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April 17, 2013

Setting up a company in Vietnam

Communism, coffee, code monkeys, pho, alcohol, rooftop bars, barbecues, startups, hackers, designers, young talent, inflation, the Vietnamese Dong, sickle and hammer, rivers, rickshaws and ruby on rails. Saigon.

vietnam llc setting up a company in vietnam

Is Saigon the next silicon valley?

I’m back from Europe (thankfully!) and made a weekend trip to Vietnam. In this missive I’ll describe the expat spots to network in Saigon, why you should start a development shop here, shocking (or not so much) evidence why socialism sucks, and a detailed breakdown of how to start a business in Vietnam.

Xin Chao Saigon

Hello from Ho Chi Minh City, where business opportunities abound and the lifestyle is incredible. Vietnam is not only one of the most exciting emerging economies in Asia, it is a country where it is an absolute blast to live and grow a business.

If you are an entrepreneur looking to bootstrap to profitability in an emerging market, Vietnam may be the best place in the world for you to set up shop. From physical products to startups in the mobile space – HCMC is absolutely crispy right now. If you don’t have a flag planted there, you are missing out.

setting up a company in vietnam
Opera House | French Influence

Saigon is Sizzling

As you walk down the street and run into familiar faces, everyone seems to be doing something special. There isn’t a feeling of lamentation and despair like in the west. In Vietnam – shit is happening, and it is happening now.

Where 10-20 years ago there used to be people outsourcing to China, nowadays the money, the manufacturing and the mindshare are spreading to Vietnam like wildfire.

Designers and Code Monkeys

Vietnam is an excellent design and development shop flag. If you are working on a web or mobile project, this place is hands down – bar none the best I’ve ever seen.

I’ve met with many different design shops, development teams and young startups trying to cut their teeth in a competitive global market – and the low cost of overhead gives them an advantage.

Despite being a socialist economy Vietnam has a good amount of freedom for its citizens at a low level. There is indeed a needless bureaucracy at higher levels (more on this below) but individuals here are eager to learn, and possess a creativity and skill level not found in other more traditional outsourcing locations (I’m looking at you Philippines).

But before we get into how to start a company there, I want to make it obvious why you should. And the reasons are very simple:

Why Start a Business in Vietnam?

  1. The lifestyle
  2. The opportunity

Costs

With a barebones meal for a dollar – or a fine dining experience for under $50, HCMC has something for people of all levels. Grab a serviced apartment for 250 per month and mobile data for $2 a month.

With food and rent at extremely low prices, and quality of life and entertainment to go around – you can easily see why HCMC has become the Global hub for the digital nomad.

Amazing Food

Sitting at a Quan Nuong BBQ looking out over the skyline of Saigon, taking in the warm night air as I sampled frog legs, rabbit, goat and venison piping hot off the grill, I came to the realization that it is very easy to live a good life in Saigon. Everywhere I went, the food was awesome, and the local people were accommodating. I can also recommend L’Usine for a sandwich or coffee, and if you like house music at 11 am – check out Window Cafe. I personally prefer to work during the day but…

The nightlife is hot.

If you like hanging out on tall buildings, check out the rooftop bar Chill or the lounge downtown – Lush bar. There is a plentiful supply of chill out spots in Saigon, but with the national “curfew” (which you wouldn’t know existed) doesn’t allow the crazy clubs of Soi 11 (Bangkok city) or MBS (Singapore City) but the scene is classy if you go to the right places.

Are ya still not sold on the lifestyle? Don’t take it from me, just look at these dudes.

There are lots of people baselining in HCMC, and there is a thriving community of ex-pats selling physical products online, doing consulting work, and other various ventures.

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Chill Bar

Business Backpackers

There is a growing number of Expats making moves… and not all of them are named Chris. Jimmy Hayes is making some great digital nomad gear, leveraging off of Vietnam’s cheap and quality manufacturing.

You can also get some amazing employees for $500-800 a month here – experienced and knowledgeable web and mobile programmers, custom CMS Software and CRM Software galore.

The startup ecosystem

There isn’t any venture capital (except for IDG capital, a few sporadic angels, and Vietnam Investment Group) and Virtual offices/startup spaces are just starting, but there is a buzz of things happening.

For instance, startup weekends, Tech in Asia, and if you talk to American national Tomo and look at Alehop who is crushing it in the social travel space, you can tangibly feel the potential of this place.

Why aren’t YOU here?

The startup ecosystem is just getting started, but if you know where to look, there are a lot of very cool people doing very cool things.

Opportunity in SE Asia

The business opportunity in this emerging market is significant. It is an overlooked, underserved, and not an overly competitive market that will grow significantly in the 21st century. There are over 90M people in an emerging middle class.

Chances are you could do it better, make more money, and incur less cost if you set up in Vietnam. Sure there is a learning curve, but imagine your business with ~15% less tax, ~50% less cost, and 100% more fun living in Vietnam.

Can I really build a Business in Vietnam?

Yes, but you need knowledge of the local market. Go there first and get your bearings. Don’t go in guns blazing you crazy foreigner! Spend time getting to know the people, the culture, the real Saigon… it will pay off in the long run.

What type of business is Right for Vietnam?

Any bootstrapped, emerging markets business that could benefit from

  • Low cost
  • Quality talent pool
  • Emerging markets
  • Mobile or tech oriented
  • Physical product businesses

Who isn’t it right for?

Venture-backed startups. If you are looking to raise capital for your business and swing for the fences, you need to get to Singapore or Silicon Valley. These two are the best places in the world to start venture-backed startups.

Bootstrapping is the only way to go in this market, as incubators, angels and venture capital is non-existent. You can find Pre-seed and growth stage money. Going IPO is reserved for a State-owned enterprise. There is very little foreign investment into tech startups.

————Quick note on OPM and venture-backed startups————-

– Please excuse me as I am an American with a myopic and insular view of the world, and compare everything to America.

Silicon Valley is the best place to startup if you are an American, but foreign entrepreneurs and foreign talent are simply NOT welcome in the land of opportunity. Did you see the recent HB-1 visa fiasco? Pay attention Washington – the economy is calling – let startups hire cheap foreign talent and let skilled foreigners migrate to America to work in Silicon Valley.

Qui Bono?

Why restrict foreigners from entering? The fact that the free market responds by building an office offshore to avoid the burdensome immigration and visa laws should be a signal.

I started this article talking about Vietnam, not America, right? Anyway – speaking of needless bureaucracy and interfering governments… back to Vietnam.

Socialism and You!

Funnily enough – the corporate tax rate is actually significantly lower in Vietnam, and people still complain about it all the time. The ones who pay, anyway.

The standard tax rate is 20%, and most startups and ventures can get special tax breaks for the first few years.

So the tax in Vietnam isn’t great, but it isn’t terrible either. What IS troublesome is the time and difficulty it takes setting up a company in Vietnam, and the very small amount of available accurate information necessary to navigate the endless autocratic processes entrenched in the Socialist Republic of Vietnam.

Are you in the Medical Device / Import Space? –

If not this section may not be interesting, but does demonstrate why socialism sucks.

—————- skip ahead to read about how to start up a company —————

I attended a breakfast thrown by the Australian Chamber of Commerce where Rafi Khan of Family Health spoke on healthcare in Vietnam. He gave some interesting insight into why foreign investment is hamstrung in Vietnam due to over-reaching government.

There is a 10 million dollar minimum investment in a hospital. Say, for instance, you want to import medical equipment.

How to import medical equipment into Vietnam

(taken from Circular guiding the import of medical device from the Ministry of Health)

c) Document for import of medical device

1. Legitimate and valid ISO 13485 or ISO 9001 Certification, the international recognized standard for quality management of the producing countries, firms to the imported medical device.

2. Legitimate and valid certificate of Free Sale (CFS) for imported medical device in the producing countries, or Certificate to foreign Government of FDA, or CE Maker Certificate (original or certified copy in Vietnam or legalized by diplomatic representative offices of Embassy of the Socialist Republic of Vietnam in the producing countries). Minimum information in Certificate of free sale for imported medical devices shall be in accordance with Appendix 3 enclosed with the promulgation of this circular. [if CE or machine exists, there is no need for an original or certified CE Again, except that MOH has no E-Data Bank, so chances are you will need to re-submit.]

3. Legitimate and valid authorization letter of producing firms or legal distributors for the agencies which are allowed to import and distribute the medical devices in Vietnam. (original or certified copy or legalized by diplomatic representative offices or embassy of the Socialist Republic of Vietnam in the producing countries.

4. The catalog of imported medical device (original or copy certified by the import agencies)

5. Technical description of medical devices in Vietnamese according to the Appendix 4 enclosed the promulgation of this certificate.

If you are just skimming, the above is the basic requirements to import medical equipment into Vietnam AFTER you already have a company set up.

Hip Hip Hooray for Socialism!

AND the equipment has to be BRAND NEW; it cannot be used. Want to know the other countries of the world which restrict their citizens from importing Refurbished medical equipment? China (to protect the domestic market) as well as Syria, Egypt, Sudan basically, the safe tourist hotspots of Africa where life is easy (joke).

Thanks, big brother for denying citizens medical equipment that will save their lives protecting citizens.

Okay, enough about importing medical equipment, how can YOU, my dear reader – start a Vietnam LLC?

On to the meat and potatoes: planting a corporation Flag in Vietnam.

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How to set up a Vietnam LLC in HCMC

Steps to legally doing business in the Socialist Republic of Vietnam

(detailed breakdown of the following points below)

  1. A. Company – Company documents including M&AA (memorandum and articles of incorporation) company minutes, and list of members, etc.
  2. B. Investment License – this is permission as a foreigner
  3. C. Tax Registration – with local tax authorities
  4. D. Capitalization – into bank account
  5. E. Employees – Utilize that cheap talent!
  6. F. Newspaper – need to publish publicly
  7. G. Work permits – depending on nature of the business

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A. Company Charter. Getting the Company Documents and incorporation is easy enough, and is a good start. You can use a template. The documents can be made in both English and Vietnamese. I can provide both if you are interested. Most companies set up in Vietnam are LLCs – in that the liability of the owner is limited to the contributed capital. In layman’s terms – the money you put in is what you are putting up for risk. LLCs are oftentimes a superior legal entity to a general partnership.

B. Investment License – this is the important distinction for starting a business in Vietnam as a foreigner. If you are Vietnamese and/or have a Vietnamese partner, this step may not be needed.

  • The government site helps… http://www.dpi.hochiminhcity.gov.vn/invest/html/sta2.html
  • Supposedly you will be able to file online someday. Unfortunately, this isn’t built yet. What do you expect? This isn’t Singapore.
  • The most important part is to be able to prove you have a business record and you are financially capable of starting a Vietnam LLC. This is easily proven with a certified bank statement, stamped and translated into Vietnamese by a legal firm.

C. An accountant will register you for tax. It would also be a good idea to have a secretary, and utilize a secretary firm, unless you enjoy drafting resolutions in Vietnamese. Don’t slack about either – you need to notify the tax office with your Vietnam LLC registration certificate within 7 working days. And also send notice to the investment certificate issuing body on the commencement of the operation of the business within 15 days from the date of issuance of the investment certificate.

D. Bank Cap. Open the bank account and put in that cash. A lawyer can help with this. Money has to go in (then you are free to spend it on your business)

E. Employees If you have employees you are paying a salary, you need to register to eventually pay their social benefits. Alternatively, you can come up with an agreement with them not to pay – this is complicated and unimportant – Accountant can help with this, don’t worry about this yet.

F. Newspaper. Your Vietnam LLC establishment needs to be published in the local newspaper. This is an important step to ensure the validity of your company and avoid problems later.

G. Work Permits. This is an intricate step that some people skip. Some companies have employees working on long term visit pass – even well reputed and established companies such as banks will have foreigners on multiple entry visas.

To do the above, you need documents translated into Vietnamese and numerous trips to a government office where you’ll sit in a queue for hours waiting to hold a paper number (if you are so inclined, the building is called “So Ke hoach dau tu”) This list is not comprehensive, but will get you started in the right direction.

Tinh Tien (bill please)

You can do this all yourself, or you can pay and have it done for you, no worries, no hassle, hands off. Shoot me a message using that green button and I’ll connect you to my lawyer there. Please, only serious inquiries.

I’ve heard accounts from people that it takes over 3 months to set up a company, and even then you are lucky. The official time to wait is at least 45 days – unless you know the right people. Lawyers and accountants, I can connect you with directly.

I’ve talked about this before – your network is your most valuable asset. It doesn’t matter what you know – it matters who you know, and who knows you.

The network you connect to is a huge benefit of joining the Flag Theory community and the group of exciting international entrepreneurs as a PT Member, or if you just want to get started, check out the passport book.

When you get started, you’ll receive a full course on incorporation written by myself and several ex-pat CPAs firms from America. You’ll also get a book on second citizenship and detailed information on countries where you can legally obtain a second passport.

Anyway, I’ve got to grab a flight to Singapore. So tạm biệt Saigon, but don’t worry, its just a temporary separation, lets plan to meet again (hẹn gặp lại).

Regards,

Flag Theory Team

 

P.s. Do I just need setting up a company in Vietnam?

The next level of corporate structure would be to have a dual outsourcing/headquarters set up / where you have a company in the ground in Vietnam and another company abroad which contracts work out, and holds all of the intellectual property rights.

While you must abide by transfer pricing laws if you maintain an arms-length relationship – this is an incredible way to avoid capital controls, increase investor and customer confidence, and legally minimize your taxes while operating from a tax-free environment with more flexibility. Good countries for IP holding include Nevis, Belize, BVI

This is an area which is complex – but important. The value of this is understood by large multinational companies (MNCs) like Google and Facebook who utilize offshore holding companies, but are often overlooked by the entrepreneur.

However – spend some time to get your corporate structure and tax situation right, and it will become the solid foundation upon which to build a profitable enterprise someone else might actually want to buy.

Growing a business to a million dollars in profit is cool. Selling a business for a billion dollars is really cool. My question for you is, would anyone want to buy your business if the corporate structure on which it was built is in question?

Planting a corporate flag in a jurisdiction with strong laws, investment options and asset protection is a diligent and intelligent move. I’ve written about this many times. See these articles on company formation in the best place in the US to start a company: Wyoming

Information and articles on Starting a Business in Asia

P.P.S. If you found this article interesting, Ask yourself this: If this is the stuff I give away for free – imagine the stuff I can’t post publicly, and consider joining the PT community.

Along with the country guides and the incorporation e-course, you’ll gain access to a community of entrepreneurs, accountants and lawyers you’ll benefit from networking with and take a tangible first step at getting a second passport.