4 Infrastructure Options For Vietnam

October 14, 2007

In our first segment about Vietnam, we gave you key facts about the country, including some useful comparisons between the costs of doing business in Vietnam and China. As you consider your initial infrastructure investments in Vietnam, it will be important to evaluate various options for establishing an entity there.

Depending on your objectives, each option will have advantages, disadvantages, and varying degrees of complexity. The four most common approaches for establishing an entity in Vietnam are:

  1. Representative Office
  2. Branch Office
  3. Joint Venture Company
  4. 100% Foreign Owned Company

Let’s take a look at each of these approaches in more detail.

Representative Office

  • Initial stage of market penetrations, presence or research
  • It is a cost center only, there can be no income generated from this entity
  • Terms are five years which are renewable
  • No corporate taxes, however there are personal income taxes for staff
  • Licensing procedures are fairly simple and straightforward
  • This structure allows a company to be upgraded to entity forms

Branch Office

  • This structure is allowed mostly for service related companies, banking, law, consultancy, etc.
  • Must establish a commercial presence or permanent site
  • Corporate taxes will apply including value added tax with no incentives
  • Terms are five years, which are renewable
  • To be approved for a license under this structure can be complex and subject to the latest WTO commitments

Joint-Venture and Wholly Owned Foreign Invested Enterprise (WOFIE)

  • Joint-Venture with a local individual or entity
  • Must have a commercial presence and corporate tax id
  • Terms, the company indefinite and the project up to 50 years
  • Easy approval for manufacturing sector and some services, which are all subject to the latest WTO commitments
  • Complex approval for import, trading, and distribution related businesses
  • The Joint-Venture can be converted 100% to a foreign owned company

In the next installment on Vietnam, we will examine the details of opening a Representative Office. For most companies, this is most cost effective and low-risk way to establish a presence in Vietnam. And be sure to check out our other articles about Vietnam.

Posted by Ravi Sastry | Filed Under Manufacturing, Sourcing & Outsourcing, Vietnam 

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