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Complete Guide to Setting Up a Sole Proprietorship in Vietnam

Vietnam is a country that had a major economic reform that enabled businesses across the globe to establish and grow their operations in the economy. The economic reforms made by the Vietnamese policymakers have made the economy an attractive country for several businesses to expand. This is due to the reasons that include —
  • The ease of conducting business
  • Regulations that encourage foreign investment
  • The government’s openness to the global economy, and
  • An influx of skilled and educated talent.
With Vietnam having business-friendly regulations, the economy has a safe spot for starting a business or business expansion. However, a sole proprietorship is one of the key business entities relatively easy to establish in Vietnam. Hence, all individuals and businesses must register a sole proprietorship and its functions in Vietnam. This article aims at ensuring that all the aspects of establishing a sole proprietorship in Vietnam are covered and why Sole proprietorship might be the most accessible type of business to develop in Vietnam.

Who can be a Sole Proprietor in Vietnam?

There are a few eligibility requirements to become a sole proprietor in Vietnam that including
  • The legal age to be an owner of a sole proprietorship is set at a minimum of 18 years old.
  • Each individual can only be the owner of one sole proprietorship.
  • Like any other type of business in Vietnam, this owner has to have enough mental capacity, doesn’t have any criminal records (both current or has been erased), and isn’t a state official or serving in the army.

Benefits of Sole Proprietorship in Vietnam

There are a few specific benefits of owning a sole proprietorship in Vietnam:
  • The sole proprietor essentially has complete control over the company’s operations, including increasing or decreasing the capital investment during the business operations.
  • A sole proprietor or the owner is entitled to all the company’s profit and the losses that the business incurs.
  • Required documents and registration procedures for establishing a sole proprietorship in Vietnam are relatively simple and easy to obtain
  • Considering that a sole proprietorship has only a single owner also means that the owner can avoid conflict of interests between the company’s members throughout the business.

Documents required for registering your business in Vietnam

As per Law on Enterprises 2020, implemented on January 1st of, 2021, documents required to register for a sole proprietorship include:
  • Copies of the ID card of the owner
  • Application form for business registration
  • Name of your business
  • Headquarter address, fax number, email address, phone number, and fax number
  • Full names, permanent residence, signature, nationality ID, or passport number of the owner
  • Capital invested by the owner
  • Estimated number of employees
  • Business lines
  • Tax registration information

Other criteria for registering a sole proprietorship in Vietnam

There are a few other criteria the sole proprietor must keep in mind when registering for a sole proprietorship in Vietnam, which include: Licencing Fee: As outlined in Decree No. 139/2016/ND-CP, the standard charges of licensing fees in Vietnam are:
  • Companies with investment capital of over 10 billion Dong – VND 3.000.000 per year
  • Companies with investment capital less than 10 billion Dong – VND 2.000.000 per year
The sole proprietor will have to pay for the licensing fees no later than the last day of January of each year. However, if the company is established within the previous six months (from July 1st to the end of December), the sole proprietor will only have to pay 50% of the license fee. However, with companies established in the first six months of the year, the owner will have to pay a full license fee. Note: In the first year of establishment, a sole proprietorship doesn’t have to pay a licensing fee, as stated in Decree No. 22/2020/ND-CP.

How to register a sole proprietorship company in Vietnam

Registering a sole proprietorship company in Vietnam is relatively simple. As a sole proprietor, you must collect all the required documents mentioned previously and submit these documents to the National Business Registration Portal. Alternatively, a sole proprietor may send the necessary documents to the Business Registration Offices. The business registration authorities shall issue a certificate of a registered business or reject the registration of a sole proprietorship alongside an additional explanation and further instructions. The registration of a sole proprietorship in Vietnam ideally takes three business days. However, specific sectors would require additional approval from the prime minister of the state. These sectors include
  • Specialist export and import business International tourism
  • Supply and production of electricity and water on a large scale
  • ocean shipping and air transportation
  • Mining of certain precious minerals
  • Distribution and manufacturing of explosives, poison, or toxic chemicals
  • Manufacture of information transmitting facilities, broadcasting, postal and telecommunication services, broadcasting, television, and publication
Currently, there are no provisions on the minimum capital requirement for a sole proprietorship in Vietnam. The entire registration process of a sole proprietorship in Vietnam ideally takes six business days.

The tax system for sole proprietorships in Vietnam

A few key tax-related aspects that must be considered while establishing a sole proprietorship in Vietnam includes Corporate Income Tax: In Vietnam, corporate income tax (CIT) is based on the net income that companies obtain while operating their businesses, generally in one business year cycle. The corporate income tax rate applicable on sole proprietorships is 20%. Although, this rate also depends on the business lines of your company. ‍Value Added Tax (VAT): All goods and services your company is doing business with are subject to value-added tax. The VAT rates in Vietnam are as below –
Items VAT Rate
  • Exported goods and services
  • International transportation
  • Essential goods and services
  • Other types of goods and services (as regulated)
  • The standard rate for goods and services
  • Certain goods and services (as prescribed)
‍ Tax number: Vietnamese tax codes are 10 or 13-digit codes assigned to individuals and firms to determine the scope of their tax liability. Tax codes allow businesses to navigate Vietnam’s accounting and financial regulations. To get a tax number, you can register online.

How can Multiplier Help?

Although opening a sole proprietorship in Vietnam is relatively easy, you must be aware of the Vietnamese laws on sole proprietorship. Setting up a sole proprietorship in Vietnam can be daunting, especially for foreign companies looking to expand into a highly regulated market. Partnering with a PEO platform such as Multiplier can help manage your employees in Vietnam through various functions such as onboarding, providing employee benefits, termination process, and providing employment contracts on time. Foreign businesses can do this without establishing a new entity in Vietnam. Talk to us to learn more!

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