Vietnam company formation is challenging for foreign investors, due mainly to  complex and unclear business licensing procedures. That said, Vietnam’s economic growth and reforms attract a steady stream of foreign investors, particularly in  export-orientated manufacturing industries where Vietnam enjoys a significant cost advantage over other Southeast Asian nations. The following is an overview of the Vietnamese economy, and the implications for Vietnam company set up.

The challenges of Vietnam company formation for foreign investors are confirmed in Vietnam’s poor 91st place in the World Bank's Doing Business 2008 Survey. The country fares particularly poorly in the survey for the ability of its legal system to protect investors, as well as the ease with which taxes are paid.

Vietnam is also considered a risky destination for foreign investors. For example, in a recent survey of Japanese firms operating in Vietnam, the Japanese External Trade Organization heard complaints about high utility costs, office rentals and skilled labour. Other issues/complaints include official corruption and bureaucracy, the lack of transparent regulations, and the failure to enforce investor rights.

Confirming the fears of Japanese companies in 4. above, Vietnam has a global reputation for corruption among public officials and politicians, ranking as one of the world’s most corrupt nations in the 2007 Corruption Perceptions Index by Transparency International.

Despite several years of sustained economic growth, Vietnam’s economy is vulnerable to the global economic downturn. In the first half of 2008, economic growth slowed to 6.5% and inflation reached 27%. Vietnam is heavily exposed to spiralling fuel costs.

An enterprise with foreign capital suffers a corporation tax of 25% on profits. However, if the company operates in a sector encouraged by the government, a lower tax rate of 20% is possible. Furthermore, to encourage foreign investment the government may grant exemption from, or reduction of, export and import duties for certain goods. Following Vietnam company formation, all foreign-invested companies are required to submit annual audited financial statements.