Have questions? Ask us!

The Ultimate Guide To
Employment in Vietnam

Vietnam Facts

Population size: 94,444,200
Currency: Vietnamese dong, ₫
Capital city: Hanoi
Languages spoken: Vietnamese
Ease of Doing Business: 82

Employing in Vietnam: What You Need to Know

Vietnam’s labour laws are heavily employee-friendly, particularly on issues related to the termination or dismissal of employees. As the following only aim to act as a guide in the broadest sense, it is still recommended that professional legal advice be sought when employing in Vietnam.

Key Factors to Consider When Employing in Vietnam

Most employment matters in Vietnam are governed by the Labour Code. For further reading on the Labour Code, please refer here.

Many of the country’s statutory requirements, including those pertaining to leave and vacation, provide for rights to employees who work under “normal” conditions, as well as those under hazardous, strenuous, or dangerous conditions with the latter group having more favourable rights.

  1. Contracts

    Under the Vietnamese Labour Code, there are 3 types of labour contracts:

    • Indefinite term labour contracts (IDT);
    • Definite term labour contracts (DT) (from 12 to 36 months);
    • Less-than-12-months term labour contracts (also known as “seasonal contracts”). However, seasonal contracts may only be signed for tasks of a seasonal nature, except under the following circumstances: when temporary replacement is necessary for an employee who is i) called for military duty, ii) takes maternity leave or iii) is temporarily absent for other reasons.

    All labour contracts must be in writing and contain the following provisions:

    • The work to be performed
    • Hours to be worked and hours to rest
    • Salary/wages
    • Work location
    • Contract duration
    • Occupational safety and hygiene conditions
    • Employee insurance

    For DT contracts, in the case of  expiration of the first contract but the employee continues to work for the employer, both parties must sign a new labour contract within 30 days of its expiry. Otherwise, the first DT labour contract will automatically be regarded as an IDT contract.

    Employers are allowed to sign and extend one DT contract per employees, after which the two parties must enter into an IDT contract.

    All labour contracts must be in compliance with the Vietnamese laws and the collective labour agreement of the relevant company (if there is one). As the standard employment contract template of the Ministry of Labour, Invalids and Social Affairs (DOLISA) does not specific contain provisions designed to protect the interests of employers, foreign companies operating in Vietnam are often advised to create both a specific labour contract and a set of internal rules specifying employee rules and regulations (ILR).

    Employers with more than 10 employees are required to issue and register their ILRs with the DOLISA within 6 months of operation. In the absence of registered ILRs, companies operating in Vietnam will find it very difficult to discipline and dismiss employees.

Employee Entitlements

Information Explanation
Statutory Working Hours ?

A standard working week is equal to 48 hours, comprising six 8-hour working days, although this may be extended by mutual agreement. Employees working in dangerous, noxious, or especially toxic jobs (as defined by DOLISA) will have their working day shortened to 6 or 7 hours.

Working on Sundays ?

No.

Medical Leave ?
An employee is entitled to paid sick leave (75% salary contributed SI), where no hospitalization is necessary
(i) 30days if the employee has been employed for less than 15 years
(ii) 40 days if the employee has been employed for more than 15 years
but less than 30 years
(iii) 60 days if the employee has been employed for more than 30 years
 
Maternity Leave :
180 days (6 months) 100% salary contributed SI.
Annual Leave Accrual Entitlement ?

Employees working for at least 12 months are entitled to at least 12 days of annual leave.

Maternity Leave in Vietnam ?

Female employees are entitled to maternity leave of at least six (6) months. They are also entitled to an allowance equal to 100% of their salary to be paid by the Social Insurance Fund.

Employment Termination

Information Explanation
Severance / Redundancy Pay ?

Employees who have been employed for at least 12 months are entitled to  one month’s salary, plus salary allowance, if there is any, for every year of service with a minimum of two months’ salary.

Termination of Employment ?

Except where labour contracts are mutually terminated or automatically terminate (e.g. through expiry), there are three legal bases whereby the employer can terminate labor contracts:

  • Unilateral termination;
  • Dismissal;
  • Redundancy.

Unilateral Termination

While it is often difficult for an employer to unilaterally terminate an employee, the employer may still do so under the following circumstances:

  • The employee regularly fails to fulfil his contractual duties
  • The employee is ill and no recovery is in sight after having received treatment for a specific period (half of the term for a labour contract for seasonal jobs or a labour contract with a term of less than 12 months; six consecutive months for a labour contract with a term of 12-36 months; and 12 consecutive months for a labour contract with an indefinite term)
  • The employer is forced to make cuts in the production and workforce due to force majeure events such as fire or natural disaster; or
  • The company or organisation ceases operations.

Procedure

Employers are required to serve prior notice to the employee in the case of unilateral termination, with the notice period depending on the type of labour contract and the reason for termination. The employer may pay the employee the salary equivalent in lieu of the notice period as long as the latter so agrees. While the current Labour Code is not clear as to whether the employer has to consult with trade union in exercising its right to unilateral termination of labor contract, doing so would still be advised for the sake of prudence.

Severance Allowance 

Only employees who have been employed for at least 12 months are entitled to severance allowance. The statutory severance allowance is equivalent to a half-month salary, plus salary allowance, if there is any, for each year of service for termination of labor contracts in cases of unilateral termination.

Dismissal 

Dismissal is permitted only when the employee has committed one (or more) of the following acts:

  • The employee steals, embezzles, gambles, deliberately causes injuries, uses drugs at the workplace, discloses trade or technological secrets, infringes employer intellectual property rights, or commits other breaches causing serious damage or threatening to cause particularly serious damage to employer interests or assets;
  • The employee who has previously been disciplined by an extension of wage increase timing, recommits the same offense during the trial period; or recommits the offense after being demoted; or
  •  The employee has been absent for a total of five days per month, or 20 days per year, without any legitimate reason.

Before dismissal, the employer must send at least one written warning to the employee, stating exactly when he has committed each of the above acts. The warning letter must be made in writing and with signature/stamp of the employer, to be acknowledged (not necessarily: accepted) by Employee. In practice it is recommended to have two (2) warning letters, in first of which employee is set a deadline to correct/adjust his wrong behaviour or actions.

Procedure

Firstly, the employer must collect all the evidence of the misconduct and conduct a disciplinary hearing in the presence of the concerned employee and the representative of the Union. The disciplinary hearing must be recorded in written minutes with the signatures of the attendees. After the disciplinary hearing, the employer is only allowed to issue the dismissal decision after consultations with the relevant Union.

In practice, it may take several weeks to months for the dismissal process to be completed. A dismissal will be declared illegal if the employer does not strictly follow the procedures as required by law.

Severance Payment 

No severance payment is available for employees who have been dismissed.

Redundancy

A company may retrench its employees where there is an organisational restructuring or technological change, including

i) partial or complete changes of machinery or equipment or replacement by advanced technological process in order to achieve increased capacity;

ii) changes of product lines or structure of products leading to a reduction in the number of employees required; or

iii) merger or dissolution of a number of departments within the company.

Procedure

In a redundancy scenario, the Labour Code requires the company to retrain the affected employees and to assign him/her to a new job that may be available at the company. If new employment is not available, the employer must give statutory notice by publishing, either internally or externally, a list of employees to be laid off.

While individual notice is not specifically required, the employer must first consult with the appropriate trade union’s executive committee and notify the local authority of the layoff 30 days prior to the termination date.

 

Termination disputes

An individual employee / class of employees may initiate Labour Court proceedings in relation to any labour dispute.

GEO Solutions or DIY Employment in Vietnam?

GEO Solutions or DIY Employment

Companies entering Vietnam must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Vietnam Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Vietnamese entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Outsourcing Employment Through a GEO Employer of Record Service

Using Shield GEO Employer of Record Services in Vietnam

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Vietnam. For companies which intend to employ their staff directly through their incorporated Vietnamese entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Vietnam.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Vietnam.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Vietnam

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Vietnam

– the company needs help with tax, employment, immigration and payroll compliance in Vietnam

Payroll

Payroll Vietnam
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ?

Vietnamese dong, ₫

 
Grossed income Tax Rate (%)
0 - VND 5,000 5
VND 5,001 - 10,000 10
VND 10,001 - 18,000 15
VND 18,001 - 32,000 20
VND 32,000 - 52,000 25
VND 52,001 - 80,000 30
Above VND 80,001 35
Tax Returns Supplied

Yes

Corporate Tax Requirements

The current corporate income tax rate is 22%, which will be reduced to 20% from 2016 onwards. Enterprises operating in the oil and gas and natural resource sectors are subject to taxes of 32% to 50%, depending on the project.

Employers Social Security and statutory contributions

Employers are required to make the following contributions: 18% to social insurance, 3% to health and 1% for unemployment.For more details, please refer to the section on Employment.

Employees Social Security and statutory contributions

Employees are required to make the following contributions: 8% to social insurance, 1.5% to health and 1% for unemployment. Foreign employees are only required to contribute to health insurance. For more details, please refer to the section on Employment.

Payroll and Tax in Vietnam

Foreign companies operating in Vietnam may find it challenging to deal with the complexities of the country's tax system. The primary concerns for a foreign company that needs to comply with tax laws in Vietnam are: Individual income tax (IIT) for employees in Vietnam, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.

Your Payroll Options in Vietnam

Information Explanation
Remote Payroll ?

A remote payroll in Vietnam is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Vietnam. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Vietnam is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Vietnam under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Vietnam may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Vietnam payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Vietnamese employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in India to a GEO, like Shield GEO. This is possible for both foreign workers and Cypriot nationals. This is the easiest, fastest and safest way to payroll staff in India.

Shield GEO manages all aspects of payroll for workers in India, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

Jump to...

Setting up payroll in Vietnam

Information Explanation
Social Security Registration ?

The Social Department provides social security protection to employees and their dependents through social security schemes and by increasing awareness of occupational safety and health for the well being of employees and their families.

Tax Figures

Information Explanation
Corporate Income Tax ?

The current corporate income tax rate is 22%, which will be reduced to 20% from 2016 onwards. Enterprises operating in the oil and gas and natural resource sectors are subject to taxes of 32% to 50%, depending on the project.

Income Tax Rate ?
Grossed income Tax Rate (%)
0 - VND 5,000 5
VND 5,001 - 10,000 10
VND 10,001 - 18,000 15
VND 18,001 - 32,000 20
VND 32,000 - 52,000 25
VND 52,001 - 80,000 30
Above VND 80,001 35
Payroll Tax ?

No

Sales Tax ?

VAT is imposed on the supply of taxable goods and services in Vietnam. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods which they receive (input tax).

The current standard rate of VAT imposed on taxable goods and services is 10%, with reduced rates of 0% (exports) or 5% (essential goods/services).

Withholding Tax ?

Vietnam imposes withholding tax (WHT) on certain classes of income earned by non-residents:-

  • Dividends: No WHT applies unless paid to an individual, where a 5% WHT would apply.
  • Royalties: 10%
  • Interest: 5%
  • Foreign contractor tax on the provision of goods and services from overseas organisations (except for pure trading transactions), which comprises corporate income tax and VAT at a total combined rate: Ranges from 0.1-15%

A reduced rate may be available under an applicable Double Tax Treaty.

Income Tax (Personal Allowance) ?
  • The resident individual that has a labour contract will be subjected to the following rates. Current PIT
    personal relief is 9,000,000VND, and dependent relief is 3,600,000VND
  • The resident individual who has no labour contract will be subjected to the PIT rate of 10%
  • The non-resident individual will be subjected to the PIT rate of 20%
Time to prepare and Pay Taxes ?

540 hours

Time required to start a Business ?

24 days

Payments

Information Explanation
Invoice / Payslips required ?

Yes. Monthly available as pdf.

Minimum Wage ?

Annual (US$)614

Immigration and Work Permits in Vietnam

Generally, obtaining a Vietnamese permit is a lengthy and difficult process due to the numerous documentation requirements. However, the Vietnamese authorities encourage the issue work permits to highly-skilled foreign applicants, namely managers and other high-level executives, skilled technicians and experts.

Use your own company?

All foreign nationals intending to work in Vietnam for longer than 3 months are required to obtain a work permit, unless they fall under certain special categories of exemptions (such as being a co-owner of an LLC, a member of the board of directors of a public joint-stock company, intra-corporate transfer of employees or certain industries etc).

All foreign nationals wishing to work in Vietnam must also be sponsored by a local employer. A foreign company that wishes to employ foreign nationals must first set up its Vietnamese subsidiary / branch / representative office. This Vietnamese entity is then required to apply for the relevant work permit for the employee before the employee commences work in Vietnam. Vietnamese employers are only permitted to legally enter into an employment contract with a foreign national after the Department of Labour, Invalids and Social Affairs (DOLISA) has issued a work permit.

Step 1: Obtaining a pre-approval letter

As part of the Vietnamese government’s plan to limit low quality foreign labour in the employment market, pre-approval of foreign labour usage is now required before submission of a work permit application. To obtain pre-approval, a foreign national is required to meet a certain criteria of skills and qualifications. The three main categories of positions for which foreign nationals may apply for a work permit in Vietnam:

  • Managers, Executives or higher positions
  • Specialists/expert
  • Technician

The Vietnamese sponsor entity is required to provide local labour authorities with written notice at least 30 days in advance of its foreign labour usage plan. The labour authorities then review the request, and make a decision as to whether to grant pre-approval based on the provincial People’s Committee decision. If successful, a pre-approval letter will be issued, which is one of the compulsory documents for the work permit application.

Agency: Local Labour Department

Time: 15 days

Step 2: Filing a work permit application with DOLISA

While the documents required to file an application vary according to the position that the foreign national will hold in Vietnam, his background and residential status etc, they typically include:

  • The completed application form
  • Health certificates issued in the foreigner’s country of residence or Vietnam
  • Copies of qualifications or professional certificates or confirmation of qualifications by authorised offices
  • The judicial profile issued by the authority of the resident country or the municipal office of Justice in Vietnam (if have lived in Vietnam for more than 6 months)
  • 3 colour photos (3x4cm) that have been taken within 1 year

The conditions for work permits vary depending on the categories of foreigners as mentioned above. However, generally all applicants are required to demonstrate that they have full capacity of civil act, are of suitable health certified and have a clean criminal record. In addition, they must also provide proof that they are “managers, executives, experts or technicians”.

Managers and executives must be foreigners directly involved in:

  • Management of companies, including the direction or organization of companies or directly dependent units of such organizations or companies; or
  • Supervision and control of the work of professional staff, other managerial staff, or other supervisors.

Experts must provide:

  • Documents proving that the foreigner holds the requisite academic qualification; or five (5) years’ experience in the field they have been trained in, which is suitable to the work duties in Vietnam; or
  • Confirmation of being experts issued by relevant organisations or authorities, or foreign companies.

Lastly, technicians must provide:

  • Documents proving or certifying that they have been trained on technical field for a duration of at least one (1) year issued by relevant organisations or authorities or foreign companies, and have three (3) years’ of experience in the field in which they have been trained and which are suitable to the work duties in Vietnam.

All documents submitted must be notarised and translated into Vietnamese.

Agency: DOLISA

Time: All applications must be filed at least 15 days before the intended start date of the employee. The work permit application process has an official processing time of 10 working days. However, in practice it is often much longer and companies are advised to apply for the permit at least 2-3 months in advance of the employee’s intended start date.

A work permit can be granted for up to two years but must not exceed the duration stated in the pre- approval letter regarding the use of foreign nationals issued by the respective DOLISA. They are renewable.

 Step 3: Declare Temporary Residence Status

Upon entering Vietnam, the foreign national is required to declare his or her temporary residence status at the local police authority.

The manager of the lodging establishment where the foreign national is residing is required to complete the declaration form and submit it to the local police authority within 12 hours (or within 24 hours if the administrative division is in a remote area) of the foreigner’s arrival at the lodging establishment. The foreign national will then be issued with a temporary residence card.

The duration of the temporary residence card is equal to the duration of the work permit.

Time: 5 business days

Use the Shield GEO Employer of Record Solution?

Once you get in touch with us, one of our consultants will take all the work off your hand, co-ordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Vietnam

Category Description of Visa
Intra-company Transfers

Inter-company transfer of foreign employees may be exempt from work permit requirements.

The requirements to obtain the exemption from the work permit requirement as an internal transfer employee include:

i) being a manager, an executive or a technical expert;
ii) the foreign employer having established a commercial presence in Vietnam and operating in one of 11 service industries under Vietnam’s WTO Commitments (business, communication, construction, distribution, education, environment, finance, health, tourism, entertainment, and transportation industries); and
iii) having been employed by the foreign company at least 12 months prior to internal relocating to Vietnam.

The employer must submit an application dossier requesting the work permit exemption to DOLISA.

Under this arrangement, the foreign national does not sign any local employment contract and remains an employee of the parent entity. However, common difficulties that are encountered for foreign companies wishing to go through this mode is that the foreign national in question is often working for an affiliate, rather than the parent company of the commercial presence in Vietnam, or has not worked for at least 12 months prior to the submission date of the application for a work permit.

If the transfer falls within the exemption category,

However, each individual exemption must be approved by DOLISA.

Setting up a company in Vietnam

When setting up a company you may want to consider these factors:

  1. Business Factors

    Vietnam has stringent bureaucratic requirements with regards to foreign investments, although investors are generally permitted to invest in Vietnamese entities. However, there are various licensing and approval processes required for investments in certain sectors. Once an investment in Vietnam is deemed to be  “foreign”, the (intended) investment projects in Vietnam must obtain an Investment Registration Certificate (IRC).

    Vietnam also reserves the right to restrict investment in certain “sensitive” sectors. The list and conditions for investing in those conditional business lines are all posted on the National Portal for Business Registration. Furthermore, investment in industries that may be harmful to national security and defense,  social safety and order, community health, jeopardise Vietnamese historical traditions, culture and customs and/or damage or destroy natural resources and the environment are prohibited.

    You may also want to consider the following when making your decision :-

    • The industry and type of business that will be conducted
    • Nationality of the headquarters / individuals (s)
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

There are three types of business forms available to foreign companies in Vietnam. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Vietnam and the planned business activity.

When setting up a company in Vietnam, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Vietnam for business purposes. In particular, it looks at common pathways to establishing a business presence in Vietnam, generally through a corporation, branch office or liaison office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Vietnam economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, September 2015 or closest available dates.

Corporation

Incorporation of a company in Vietnam is often a lengthy, difficult and costly process due to the numerous bureaucratic requirements companies are required to comply with.

There are two types of corporations that can be set up:

  • Limited liability corporation
  • Joint-stock company 

The most commonly selected option is the limited liability corporation, however the choice largely depends on the expected activity level in Vietnam.

1.Limited liability corporation (LLC) [cong ty trach nhiem huu han]

A limited-liability company is a legal entity established by its members through capital contributions to the company.  Liability of members is restricted to the extent of their capital contributions.

Investment Capital Requirements

There is no minimum capital requirements for foreign investors intending to establish a LLC in Vietnam. Investors can be corporations or individuals. LLCs may be established by a single investor (single-member LLCs) or multiple investors (multiple member LLCs). Multiple member LLCs consist of at least two (2) stockholders, up to a maximum of 50 members. The regulations for single-member and multiple-member LLCs are mostly similar.

Depending on the ownership structure, LLCs established by foreign investors may take the form of either:

  • A 100% foreign-owned enterprise (where all members are foreign investors); or
  • A foreign-invested joint-venture enterprise between foreign investors and at least one domestic investor.

All charter capital has to be fully paid up within 90 days of establishing the LLC.

Management

The management structure of a LLC comprises of the members’ council, the chairman of the members’ council, the director or general director and a controller. A board of supervisors is also required where the LLC has more than 11 members. The Members’ Council is the highest decision- making body of the LLC and comprises of all capital contributing members.

Accounting/ Auditing requirements

Preparation of financial statements is mandatory for each company, and the balance sheet and profit and loss account of the company have to be filed with the Ministry of Finance, the local tax authorities, Department of Statistics and other local authorities subject  to requirements by the law within ninety days from the end of the financial year.

All foreign-invested business entities must have their annual financial statements audited by an independent auditor operating in Vietnam. Banks, non-banking credit institutions and foreign banks’ branches are required to rotate audit firms after five consecutive years.

In addition, foreign invested enterprises and organisations incorporated and operating in Vietnam reporting in a foreign currency are also required to prepare an additional set of financial statements translated into VND to be submitted to the authorities. These translated financial statements must also be audited.

2. Joint- stock company (JSC)

A joint-stock company is established through a subscription for shares in the company. Under Vietnamese law, only JSCs are permitted to issue shares to the public and may be listed on stock exchanges.  The charter capital of a JSC is divided into shares, and each shareholder holds shares corresponding to the amount of capital contributed to the company. JSCs may either be 100% foreign-owned or may take the form of a joint venture between both foreign and domestic investors.

Investment Capital Requirements

A JSC must have a minimum of three shareholders, with no maximum. Shareholders are generally free to assign their shares to other persons, except in a few cases where restrictions exist.

A JSC’s charter capital equals the the aggregate value of the issued shares that the founding shareholders and the other shareholders have subscribed and recorded in the charter of the JSC.

Management

A JSC’s governance structure comprises of a General Meeting of shareholders, the board of management, the chairman of the board of management and the general director. A Board of Supervisors is also required where the JSC has more than 11 individual shareholders, or if a corporate shareholder holds more than 50% of the shares of the joint-stock company.

The GSM is the highest decision-making body of a JSC, while the Board of Management manages the day to day operations of the JSC. The BOM is required to have at least 3 members, with a maximum of 11. The number of members of the BOM who must reside permanently in Vietnam is stipulated in the JSC’s charter.

Accounting /auditing requirements

Similar to the LLC, JSCs are also required to prepare and submit audited financial statements to the appropriate authorities within ninety days from the end of the financial year.

Steps for Incorporation

Incorporation in Vietnam is generally considered a lengthy and bureaucratic process.

Step 1: Check the proposed company name; obtain a business registration certificate as well as a tax registration certificate from the local business registration office under the Department of Planning and Investment

The first step in the incorporation of a Vietnamese entity is to submit the relevant documents in accordance with Government Decree 43/2010/ND-CP (15 April 2010) on enterprise registration, as amended by Government Decree 05/2013/ND-CP (9 January 2013) (“Decree 43”).  Provided the application file for enterprise registration fully satisfies the conditions for issuance of an enterprise registration certificate, information about that file shall be transferred to the database of the Department General of Taxation (Ministry of Finance). The Department General of Taxation will then create a unique enterprise code number and transfer it to the national database within two working days from the date of receipt of information from the national database of information. The provincial business registration office will then issue it to the enterprise. This code number is both the business registration code number and the tax code number of that enterprise (Article 8 of Decree 43).

Agency: Department of Planning & Investment

Time: 14 days

Cost: VND 200,000

2) Make a company seal

The company obtains a company seal from a seal maker.

Agency: Sealmaker

Time: 8 days

Cost: VND 165,000 – VND 370,000 for bronze seal

3) Registration of the seal-sample at the Police Department

In Vietnam, most business transaction documents must be signed and stamped in order to be considered valid and legal. When registering the seal at the police division, the company representative also has to lodge a copy of the enterprise’s Business and Tax Registration Certificate and also present his or her identity card.

Agency: Local Police Office

Time: 1 day

Cost: VND 50,000

4) Open a bank account

It is worth noting that the minimum deposit to open an account differs by bank. To open the account, applicant will require a bank- issued application form, the company seal, the company’s business registration certificate, and the resolution of the management board on the authorised signatures.

Agency: Bank

Time: 1 day

Cost: No charge

5) Publish the registration contents on the National Business Registration Portal (NBRP)

Under Decree No. 05/2013/NĐ-CP dated 09/01/2013, enterprises are required to post their registration contents on the National Business Registration Portal (NBRP)within 30 working days since the date of the establishment or the amendment registration.

They are also required to pay a publication fee of VND 300,000 as per Circular No. 106/2013/TT-BTC of the Ministry of Finance dated August 9, 2013.

Agency: National Business Registration Portal (NBRP)

Time: 5 days

Cost: VND 300,000

6) Pay business license tax

The business license tax is paid to the tax authority where the enterprise registers its tax reports or through designated commercial banks. This is an annual tax and is paid in the first month of the enterprise’s operating year and in the month it obtains its tax registration certificate and tax code. Companies established during the first 6 months of the year are required to pay the entire annual business license tax and 50% if established in the second half of the year.

Agency: Tax office or commercial bank

Time: 1 day

Cost: VND 1,000,000

7) Buy pre-printed VAT invoices from the Municipal Taxation Department or obtain and print self-printed VAT invoices

All companies are required to use self-printed VAT invoices from 1 January 2011. As such, a newly established enterprise is required to order its VAT Invoice Books from a publisher and register the circulation of its VAT Invoices with the Municipal Taxation Department.

To register for self-printing, the company founders must submit a standard-form along with (a) a sample of the company’s self-printed invoice, including all statutory details; (b) a map showing the location of the company’s office or copy of the lease contract if the premises are leased, certified by the ward commune people’s committee; (c) the general director’s identification card; (d) a copy of the business registration certificate; and (e) and the tax registration certificate as well as a copy.

Agency: Municipal Taxation Department

Time: 10 days

Cost: about VND 200,000 per book

8) Register with the local labour office to declare use of labour (Municipal Department for Labour, Invalids and Social Affairs).

Within 30 days of starting operations, the employer must register all employees and their qualifications with the Labour Office.

Agency: Municipal Department for Labour

Time: 1 day

Cost: no charge

9) Register employees with the Social Insurance Fund for the payment of health insurance and social insurance.

All employees who have contracts for 3 months or longer must be registered with the Social Insurance Fund. The employer must complete a form provided by the Hanoi Social Insurance along with the following information: the employee name and date of birth, salary (as stated in the labour contract), the social insurance book serial number (for employees already issued with those books), a certified copy of the company’s business registration certificate, and a copy of each labour contract.

The Social Insurance Office will issue an insurance registration book for each new employee that was not issued such book by the previous employer within 30 days of receipt of the application. Health insurance certificates are issued during the first month of the year.

Agency: Social Insurance Fund

Time: 1 day, simultaneous with previous procedure

Cost: no charge

10)  Registration for trade union with Vietnam General Confederation of Labour

The employer must register with the local trade union or industry trade union (as defined below) no later than 6 months from the date it starts operations.

The term “trade union” includes (a) provincial or municipal-level confederations of labour under the Vietnam General Confederation of Labour; (b) central-level industry trade unions; (c) trade unions of corporations under the Vietnam General Confederation of Labour; (d) confederations of labour of districts, towns, and provincial cities; (e) local-level industry trade unions, (f) trade unions of processing zones, industrial zones, and high-tech zones; (f) trade unions of corporations; and (g) superior trade unions of other establishments. These trade unions are responsible for establishing a trade union for the company, according to the provisions of the Labour Code, the Law on Trade Unions, and the Charter of the Trade Union of Vietnam, to represent and protect the lawful and legitimate rights and interests of the employees and the labor collective.

If a company trade union is not established within 6 months, the superior trade union shall appoint a provisional executive committee of the trade union.

Agency: Confederation of Labour

Time: 7 days

Cost: no charge

Branch office

Foreign corporations operating in Vietnam can operate as a branch office without the need to incorporate. However, it is generally advisable to incorporate rather than set up a branch office in Vietnam, given the numerous drawbacks associated with having a branch office. However, generally, branches are not a common form of foreign investment given they are only permitted in a few sectors.

As a matter of practice, apart from the culture, education and tourism, banking, tobacco, legal services and airline industry, there have been very few branches established in Vietnam.

A foreign company can establish a branch office in Vietnam provided it has obtained prior approval from the government. The Branch will have to apply and obtain the establishment license, and possess a seal bearing the name of the Branch. The conditions for obtaining a Branch license are quite simple. Normally, a Branch license shall be granted if the foreign entity satisfies the following conditions:

(i) It possesses a legal certificate of business registration, in accordance with the laws of applicant’s country;
(ii) Has been established for a period of not less than 5 years, from the business registration.

The application needs to be filed with the  MoIT ( Ministry of International Trade) Approval is location specific and subject to guidelines issued in this regard. There are eligibility criteria and procedural guidelines for establishment of a branch office by foreign entities in Vietnam.

The branch’s operating license expires five years from the licensing date and is renewable.

Representative Office

A representative office is not an independent legal entity and hence,  may not conduct direct commercial or revenue-generating activities with the execution of contracts, receipt of funds, sale or purchase of goods, or provision of services.

ROs are generally used as a first step for foreign enterprises looking to enter Vietnam. While not permitted to engage directly in revenue-generating activities, ROs are used to provide a wide range of ancillary support to their head offices overseas.

There are four steps that need to fulfilled to set up a representative office and operate legally:
1) Obtain the main license.
2) Submit the chief representative’s income tax and labour declaration.
3) Obtain the operation license.
4) Obtain the representative office stamp


Approval for the establishment of a Vietnamese RO is only granted if the parent company has a certified business registration certificate in its country of incorporation and has been in operation for a minimum of one year since the effective date of incorporation.

An application dossier for a Vietnam representative office license must be submitted to the Provincial Department of Industry and Trade. An RO license, valid for a maximum of five years with an option for renewal, shall be issued within 15 working days of receipt of valid application documents, excluding any time spent amending or supplementing the application.

In general, ROs are allowed to:

  • Act as a liaison office to oversee the business environment;
  • Search for trade and/or investment opportunities and partners;
  • Supervise and assist with the execution of contracts entered into between its head office and Vietnamese partners;
  • Act on behalf of its head office to supervise and direct the implementation of projects in Vietnam.

Others

Besides the corporate forms mentioned above, there are two other ways of doing business in Vietnam available to foreign investors:

1. Business Cooperation Contract (BCC)

A BCC is a cooperation agreement between foreign investors and a minimum of one or more Vietnamese associate with the intention to carry out a specific business activity.

2. Public and Private Partnership Contracts (PPP)

A PPP contract is an investment form executed based on a contract between the government authorities and project companies for infrastructure projects and public services.

1.Business Cooperation Contract (BCC)

BCCs are usually used for short- to medium-term projects lasting five to fifteen years in sectors where participation is conditional or restricted. The use of a BCC does not involve the formation of a new legal entity. Instead, the investors in a BBC generally divide the revenues and/or products arising from a BBC and have unlimited liability for the debts of the BBC.

A coordination board may be set up, if necessary, to ease daily operations, made up of an equal number of representatives nominated by the parties. The foreign partner can also set up an executive office in Vietnam to act as its representative for the duration of its performance of the BCC.

2. Public and Private Partnership Contracts (PPP)

PPP Contracts includes Build-Operate-Transfer (‘BOT’), Build-Transfer (‘BT’), Build-Transfer-Operate (‘BTO’), Build- Own-Operate (‘BOO’), Build-Transfer- Lease (‘BTL’), Build -Lease-Transfer (‘BLT’) and Operate-Manage (O&M) Contracts.

Both public and private investors
are encouraged to engage in PPP Contracts. The rights and obligations of the foreign investor will be dictated by the terms of the PPP contracts and the applicable regulations governing such contracts. Investment sectors include:

  • Transportation infrastructures and relevant services;
  • Lighting systems, clean water supply systems, water drainage systems, water/waste collection and treatment systems, social/resettlement houses, cemeteries;
  • Power plants and power transmission lines;
  • Infrastructures for healthcare, educational and training, cultural,sport and relevant services, offices forgovernment authorities;
  • Infrastructure for commerce, science and technology, hydrometeorology, economic zone, industrial zone, high- tech zone, centralised information technology zone, information technology application;
  • Infrastructure for agriculture and rural development, services for enhancing the correlation of agricultural production with processing and consumption of agricultural products; and
  • Other sectors according to the Prime Minister’s decisions.

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Vietnam, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Vietnam, they must also decide whether they will administer that employment internally or use a Global Employment Organisation to handle payroll and employment responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Vietnam
  • the company needs help with tax, employment, immigration and payroll compliance in Vietnam

The complexity of employment regulations in Vietnam makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Vietnam allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Vietnam.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Vietnam. Read more about outsourced employment through Shield GEO.

  • Vietnam Employer of Record Overview

Vietnam Employer of Record Overview

  • Vietnam Employer of Record Overview

Vietnam

Vietnam

CONTACT US

  • This field is for validation purposes and should be left unchanged.

BACK TO TOP

Join over 1,000 professionals!

Subscribe to our monthly Global Mobility newsletter