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| Vietnam Company Formation | ||||||||||
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 formation.
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| 1. | Vietnam company formation can be considered a risky option 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.
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| 2. | Confirming the fears of Japanese companies mentioned above, Vietnam has a global reputation for corruption among public officials and politicians which is a negative influence on investors considering Vietnam company formation. To illustrate this, Vietnam ranks as one of the world’s most corrupt nations in the 2009 Corruption Perceptions Index by Transparency International, ranking 120th out of 180 countries. It also ranks as one of the least competitive economies in the World Economic Forum's Global Competitiveness Report 2009-2010, in which it ranks a low 75th place.
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| 3. | Despite several years of sustained economic growth, Vietnam’s economy is vulnerable to the global economic downturn. The Economist Intelligence Unit (EIU) estimate the 2008 GDP to have slowed to 6.1% with inflation being 22.6%. Vietnam is heavily exposed to spiraling fuel costs.
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| 4. | Vietnam only joined the World Trade Organization in 2007. However, improved trade conditions and economic liberalization has already led to a surge of foreign direct investment (FDI) to Vietnam and strong economic growth, which has averaged 7.5% annually over the past decade.
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| 5. | Despite this, Vietnam’s economy remains undeveloped compared to other Asian countries. In the Heritage Organisation’s 2010 Index of Economic Freedom, Vietnam is placed a low 144th in the world across a range of economic criteria, from the freedom of its business, trade, monetary, financial, investment and labour markets.
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| 6. | The challenges of Vietnam company formation for foreign investors are confirmed in Vietnam’s poor 93rd place in the World Bank's Doing Business 2010 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.
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| 7. | When undertaking Vietnam company formation, the majority of foreign investors choose to incorporate a 100% foreign-owned company, thereby retaining full control of the entity. A foreign-owned company requires only one director and one shareholder to complete Vietnam company registration. Neither shareholder nor director need be resident in Vietnam.
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| 8. | 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.
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| Other Information | ||||||||||
Refer to the following links to read more about Vietnam company formation:
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| Contact Us | ||||||||||
For more information on Vietnam company formation, contact email@healyconsultants.com or call us in Singapore at (+65) 6735 0120.
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