsidiary in Vietnam
Foreign companies attracted by moving into Vietnam will be moving into one of the world’s fastest-growing economies, but one with administrative bureaucracy which is still catching up. This is a combination that requires expert advice and guidance when setting up a subsidiary, which is the preferred route for entering Vietnam’s thriving, but demanding, economy. Operating as a Wholly Foreign-Owned Enterprise (WFOE), the subsidiary comes under Vietnamese Companies Law.
Operating a subsidiary in Vietnam boosts the foreign parent company’s international profile and emphasizes its global reach. Plus, the foreign company can test the market with a ‘toe in the water’ approach and without major capital investment. Other advantages attaching to a subsidiary:
- The parent company has no responsibility for the subsidiary’s debts or liabilities beyond the initial investment of the shareholders
- Subsidiaries can have a totally different name from the parent company, pursue the same or different business activities and form their own contracts