How to set up trading company in Vietnam?

Is setting up a trading company in Vietnam difficult?

Vietnam offers incredible investment opportunities. This is largely due to its efforts to make it easier for foreigners to do business within the country. Foreign business owners can now set up companies that are fully owned by foreign people or entities. They no longer require any previous business experience like in the past. This willingness to allow investments from overseas has been the result of various trade agreements that the Vietnamese authorities have successfully ratified and signed over the years with other trading countries.

It is likely that the business atmosphere in the country will keep improving as the government continues to sign more trade deals and foreign investors continue to invest their money, thus assuring the rest of the world that Vietnam is definitely a safe country to invest in. Some the sectors like the electronics, automotive, and food industry have become especially attractive for foreign investors. However, before they start investing money into their businesses, business owners need to educate themselves on the laws and regulations currently in place in the country. The formalities of setting up new businesses need to be followed to the letter in order to comply with all the relevant local laws. For this purpose, having a local law firm on your side is of great advantage. The process can be complicated and confusing to foreign investors but since the government is already encouraging them to invest, they can expect a lot of help along the way. Yet, a local law firm can be the perfect medium of communication between the government and the foreign investors.

The process can be complicated and confusing to foreign investors but since the government is already encouraging them to invest, they can expect a lot of help along the way.

Moving on to the specific laws that regulate the setting up of a trading setup, the most relevant one is the 2005 Enterprise Law of Vietnam. This law makes the provision for foreign individuals as well as companies to set up and manage their companies within Vietnam. There are specific exceptions to this provision. Similarly, Decree 108/2006/ND-CP focuses on how foreigners can start a hundred percent foreign owned business in the country. Being familiar with these laws is important when setting up a company in Vietnam.

The investor has to carefully consider the benefits his/her company brings to the local people and the country. At the time of applying for a license, he/she needs to explain to the authorities why setting up the business is great for the local economy. It goes without saying that a business that benefits the country will have no problem being accepted. However, investors should expect a four to six month time delay in obtaining their license from the relevant ministry.

What requirements does one need to fulfil to set up a trading company in Vietnam?

Here are the three main requirements you will need to consider.

Minimum capital investment:

While there isn’t any minimum investment amount required by law, investors need to carefully consider their costs and expenses before going ahead with the setting up of their business.

When it comes to determining how much money investors should put in, the starting amount can vary. Initial costs can be big because of the need to identify suppliers and distributors in the country, for which local interpreters and/or law firms or market entry firms may be necessary. 

The business plan

Before an investor establishes the company, he/she has to prepare a business plan that includes the following important points:

  • What the business will do and what methods it will employ to achieve its purpose
  • Market development
  • The resulting effect of the business plan on the country’s social and economic life
  • Intended use of labour

Financial plan

A financial plan needs to be submitted in addition to the business plan. It requires the following information with supporting documentation:

  • Capital representation
  • Funds sources
  • Plans for fundraising
  • Miscellaneous financial documents

Do note that after the first year of establishment of your business, you also need to provide the income statement for that year. This income statement is based on the latest audited financial statement of your company.

How to set up the trading company?

  1. Investment License

The Department of Planning and investment issues a license allowing foreign business owners to start their own trading company in Vietnam. Your first step as a foreign business owner is to obtain this license. Usually, you can expect up to a month of processing time till you acquire this license.

  1. Business registration certificate

Acquiring the Enterprise Registration Certificate is the second step in setting up your trading company. You can get it from the same ministry mentioned above and it usually takes just a week to obtain it. Once you have obtained this certificate, you are required to make the first capital contribution within a period of ninety days.

  1. Trading license

Acquiring the trading license is the third step in the process of setting up your own trading company in Vietnam.

This process is based on three small steps:

  • First, the business owner sends his/her application to the Department of International Trade. He/she then receives an approval to proceed, or a demand for further documents which may be necessary or missing from his/her application.
  • Second, the Department of International Trade will prepare an official letter for you which is then sent to the Ministry of Industry and Trade.
  • Third and finally, the Ministry of Industry and Trade will approve your application for a trading license. Even at this step, they may demand additional documentation, so you have to ensure everything is in order. The license is usually issued within a week.

In case your application is not approved, the business owner will have to go back to the Department of International Trade and provide the necessary documentation so that they can arrange a new official letter for him/her.

  1. Registration of Products/Sale approval

Even though all products do not necessarily require a registration, you need to be careful in ensuring you are only selling the products you are allowed to. The approval is necessary to comply to local norms and regulations as a violation here can put an end to your business plans.

Finally, after the business has acquired all required documents and approvals mentioned above, the business owner of the trading house can start importing products. Vietnam Customs is strong on enforcing local laws and regulations that can be complex and difficult to navigate without expert guidance of an experienced Customs broker. At the very minimum the trader should ensure that all shipping documents are complete and accurate.

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