Conditions for establishing a software company in Vietnam

Currently, the field of electronic software is developing very strongly in countries around the world in general and Vietnam in particular. High-quality human resources, large markets, and increasing demand are the premises to attract many investors interested in establishing software companies. Viet An Law hereby would like to advise on the conditions for establishing a software company in Vietnam as follows.

Legal basis

• Vietnam’s schedule of service commitments in the WTO;
• Law on Investment 2020;
• Law on Enterprise 2020;
• Law on Information Technology 2006, as amended and supplemented 2017;
• Decree 01/2021/ND-CP on business registration;
• Decree 31/2015/ND-CP detailing and guiding the implementation of several articles of the Investment Law;
• Decree No. 71/2007/ND-CP detailing and guiding the implementation of several articles of the information technology law on the information technology industry;
• Decree 31/2021/ND-CP regulates the list of industries and occupations that limit market access for foreign investors;
• Decree 218/2013/ND-CP detailing and guiding the implementation of the Corporate Income Tax Law.

Market access conditions for foreign investors in software services

For software services, Vietnam has committed in the Schedule of Specific Commitments on Services in the WTO with codes CPC 841 – 845 and CPC 849 (Computer services and related services). Accordingly, the method of cross-border supply and consumption abroad of this service is not restricted in Vietnam.

Regarding commercial presence, conditions include:

• Within 2 years from the date of joining the WTO, 100% of foreign-invested enterprises can only provide services to foreign-invested enterprises in Vietnam;
• After 2009, foreigners are allowed to establish branches and the branch chief must be a permanent resident in Vietnam.

Regarding investment forms, foreign investors can establish foreign-invested companies in two forms:

• Direct investment: Foreign investors establish companies with foreign capital, with no limit on the percentage of capital. This form must meet the conditions in Article 22 of the Investment Law 2020;
• Indirect investment: Foreign investors invest in the form of capital contribution, and purchase shares or stakes in Vietnamese economic organizations that do business in software services. Conditions for foreign investors to establish enterprises in this form are specified in Clause 2, Article 24 of the Investment Law 2020.

Conditions for establishing a software company in Vietnam

In general, software production and business are not conditional business fields. Therefore, establishing a software company will not be too complicated, you just need to meet the conditions for business registration.

Conditions for appropriate business registration

Enterprises must register business lines appropriate to the software field. Some business codes that can be registered include:

• Code 6201: Computer programming;
• Code 6202: Computer consulting and computer system administration;
• Code 6209: Information technology service activities and other services related to computers;
• Code 6311: Data processing, leasing, and related activities;
• Code 4741: Retail sale of computers, peripheral devices, software, and telecommunications equipment in specialized stores;
• Code 631-: Data processing, leasing and related activities; portal.

If doing business in a business related to software, camouflage equipment, audio recording, positioning, and video recording, the business needs to apply for a license to meet security and order conditions to be allowed to do business.

Conditions on company name

• The company name must ensure at least two elements: Type of business and company name;
• The company’s name can be in Vietnamese or foreign language. If the name is in a foreign language, the nameplate must be printed smaller than the Vietnamese name at the headquarters, branches, and business locations and on transaction papers, documents, and publications issued by the company;
• The company name must not be identical or easily confused with companies registered on the nationwide business registration portal.

Conditions on the business address

• Enterprises must have a legal business address. That is, have a valid certificate of ownership and land use rights, have a land lease contract, and rent an office or office by regulations;
• The company address must be located within the territory of Vietnam, with clear and accurate house numbers, alleys, districts, cities…;
• Do not use a fake address as a software company address.

Conditions for business owners

Business owners must ensure they have full civil capacity, and health and are legal citizens, not subject to restrictions on establishing a software business.

Tax conditions

Corporate income tax

Software manufacturing enterprises enjoy corporate income tax (CIT) incentives with the following roadmap:

• From 1^st year to 4^th year: Exemption from corporate income tax;
• From the 5th year to the 13th year (the next 9 years): Receive a 50% reduction in corporate income tax at a tax rate of 10% (pay 5%) ;
• From the 14^th year to the 15^th year (tax rate 10% for 15 years): Tax rate 10%;
• From the 16^th year onwards: Pay normal corporate income tax.

Note: Enterprises doing business in purchasing and selling software are not eligible for the above corporate income tax incentives.

Value Added Tax (VAT)

Computer software, including software products and legal software services, is not subject to VAT. Therefore, software businesses are not subject to this tax.

Procedures for establishing a software company with Vietnamese capital

Step 1: Prepare and submit the business establishment documents

The owner applies to the Department of Planning and Investment where the business is headquartered. Business establishment documents include:

• Application for business registration;
• Company charter;
• List of founding shareholders and shareholders who are foreign investors (for joint stock companies); List of members (for LLCs with multiple members);
• Certified copy of identity card or citizen identification card or passport (if an individual); Establishment decision, enterprise registration certificate or equivalent document and citizen identification card or identity card or passport with authorization document for the capital manager in Vietnam (if an organization) ;
• Certified copy of Investment Registration Certificate issued.

Step 2: Publish business information content

After being granted an Enterprise Registration Certificate, an enterprise must make a public announcement on the National Business Registration Portal and pay fees according to the provisions of law. The published content includes:

• Enterprise Registration Certificate;
• Specific information about business lines;
• List of founding shareholders; List of shareholders who are foreign investors for joint stock companies (if any).
• Publication fee: The request to publish the business registration content and pay the fee to publish the business registration content are made at the time the enterprise submits the business registration application. In case the enterprise is not granted business registration, the enterprise will be refunded the fee for publishing the business registration content.

The publication fee is 100,000 VND according to regulations in Circular 47/2019/TT-BCT.

Step 3: Engrave the business seal

• Seal include stamps made at a seal engraving facility or stamps in the form of digital signatures by the law on electronic transactions;
• The enterprise decides on the type of seal, quantity, form, and content of the seal of the enterprise, branches, representative offices, and other units of the enterprise;
• The management and storage of seals is carried out by the provisions of the company charter or regulations issued by the enterprise, branch, representative office, or other unit of the enterprise with the seal. Enterprises use seals in transactions according to the provisions of law.

Clients who want to receive detailed advice on the conditions for establishing a software company in Vietnam, please contact Viet An Law Firm for our best support!