{"id":32762,"date":"2025-12-10T06:39:56","date_gmt":"2025-12-10T06:39:56","guid":{"rendered":"https:\/\/msadvisory.com\/?p=32762"},"modified":"2026-04-26T18:01:22","modified_gmt":"2026-04-26T18:01:22","slug":"doing-business-in-vietnam","status":"publish","type":"post","link":"https:\/\/msadvisory.com\/doing-business-in-vietnam\/","title":{"rendered":"Doing Business in Vietnam"},"content":{"rendered":"\t\t
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Vietnam, a Southeast Asian nation known for its rich cultural heritage and picturesque landscapes, has rapidly transformed into a dynamic economic hub over the past few decades. With a population surpassing 100 million people and a median age of around 32 years, the country boasts a young and vibrant workforce ready to propel industries forward.<\/p>

Here we look in detail at the pros & cons of Vietnam business expansion and look at your options for doing business in Vietnam<\/strong>.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Overview of Vietnam’s Economy<\/h2>

Vietnam’s economy is characterized by its diversification and integration into the global market. The manufacturing sector is a cornerstone contributing to GDP and export revenues<\/strong>. Electronics manufacturing has surged, with multinational corporations like Samsung and Intel investing heavily in production facilities. Samsung alone accounts for a substantial portion of Vietnam’s export revenue, manufacturing smartphones and electronic components.<\/p>

The agricultural sector remains vital, employing a significant percentage of the workforce. Vietnam is one of the world’s leading exporters of rice, coffee, cashews, and black pepper<\/strong>. Efforts are being made to modernize agriculture by adopting advanced technologies and sustainable practices to increase productivity and value-added<\/a> processing.<\/p>

The services sector, particularly tourism and retail, has expanded due to rising incomes and urbanization. Vietnam attracted over 18 million international tourists annually prior the COVID-19 pandemic, contributing billions to the economy. The government invests in infrastructure to support tourism growth, including airports, roads, and hospitality facilities.<\/p>

Vietnam’s participation in various free trade agreements has enhanced its economic integration. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)<\/a> and the European Union-Vietnam Free Trade Agreement (EVFTA)<\/a> reduce tariffs and open markets, making Vietnam an attractive destination for foreign investors. These agreements facilitate access to markets with high purchasing power, promoting the export of Vietnamese goods and services.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Overview of Vietnam’s Business Regulation<\/h2>

Vietnam has undertaken significant legal reforms to improve its business environment and attract foreign investment. The Law on Investment 2020<\/strong> is a critical piece of legislation<\/a> that outlines the rights and obligations of investors, investment incentives, and prohibited sectors. It classifies business lines into sectors where investment is not permitted, conditional, or encouraged. For instance, foreign investment is not allowed in industries affecting national security or public health, such as certain hazardous chemicals or wildlife exploitation.<\/p>

The Law on Enterprises 2020<\/strong> <\/a>governs the establishment, operation, and dissolution of businesses in Vietnam. It simplifies procedures for business registration and reduces administrative burdens. Companies can choose from various legal forms, including limited liability companies (LLCs), joint-stock companies (JSCs), partnerships, and sole proprietorships. Foreign investors commonly establish LLCs due to their flexibility and limited liability protection.<\/p>

Foreign ownership regulations have been liberalized, allowing up to 100% foreign ownership in many sectors (See Viet An Law Firm<\/a>). However, certain industries, such as telecommunications, banking, and transportation, have ownership caps or require joint ventures with local partners. The Negative List<\/strong>\u00a0specifies sectors where foreign investment is restricted, providing clarity to investors.<\/p>

Taxation in Vietnam includes a standard corporate income tax (CIT) rate of 20%<\/strong>. Preferential 10% or 17% tax rates<\/strong> may apply to encouraged sectors or regions, such as high-tech industries, agricultural processing, or economically challenged areas. Tax incentives may include CIT exemptions for a specific number of years and reductions in subsequent years. Value-added tax (VAT) is applied at 0%, 5%, or 10%, depending on the goods or services.<\/p>

Labor laws are governed by the Labor Code 2019<\/strong><\/a>, which emphasizes protecting employees’ rights while balancing employers’ needs. It covers employment contracts, working hours, overtime, minimum wage, and dispute resolution. The law allows for definite and indefinite-term contracts and stipulates maximum working hours and overtime limits. Employers must contribute to social insurance, health insurance, and unemployment insurance funds on behalf of employees.<\/p>

Intellectual property rights are protected under the Law on Intellectual Property 2005<\/strong>, amended in 2009 and 2019. Vietnam is a member of international treaties like the Paris Convention and the Madrid Protocol, facilitating the protection of IP rights. Enforcement mechanisms exist, but challenges remain in combating counterfeit goods and piracy.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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What Are the Benefits of Doing Business in Vietnam?<\/h2>

One of the primary benefits of operating in Vietnam is its strategic geographic location<\/strong>. Situated along major sea routes, Vietnam provides access to the vast markets of China<\/a>, ASEAN countries, and the broader Asia-Pacific region. Its extensive coastline with deep-water ports like Hai Phong, Da Nang, and Ho Chi Minh City facilitates efficient maritime trade.<\/p>

The competitive labor market<\/strong> is another significant advantage. Vietnam’s labor force is young, with a literacy rate exceeding 95%. Labor costs are relatively low compared to neighboring countries like China and Thailand, making Vietnam an attractive destination for labor-intensive industries. The government invests in education and vocational training to improve workforce skills, particularly in technology and engineering.<\/p>

Vietnam’s economic stability and growth<\/strong> offer a favorable environment for investors. The government maintains prudent fiscal policies, controls inflation, and manages exchange rates to ensure financial resilience. Political stability, under the leadership of the Communist Party, provides consistent economic policies and long-term planning.<\/p>

Government incentives<\/strong> play a crucial role in attracting foreign investment. The Law on Investment provides incentives such as tax holidays, reduced land lease fees, and support for infrastructure development in high-priority sectors. Projects in high-tech industries, research and development, renewable energy, and education may qualify for these incentives.<\/p>

The expanding consumer market<\/strong> presents opportunities in various sectors. With rising incomes and urbanization, demand for consumer goods, automobiles, real estate, healthcare, and education services is increasing. The middle class is projected to grow significantly, enhancing consumption and lifestyle changes.<\/p>

Vietnam’s integration into global trade networks<\/strong> reduces tariff barriers and enhances market access. The EVFTA eliminates tariffs on approximately 99% of goods over ten years, benefiting exporters and importers. These agreements also promote adopting international standards and practices, improving the business environment.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

\n\t\t\t\t\t\t\t\t\t\n \n \n \n \n \n \n \n
Aspect<\/th>\n Benefit \/ Advantage<\/th>\n Potential Challenge or Consideration<\/th>\n <\/tr>\n <\/thead>\n
Foreign Ownership & Legal Entry<\/strong><\/td>\n Ability to establish 100% foreign-owned LLCs in many non-restricted sectors.<\/td>\n Some sectors remain restricted or require joint ventures (e.g. banking, certain regulated industries).<\/td>\n <\/tr>\n
Tax & Incentives<\/strong><\/td>\n Standard corporate income tax of 20%, plus preferential CIT rates, tax holidays, and incentives for encouraged sectors\/regions.<\/td>\n Need to meet sector- and location-specific conditions to qualify; compliance and ongoing requirements apply.<\/td>\n <\/tr>\n
Market Access & Integration<\/strong><\/td>\n Access to ASEAN markets and global trade agreements (via manufacturing\/export potential, favorable demographic workforce, export-oriented economy).<\/td>\n Legal\/regulatory complexity, need to navigate local compliance, variable infrastructure quality outside major urban centres.<\/td>\n <\/tr>\n
Regulatory Reforms<\/strong><\/td>\n The 2020 Investment Law and recent reforms simplify procedures, improve investor protections, and make investment more transparent.<\/td>\n Some regulations still require careful legal review; restricted or conditional sectors remain; due diligence needed.<\/td>\n <\/tr>\n <\/tbody>\n<\/table>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t
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\"Shanghai<\/a><\/figure>
Ready to tap into Vietnam\u2019s growth potential?<\/a><\/div>

MSA can guide you step-by-step \u2014 from entity registration to legal compliance and tax incentives \u2014 so you capitalize on Vietnam\u2019s favorable business environment with confidence\nMessage  \u2192<\/span><\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t

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What Are the Downsides of Doing Business in Vietnam?<\/h2>

Despite the advantages, businesses may face regulatory challenges<\/strong> in Vietnam. Administrative procedures can be complex, involving multiple governmental agencies with overlapping jurisdictions. Obtaining necessary licenses and permits may be time-consuming due to bureaucratic inefficiencies. Additionally, regulations may change frequently, sometimes without adequate notice, requiring businesses to monitor legal developments continuously.<\/p>

Infrastructure gaps<\/strong> pose challenges, particularly outside major urban centers. While cities like Hanoi and Ho Chi Minh City have developed infrastructure, rural areas may lack reliable transportation networks, electricity supply, and internet connectivity. These deficiencies can affect logistics, supply chain management, and market reach.<\/p>

Intellectual property (IP) concerns<\/strong> remain a critical issue. The enforcement of IP rights is improving but still lags behind that of developed countries. Counterfeit goods and piracy are prevalent, undermining brand integrity and profitability for companies reliant on intellectual property.<\/p>

Cultural and language barriers<\/strong> can impact business operations. Understanding Vietnamese business etiquette, negotiation styles, and relationship-building practices is essential. Language differences may require hiring local staff or interpreters to facilitate communication and avoid misunderstandings.<\/p>

Although\u00a0<\/strong>government anti-corruption campa<\/strong>igns<\/b> are addressing corruption and transparency issues<\/span>, they still exist. Transparency International\u2019s Corruption Perceptions Index continues to place Vietnam in the lower half of countries, indicating that corruption can be a significant challenge. Companies may encounter unethical practices at various levels of government, affecting fair competition and increasing operational risks.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Options for International Expansion into Vietnam<\/h2>

Choosing the appropriate entry strategy is crucial for successful international expansion into Vietnam. Businesses must consider legal structures, investment costs, control levels, and compliance requirements.<\/p>

a. Subsidiary Incorporation<\/h3>

Like China, Vietnam allows for the establishment of wholly foreign-owned enterprises (WFOEs). This allows a company to operate independently in Vietnam. The process involves several steps:<\/p>

First, the investor must obtain an Investment Registration Certificate (IRC)<\/strong> from the Department of Planning and Investment (DPI). This certificate approves the investment project and specifies the investment objectives, scale, and duration. The application requires detailed documentation, including the investor’s legal status, financial capacity, project proposal, and environmental impact assessments for certain industries.<\/p>

Next, the investor applies for an Enterprise Registration Certificate (ERC)<\/strong>, establishing the legal entity. This step involves registering the company’s name, charter capital, business lines, and management structure. The company’s charter (articles of association) must comply with the Law on Enterprises.<\/p>

Capital contribution is a critical requirement, with requirements varying by industry. Certain sectors may have minimum capital requirements, and contributions can be made in cash or in kind. The capital must be fully contributed within a specified period, often 90 days from the issuance of the ERC.<\/p>

Compliance obligations include registering for tax codes, obtaining a seal, opening bank accounts, and adhering to accounting standards as per the Vietnamese Accounting System (VAS)<\/strong>. Companies must file regular tax declarations and financial statements and comply with labor regulations if employing staff.<\/p>

While subsidiary incorporation<\/a> provides full operational control and long-term market presence, it involves higher initial costs and a thorough understanding of local laws and compliance requirements.<\/p>

b. Branch Registration<\/h3>

Registering a branch allows a foreign company to conduct business without establishing a separate legal entity<\/a>. The branch operates under the name and authority of the parent company.<\/p>

The foreign company must have been operating for at least five years to register a branch. The application for a Branch Establishment License<\/strong> is submitted to the Ministry of Industry and Trade. The application must include the company’s certificate of incorporation, audited financial statements, and proof of legal operation in its home country.<\/p>

Once approved, the branch must register for tax codes and comply with Vietnamese tax obligations. The branch can conduct commercial activities aligned with the parent company’s business scope, subject to legal restrictions.<\/p>

Operating a branch allows for direct control from the parent company and can simplify accounting since it is not a separate legal entity. However, the parent company bears full liability for the branch’s activities. Additionally, branches are limited to certain sectors and may face restrictions compared to locally incorporated entities.<\/p>

c. Professional Employer Organization (PEO)<\/h3>

A Professional Employer Organization (PEO) enables foreign companies to hire employees in Vietnam through a local partner. The PEO serves as the co-employer for tax and legal purposes<\/a>, while the client company manages the employees’ day-to-day activities.<\/p>

The PEO handles human resources functions, including payroll processing, tax withholding, social insurance contributions, and compliance with labor laws. This arrangement allows companies to enter the market quickly and focus on business development.<\/p>

While using a PEO reduces administrative burdens and provides local expertise, it may limit the company’s control over certain HR policies and benefits structures. It suits companies looking to test the market or with fewer employees.<\/p>

d. Employer of Record (EOR)<\/h3>

An Employer of Record (EOR) is similar to a PEO but takes full legal responsibility for employment, including compliance with labor laws, employment contracts, and terminations. The EOR becomes the official employer<\/a>, mitigating legal risks for the foreign company.<\/p>

The EOR arrangement allows businesses to hire staff quickly, ensuring compliance with complex labor regulations. It is particularly beneficial when navigating Vietnam’s labor laws, which include specific provisions on contract types, probation periods, working hours, and termination procedures.<\/p>

However, reliance on an EOR means the company must trust the EOR’s adherence to legal standards and service quality. It may also restrict the company’s ability to implement certain corporate policies or cultural practices.<\/p>

Often the terms ‘Vietnam PEO’ and ‘Vietnam EOR’ are used interchangeably<\/b>.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Vietnam’s young workforce and strategic trade position make it an attractive alternative to China for manufacturing and sourcing, yet regulatory and operational challenges differ by country. MSA Asia’s full suite of China services<\/a> extends across Southeast Asia to support multi-country strategies. Reach out to our team<\/a> to compare your regional options.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Vietnam, a Southeast Asian nation known for its rich cultural heritage and picturesque landscapes, has rapidly transformed into a dynamic economic hub over the past few decades. With a population surpassing 100 million people and a median age of around 32 years, the country boasts a young and vibrant workforce ready to propel industries forward. […]<\/p>\n","protected":false},"author":11,"featured_media":32849,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"iawp_total_views":213,"footnotes":""},"categories":[404],"tags":[],"class_list":["post-32762","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-vietnam"],"acf":[],"_links":{"self":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/32762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/comments?post=32762"}],"version-history":[{"count":12,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/32762\/revisions"}],"predecessor-version":[{"id":49175,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/32762\/revisions\/49175"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media\/32849"}],"wp:attachment":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media?parent=32762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/categories?post=32762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/tags?post=32762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}