Set up 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 market and increasing demand are the premise to attract many investors interested in setting up a software company. In the following, Viet An Law Firm would like to summarize the legal provisions on conditions to set up a software company in Vietnam.

Legal basis

• Vietnam’s schedule of commitments on services in the WTO;
• Investment Law 2020;
• Enterprise Law 2020;
• Law on Information Technology 2006, amended and supplemented in 2017;
• Decree 01/2021/ND-CP dated 04/01/2021 on business registration;
• Decree 31/2015/ND-CP dated 26/03/2021 detailing and guiding the implementation of a number of articles of the Law on Investment;
• Decree No. 71/2007/ND-CP dated 03/05/2007 detailing and guiding the implementation of a number of articles of the information technology law on the information technology industry;
• Decree 31/2021/ND-CP stipulates the list of business lines and trades restricted from market access for foreign investors;
• Decree 218/2013/ND-CP dated 26/12/2013 details and guides the implementation of the Law on Corporate Income Tax.

Market access conditions for foreign investors

• 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, for cross-border supply and overseas consumption, this service is not restricted in Vietnam.
• For the form of commercial presence, conditions include:
• Within 2 years from the date of WTO accession, 100% foreign-invested enterprises may only provide services to foreign-invested enterprises in Vietnam;
• After 2009, foreigners are allowed to set up branches and the head of the branch must be a permanent resident in Vietnam.
• Regarding the form of investment, foreign investors can set up foreign-invested companies in 2 forms:
• Direct investment: Foreign investors set up company with foreign capital, unlimited percentage of capital. This form must meet the conditions in Article 22 of the Law on Investment 2020;
• Indirect investment: Foreign investors invest in the form of capital contribution, share purchase, purchase of contributed capital in economic organizations providing software services. Conditions for foreign investors to set up company in this form are specified in Clause 2, Article 24 of the Law on Investment 2020.

Conditions for setting up a software company in Vietnam

In general, software production and business is not a conditional business. Therefore, the establishment of a software company will not be too complicated, just meet the conditions for conducting business registration.

Conditions for appropriate business registration

Enterprises must register business lines suitable to the software field, some business lines that can be registered include:

• Business line 6201: Computer programming;
• Business line 6202: Computer consulting and computer system administration;
• Business line 6209: Information technology and other computer-related services;
• Business line 6311: Data processing, leasing, and related activities;
• Business line 4741: Retail sale of computers, peripherals, software and telecommunications equipment in specialized stores;
• Business line 6312: Data processing, leasing, and related activities; portal.

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

Company name conditions

• The name of the company must ensure at least two elements: Type of business and proper name of the company;
• The name of the company can be Vietnamese or foreign. If the name is in a foreign language, the name plate must be printed smaller than the Vietnamese name at the head office, branches, business locations and on transaction papers, documents and publications issued by the company;
• Company names must not be identical or confusing with companies registered on the business registration portal nationwide.

Conditions on business address

• The enterprise must have a legal business operation address. That is, having valid certificates of ownership, land use rights, having land lease contracts, renting offices and offices in accordance with regulations;
• The company address must be located within the territory of Vietnam, with the number of houses, alleys, districts, cities … clear, precise;
• Don’t use a fake address as a software company address.

Business owner eligibility

Business owners must ensure that they have sufficient civil capacity, health and are legal citizens, not subject to restrictions on setting up software businesses.

Tax conditions

Corporate income tax

Software manufacturers are entitled to corporate income tax (CIT) incentives with the following roadmap:

• From the 1st to the 4th year: Exempt from corporate income tax.
• From the 5th to the 13th year (next 9 years): 50% CIT reduction with 10% tax rate (5% payment);
• From year 14 to year 15 (tax rate of 10% for 15 years): Tax rate of 10%;
• From year 16 onwards: Pay CIT normally.

Note: Software trading enterprises are not eligible to apply the above corporate income tax incentives.

Value Added Tax (VAT)

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

Procedures to set up a Vietnamese capital software company in Vietnam

Step 1: Prepare and submit the business set up dossier

The owner shall submit the application at the Department of Planning and Investment where the enterprise is headquartered. The set of business set up documents includes:

• Application for registration of the enterprise;
• The company’s charter;
• List of founding shareholders and shareholders being foreign investors (for joint-stock companies); List of members (for limited liability companies with two or more members);
• Certified copy of identity card or citizen identification card or passport (if an individual); set up decision, enterprise registration certificate or equivalent document and citizen identity card or identity card or passport with written authorization for the capital manager in Vietnam (if it is an organization);
• A certified copy of the issued Investment Registration Certificate.

Step 2: Disclosure of business information content

After being granted the Certificate of Business Registration, an enterprise must publicly announce it on the National Business Registration Portal and pay fees as prescribed by law. Contents of the announcement include

• Certificate of business registration;
• Specific information about business lines and lines;
• List of founding shareholders; list of shareholders being foreign investors, for joint-stock companies (if any).
• Publication fee: The request for publication of enterprise registration contents and payment of fees for disclosure of enterprise registration contents shall be made at the time the enterprise submits the enterprise registration dossier. In case an enterprise is not granted enterprise registration, the enterprise will be refunded the fee for announcing enterprise registration contents.

The announced fee is VND 100,000 as prescribed in Circular 47/2019/TT-BCT.

Step 3: Engrave the seal of the business

• Seals include seals made at seal engraving set up or seals in the form of digital signatures in accordance with the law on e-transactions;
• The enterprise shall decide 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 retention of the seal shall comply with the provisions of the company’s charter or regulations promulgated by the enterprise, branch, representative office or other unit of the enterprise bearing the seal. Enterprises use seals in transactions in accordance with the provisions of law.

If you want to learn and be consulted in detail about the conditions for setting up a software company, please contact Viet An Law Firm for the best support!