When launching a new company, it’s common to make a few mistakes, and emerging markets like Vietnam offer particular difficulties regarding company setup. Establishing a business in Vietnam can be challenging. In this article, we’ll talk about some of the most typical errors made by foreign investors looking to launch a business in Vietnam.
Thinking that all sorts of companies require a local partner
It’s a widespread misperception that starting a business in Vietnam requires having a local partner. For some industries, like tourism, this is accurate. Many industries do, however, permit 100% foreign ownership. For instance, manufacturing, trading, IT, and consulting firms don’t require a local partner.
Registering your company as a local company and subsequently assigning ownership
Compared to registering a foreign company, registering a local company is quicker and simpler. For this reason, some agents advise registering your business as a regional entity first and then eventually transferring ownership to you.
Local businesses might be able to register more quickly, but transferring ownership could take as long as registering a foreign company. This approach carries some legal risks as well.
It’s also important to remember that businesses with a majority foreign ownership follow the same procedures as those with 100% foreign ownership. However, in terms of sublicenses and compliance, all companies—domestic or foreign—must adhere to the same standards.
Most business lines in Vietnam do not have a minimum capital requirement. This implies you won’t require a sizable down payment to launch your business. When calculating your projected capital, you must still be reasonable and practical.
The authorities will decide whether your capital satisfies your business’s anticipated needs. For instance, a manufacturing company needs capital for building supplies and equipment. Any company renting a space should also have enough capital to pay the rent for the first six to twelve months. It is optional to increase this amount in the future; it is not a fixed amount.
Not making the capital contribution on time
When calculating your capital, remember that the entire amount must be paid within ninety days of your company’s registration date. You might have to close your business for a few weeks or months if you still need to accomplish this. The company’s founders are prohibited from starting other businesses in Vietnam during this period.
It is optional for your minimum capital to be a monetary contribution. Other assets are also acceptable if you can provide an invoice for the relevant product.
Neglecting VAT invoices
Not every receipt contains an invoice for value-added tax or VAT. Always request VAT invoices on the day of purchase or ahead of time. Many businesses won’t provide VAT invoices if you ask for them after the sale.
All VAT invoices for purchases made before and after the company registration should be kept. These can be documented as business expenses for future reimbursement. Your corporation income tax rate may be lowered by recovering accurate VAT invoices. A contract with landlords, contractors, and the like is also a good idea, as it will allow them to issue VAT invoices once your company has successfully registered.
The accounting must be in order because all businesses with foreign ownership must submit audited financial statements.
Believing that foreign companies are exempt from local laws
When it comes to following local regulations and filing taxes, foreign investors are also prone to make mistakes. A plausible explanation could be a simple lack of awareness or comprehension of the relevant regulations.
Please be aware that companies with foreign ownership typically face more scrutiny. Given this, it is even more crucial that you comprehend all the rules and abide by them. For instance, the quarterly compliance requirements declare and pay value-added, corporate, and personal income taxes.
Being a full or partial business owner does not entitle you to live in Vietnam. Investors who own shares in a single company valued at less than USD 130,000 will no longer be qualified to apply for resident cards as of July 2020. Foreign investors must understand the regulations regarding stay permits.
Postponing tasks until the last minute
Vietnam’s incorporation process is more drawn out than developed nations, similar to many other developing countries. In Vietnam, establishing a legal entity can take up to three months. This covers the time needed to gather and turn in all necessary paperwork.
You can prevent the delay by preparing beforehand for your company registration. Emerhub can assist you in avoiding needless delays by helping you gather the necessary paperwork.