Establishment of a U.S. capital company in Vietnam

The investment cooperation between Vietnam and the United States has been growing strongly, becoming one of the important pillars in bilateral relations. The Vietnam-US Free Trade Agreement (BTA) has created a solid legal framework, promoting two-way trade and investment exchanges. U.S. businesses have invested in many sectors in Vietnam, from industrial manufacturing such as textiles, footwear, and electronics, to services, information technology, and renewable energy. The presence of US investors not only brings large capital but also transfers modern technology, contributing to improving the competitiveness of Vietnam’s economy. Vietnam, with its young workforce, large domestic market, and aggressive opening policy, has attracted great interest from U.S. investors. In turn, the United States is able to expand its consumption markets, diversify its supply chains, and contribute to regional stability. SO, more and more U.S. investors want to set up a company in Vietnam. Viet An Law would like to guide customers through the article below.

The content of the Vietnam-US Free Trade Agreement (BTA) is a premise for establishing more U.S.-owned companies in Vietnam

The Vietnam-US Free Trade Agreement (BTA) is a bilateral trade agreement of historical significance, marking an important turning point in economic relations between the two countries. This agreement has created a solid legal framework, eliminated tariff and non-tariff barriers, and facilitated trade and investment activities between the two economies.

BTA Highlights

• Removal of tariff barriers: BTA has eliminated most tariffs on goods exported from Vietnam to the United States and vice versa, helping to reduce production costs and increase the competitiveness of products.
• Market expansion: The agreement opens up the opportunity to access the world’s largest consumer market for Vietnamese goods and services, and facilitates U.S. businesses to invest in Vietnam.
• Trade facilitation: The agreement simplifies customs procedures, facilitates the clearance of goods, and shortens transaction time and costs.
• Cooperation in other fields: In addition to trade in goods, BTA also expands cooperation in fields such as services, investment, labor, environment, etc.

Impact of BTA

• Boosting exports: BTA has helped increase Vietnam’s exports to the United States, especially textiles, footwear, and electronics products.
• Investment attraction: The agreement has created favorable conditions for U.S. businesses to invest in Vietnam, especially in the fields of high technology, automobile manufacturing, pharmaceuticals, etc.
• Improving competitiveness: BTA promotes Vietnamese businesses to improve their competitiveness and meet international quality standards.
• Deeper integration: BTA helps Vietnam integrate more deeply into the world economy, enhancing Vietnam’s position in the international arena.

Apply for an investment certificate to establish a U.S.-owned company in Vietnam

Application for an investment certificate of a U.S. company

• Written request for implementation of the investment project;
• An investment project proposal includes the following contents: the investor implementing the project, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, investment schedule, labor demand, proposal for investment incentives, impact assessment, etc socio-economic efficiency of the project;
• Dossier proving the company’s head office: Lease contract, Notarized copy of real estate documents of the lessor: Land use right certificate, Construction permit; if the lessor is a company: It is necessary to provide a copy of the enterprise registration certificate with the function of real estate business;
• Confirmation of account balance corresponding to the capital intended to establish an FDI company is consular legalized and notarized

Place of application: Department of Planning and Investment where the head office is expected to be located.

Processing order: Within 15 days from the date of receipt of a complete and valid dossier, the Department of Planning and Investment will issue an Investment Registration Certificate to the foreign investor. In case of refusal, the Department of Planning and Investment will reply in writing and clearly state the reason.

Establishment of a US-owned company in Vietnam after being granted an investment registration certificate

Dossier of application for a certificate of registration of a U.S.-funded enterprise

• Application for enterprise registration;
• Charter of the enterprise;
• List of members of a limited liability company with two or more members or a list of general partners;
• A notarized copy of the identity card or valid passport of the individual member; a notarized copy of the enterprise registration certificate of the member being an organization; a notarized copy of the valid identity card or passport of the legal representative of that organization;
• The investor’s investment registration certificate has been completed above.

Place of application: Department of Planning and Investment where the enterprise is headquartered.

Duration: 03 – 06 working days.

After the business has a tax identification number, engraving the legal entity seal is an important step to complete the establishment procedures

Opening an investment capital account, contributing registered capital and doing business

Preparation of dossiers for opening investment capital accounts includes:

• Enterprise establishment license or investment registration certificate.
• Investor’s identity document (passport, visa).
• Documents proving the legal origin of the investment capital.

Place to apply: Submit the application at the selected bank.

The bank will conduct the appraisal of the dossier and open an investment capital account for the investor.

After having an investment capital account, the company with Chinese capital contributes capital. Note that enterprises need to fully contribute the registered capital within 90 days from the date of issuance of the business registration certificate.

• Money transfer: Investors transfer money from an overseas account to an investment capital account opened in Vietnam.
• Confirmation: The bank will confirm the transfer of capital contribution.

Some related questions about setting up a U.S. capital company in Vietnam

• What taxes must be paid by foreign-invested companies?

Foreign-invested companies in Vietnam, like domestic enterprises, must fulfill their tax obligations in accordance with the law. Here are the main taxes that these companies usually have to pay:

Corporate income tax (CIT):

• Tax rate: Normally 20%. However, there may be preferential tax rates depending on the business sector, investment location, and special preferential policies.
• Taxable objects: After-tax profits of enterprises.

Value Added Tax (VAT):

• Tax rate: Depending on the type of goods, services and customers, it can be 10% or 0%.
• Taxable objects: Added value in the process of production and trading of goods and services.

Personal Income Tax:

• Applies to: Income of foreigners working at the company.
• Tax rate: Depends on residency and income level.

Natural resource tax:

• Applies to: Companies exploiting and using natural resources.
• Tax rate: Depends on the type of resource and the volume of mining.

Excise Tax:

• Applicable to: Products and services on the list of goods subject to excise tax (e.g. wine, beer, tobacco, petrol and oil).
• Tax rate: Depends on each type of goods.

Land Tax:

• Applicable to: Land used for business purposes.
• Tax rate: Depending on the type of land, location and purpose of use.
• What are the forms of establishing a foreign-invested company in Vietnam?

One Member Limited Liability Company:

• Characteristics: The enterprise has only one member, which can be an individual or a foreign legal entity.
• Advantages: The establishment procedure is simple, fast, suitable for small and medium-sized projects.
• Cons: The investor is liable for unlimited liabilities of the company within the scope of his assets.

Limited liability company with two or more members:

• Characteristics: Enterprises have two or more members, can be Vietnamese or foreign individuals or legal entities.
• Advantages: Divide rights and responsibilities among members, increase the stability of the company.
• Cons: The incorporation procedure is more complicated than that of a one-member limited liability company.

Joint Stock Company:

• Characteristics: Charter capital is divided into many shares, which can be issued to the public to raise capital.
• Advantages: Easy to raise capital, with high liquidity.
• Disadvantages: The establishment procedure is complicated, requiring a lot of capital.

Partnership:

• Characteristics: All members are infinitely liable for the company’s debts.
• Advantages: Suitable for family businesses or low-risk projects.
• Cons: Less common than other forms.

Other forms of investment:

• Investment to contribute capital, buy shares: Foreign investors can buy shares of companies established in Vietnam.
• Implementation of investment projects: Investors implement investment projects under contracts with state agencies or Vietnamese enterprises.

Any requirement for establishing a company in Vietnam, please contact Viet An Law for the best advice!