Conditions For Foreign Individuals To Set Up Company In Vietnam

Currently, Vietnam is considered one of the most promising markets, attracting interest from many individuals and foreign organizations looking to set up businesses. So, can foreign individuals set up a company in Vietnam? What does the current legal framework say about this? To provide investors with clearer insights, let’s explore this article by FTA Law to understand the conditions foreign individuals need to meet when establishing a company in Vietnam.

Figure 1.1: Introduction to Company Formation in Vietnam

1. Legal Framework

The establishment of a company in Vietnam by foreign individuals is specifically regulated in key legal documents, including:

• The Investment Law of 2020.

• Decree No. 31/2021/ND-CP issued by the Government, providing detailed guidance on some provisions of the Investment Law. These legal documents clearly outline the rights, obligations, and conditions that foreign investors must comply with when participating in the Vietnamese market.

2. Are Foreign Individuals Considered Foreign Investors?

According to Clause 19, Article 3 of the Investment Law 2020, the term “foreign investor” includes both foreign organizations and individuals who are nationals of foreign countries engaging in investment activities in Vietnam.

Thus, foreign individuals have the right to set up a company without the need to affiliate with or join another organization. This allows individual investors to easily access the market and expand business opportunities in Vietnam without facing significant legal barriers.

3. Market Access Conditions for Foreign Individuals When Setting Up Economic Organization

The Investment Law 2020 clearly stipulates the conditions for market access for foreign investors in Article 9. Accordingly, foreign individuals need to consider the List of Restricted Industries and Professions, which are divided into two main groups:

• Industries and professions that are not allowed to access the market.

• Industries and professions that can access the market but are subject to specific conditions. Restricted industries are typically related to vital sectors such as national security, natural resources, or sectors with a significant impact on the domestic economy. To invest in conditional industries, foreign individuals must meet the criteria set out in various legal documents, including laws, resolutions of the National Assembly, government decrees, and international treaties to which Vietnam is a party.

4. Market Access Scenarios for Foreign Individuals

There are three specific scenarios when a foreign individual wants to establish a company in Vietnam:

• Not allowed to establish a company if the industry falls under the restricted market access list.

• Allowed to establish a company but must meet certain conditions if the industry is on the restricted list.

• Allowed to establish a company just like domestic investors if the industry is not listed in the restricted list. The specific list of industries is detailed in Appendix I of Decree 31/2021/ND-CP. Once the company is granted a Business Registration Certificate or equivalent legal documents, the investor will proceed with the projects outlined in the Investment Registration Certificate.

5. Do Foreign Individuals Need an Investment Registration Certificate to Set Up a Company?

According to Clause 1, Article 22 of the Investment Law 2020, before establishing an economic organization, foreign individuals must meet the following requirements:

• Ensure compliance with market access conditions as outlined in Article 9 of the Investment Law 2020.

• Have a specific investment project and complete the procedure for obtaining an Investment Registration Certificate (with some exceptions such as small and medium-sized creative startups). Therefore, as a general rule, foreign individuals need an Investment Registration Certificate when opening a company in Vietnam, except for enterprises that are exempt according to legal regulations.

6. Investment Forms in Vietnam

The Investment Law 2020 offers several investment forms that foreign individuals and organizations can choose from:

• Establishing an economic organization.

• Contributing capital, purchasing shares, or acquiring equity in a Vietnamese enterprise.

• Executing investment projects.

• Entering into business cooperation contracts (BCC).

• Other investment forms as specified by the Government. Investors can flexibly choose the form that aligns with their business strategy, as long as they comply with legal regulations.

Figure 1.2: Investment Forms Available for Foreigners in Vietnam

7. Regulations on Foreign Capital Investment Activities

Economic organizations with foreign investment capital must comply with the legal conditions and procedures when engaging in investment activities such as establishing new enterprises, contributing capital, purchasing shares, or investing under BCC contracts. If the organization falls into one of the following categories, it will be subject to special management regulations:

• Foreign investors hold more than 50% of the charter capital.

• The majority of the general partners in a partnership company are foreign individuals.

• The enterprise has over 50% of its charter capital owned by foreign organizations. Strict control over these investments helps ensure transparency and safety for the Vietnamese economy.

8. Do Foreign Individuals Need a Work Permit When Set Up a Company in Vietnam?

According to Decree 152/2020/ND-CP, foreign employees are required to have a work permit when working in Vietnam, with some exceptions, such as:

• Being an owner or a member of a limited liability company with a capital of VND 3 billion or more.

• Being a member of the Board of Directors of a joint-stock company with capital of VND 3 billion or more.

• Being an expert or manager transferred within industries committed to the WTO. Other specific cases may also be exempt from the work permit according to legal regulations.

9. Documents Required for Foreign Individuals to Set Up a Company in Vietnam

9.1. Investment Registration Certificate Application

Foreign individuals need to prepare the following documents:

• Investment license application.

• Valid identification (ID card, passport, or CCCD).

• Financial reports or bank balance confirmation to prove financial capacity.

• Investment project proposal and land use requirements (if applicable).

9.2. Business Registration Certificate Application

Foreign individuals need to prepare the following documents:

• Business registration certificate application.

• Company member list.

• Draft company charter.

• Document confirming the legal status of the investor. After preparing the complete application, the enterprise submits it to the Department of Planning & Investment to obtain the business license within 3 to 6 days.

Figure 1.3: Documents Required for Foreigners to Set Up a Company in Vietnam

10. Conclusion:

Foreign individuals setting up a company in Vietnam must comply with the legal regulations, including market access conditions, procedures for obtaining an Investment Registration Certificate, and Business Registration Certificate. Additionally, foreign investors should be aware of the work permit requirements and suitable investment forms that comply with Vietnamese law.

To ensure a smooth company establishment process, foreign individuals should thoroughly review current legal regulations or consult with professional advisory services like FTA Law to receive detailed support, save time, and ensure full compliance.