The 4 things to know before creating a startup in Vietnam
Why create a startup in Vietnam? In what form? How to obtain an investment certificate and registration? Find the answers from our lawyers about the creation of startups in Vietnam.
1/ Why create a startup in Vietnam?
Vietnam is an attractive market on several fronts:
- The Vietnamese population: The population has already reached 90 million, and will likely exceed 100 million in ten years. Nearly 70% of the population is rural today, but it is expected that at least half of the population will be urbanised in 10 years, causing an impact on consumption and the opportunities opened up by the Vietnamese market. The Vietnamese market is indeed driven by the emergence of a middle class that will promote a strong increase in demand.
- The Vietnamese economy: The Vietnamese economy is young and internationalisation allows it to accommodate more and more foreign investors and facilitate the arrival of new businesses. Vietnam’s growth rate was more than 6% over the past 25 years.
- Labour: Vietnam has a large workforce, young and inexpensive. In addition, the cost of living in Vietnam is not very high, which allows for significant savings.
2 / In what form should I create a startup in Vietnam ?
A foreign entrepreneur can create a startup in Vietnam either by creating a company with 100% foreign capital, or in the form of a joint venture. Each of these forms of startups has advantages and disadvantages, but it seems better to opt for one with 100% foreign capital. The joint venture is also now rarely used by would-be startup founders.
Company with 100% foreign capital:
- Advantages: It has great freedom in its operation. There is no need to deal with a Vietnamese partner and there is no interferance by the Vietnamese State in the pursuit of the startup business. The risk of a dissolution of the startup because of a malfunction caused by a misunderstanding between Vietnamese and foreign partners is zero.
- Disadvantages: Lack of a Vietnamese partner hinders access to Vietnam’s natural resources. This absence also makes it difficult to acquire market shares and the establishment of a network in Vietnam. A single outlet can be opened to a company with 100% foreign capital, opening additional outlets is subject to administrative authorisation.
- Advantages: The Vietnamese joint venture ensures better access to the Vietnamese market for foreign startups. This is particularly the case for protected markets that require a thorough understanding of the socio-economic-cultural characteristics of Vietnam. As this is a relatively closed market, a foreign startup becomes accepted as a national company. The stages of formation, evaluation and implementation of the project or obtaining resources controlled by local actors for the foreign investor are facilitated. The joint venture allows to quickly obtain a significant market share.
- Disadvantages: The Vietnamese joint venture is composed of two groups: foreign and Vietnamese. The difference exists in all areas, including the financial situation, culture, language, professional practice, interest, etc. The first risk of the joint venture is therefore that of conflict between the partners. Disagreement may prevent normal operations of the startup or even failure of the project. The other major drawback in the governance of the company is that the joint venture is subject to Vietnamese State control through the Vietnamese partner.
3 / How to obtain a certificate of investment in Vietnam?
Before creating a startup in Vietnam, foreign investors must obtain an investment certificate from the Vietnamese authorities. The declaration of all foreign direct investment is mandatory, the investor is a natural or legal person.
Each business project represents a specific investment that will be subject to requirements and specific regulations established by the Vietnamese government. Significant transactions will be subject to stricter conditions than smaller projects and will be subject to an investment evaluation procedure.
Vietnamese-Attorney.com can assist you in your efforts with the Vietnamese government and ensure the rapid acquisition of these documents that are required to start your business.
4 / How do I register a startup in Vietnam?
The investment certificate/license is an authorisation from the Vietnamese government that allows an economic enterprise with foreign capital to carry out its activities in Vietnam. The registration certificate enables the recording of the business.
Contrary to what one might think, the registration procedure of a joint venture is not necessarily easier than that of a 100% foreign invested company, since everything will depend on the share of capital held by the foreign investor. If this share exceeds 51%, the joint venture will not be considered as a domestic company and the registration process will be the same as that of a company with 100% foreign capital.
Foreign investors wishing to create a foreign startup in Vietnam must submit the case to the planning and investment department where the registered office of the company is located. The file includes generally: investment registration application, a report on the financial capacity of investors, the identity card or passport of investors, the articles of association of the company (in case the investors are from foreign corporations), the documents proving the creditworthiness of the startup, and the concrete investment project.
A foreign startup must first obtain an investment license, and can then proceed with the registration of the company by obtaining a registration certificate.
Vietnamese-Attorney.com can advise you on how to obtain a business investment license and registration in Vietnam. Ask online for a free no-obligation quote.