Foreign investors can establish joint ventures with both with foreign and local entities. It is common for foreign investors to set up joint ventures with local companies to comply with foreign ownership regulations. In this article, we will detail how to set up a joint venture in Vietnam with a local company.
We will list which industries require local partners in Vietnam. We will also outline the process to register this type of company. Additionally, you will find some tips for protecting your investment when setting up a joint venture.
Why form a joint venture in Vietnam?
A joint venture is a business entity established with a partner. There are two main reasons to form a joint venture in Vietnam. The first is to create a mutually beneficial partnership between two parties.
Another reason foreign investors set up this type of company is to comply with foreign ownership regulations in Vietnam. In business lines that limit foreign ownership, you will need a local partner.
Business Lines with Limited Foreign Ownership in Vietnam
Not all business lines are open to 100% foreign ownership. For some business lines, you must have a local partner. If you plan on establishing a company in the following business lines, you will need to set up a joint venture with a local entity:
- Advertising services
- Services incidental to agriculture, hunting, and forestry
- Telecommunication services
- Travel agencies and tour operator services
- Entertainment services
- Electronic game business
- Container handling services
- Customs clearance services
- Internal waterways transport, rail and road transport services
- Services auxiliary to all modes of transport
Who can set up a joint venture in Vietnam?
Note that a joint venture requires the participation of two business entities. For some business lines, the local partner must be a 100% Vietnamese-owned company in Vietnam. One example would be advertising where the local partner must be a company with an advertising license. Note, however, that in some cases, individuals may also establish this type of business structure.
Emerhub’s consultants will advise you regarding the requirements for your planned business. Get in touch with us to learn more about joint ventures and other types of business structures in Vietnam.
How to Establish a Joint Venture in Vietnam
The process to register a limited liability company in Vietnam is the same whether you are a sole investor or part of a joint venture. The steps to set up a limited liability company are as follows.
- Get an Investment Registration Certificate (IRC)
The first thing you need is to get an Investment Registration Certificate (IRC). The Department of Planning and Investment (DPI) issues this certificate. On average, it takes about one month to get this document.
Emerhub can assist in preparing your application to get this certificate. We can also facilitate the whole process of obtaining the IRC. Get in touch with our consultants to get started today.
- Business Registration Certificate (BRC)
After getting the IRC, the next step is to get a Business Registration Certificate (BRC). This is also known as Enterprise Registration Certificate (ERC). The DPI also issues this certificate. It typically about one week to obtain the BRC.
Note that the company must complete tax registration within 30 days of receiving the BRC. They must also pay the annual business license tax during this period. Additionally, the company must inject their capital contribution within 90 days of receiving the BRC.
- Obtain sub-licenses, if necessary
Some business lines require additional licenses before operating. For example, a trading company in Vietnam will need a trading license. Similarly, to set up a manufacturing company in Vietnam, you will need a construction permit and a fire safety license, among others.
The timeline to obtain licenses varies depending on the specific license. It can take a few weeks to a few months. Our consultants will advise you regarding any licenses that you will need. We will also facilitate the application process for the necessary licenses.
The minimum capital requirement in Vietnam
There is no official minimum capital requirement in Vietnam for most businesses. However, there are some business lines with a set minimum capital requirement. For example, to set up a real estate business in Vietnam, you will need a capital of at least VND 20 billion (approx. USD 860,000).
If there’s no minimum capital requirement, you must propose a capital amount. The amount must be reasonable and realistic for your intended business. The DPI will assess if your proposed capital is suitable for your company.
Your proposed capital must be enough to cover operational expenses until the company starts making a profit. Most companies in Vietnam start with a capital of USD 10,000, but this will still depend on your business activities. When coming up with your capital consider the following:
- Office rental fees;
- Utilities and bills;
- Labor fees;
- Visa fees for foreign investors and employees
Note that you must inject your capital through a capital bank account. Emerhub can assist you in setting up a capital bank account in Vietnam. Our consultants will also advise you on any concerns regarding capital and tax compliance. Contact us using the form below or send an email to [email protected].
How to protect your investment when forming a joint venture
Any type of investment carries risks. You can mitigate risks by taking a few precautionary measures. We listed some tips below to help you protect your investment in Vietnam.
Tip #1 Always carry out a proper background check
Before entering a joint venture, you must do a background check on your future associate. This is otherwise known as conducting due diligence. You can easily get information on a company by checking Emerhub’s company registry in Vietnam.
Through our company registry, you can get in-depth information about a company including:
- Company information such as its owners, legal representatives, etc.
- Transaction history and capital
- Articles of Association/Charter of Company
Tip #2 Check the company’s Articles of Association
It is necessary to check your potential partner’s Articles of Association. This is to make sure that their company will be able to enter a joint venture with you, with respect to their internal regulations.
Tip #3 Prepare a cooperation agreement
Note that your partner’s Articles of Association will not cover your joint venture. As such, you must also prepare a cooperation agreement. This document must include the following among others:
- Parties, their liabilities, and benefits
- Purpose and structure
- Capital and future financing
- Governing law
- Confidentiality, warranties, exit provisions
Emerhub has experience in preparing documents such as this. You may send your inquiries using the form below or through email at [email protected].
Setting up a Special Purpose Vehicle in Vietnam
Another option is to set up a special purpose vehicle. This will allow you to engage in business lines with foreign ownership restrictions. The special purpose vehicle will allow you to protect your investment and maintain control over it.
You can reach out to our consultants to learn more about special purpose vehicles in Vietnam.
Need assistance with setting up a joint venture in Vietnam?
Contact us by filling out the form below. Our consultants will gladly assist you in establishing a joint venture in Vietnam. You can also send us an email at [email protected].