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Vietnam Company Registration Guide

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Vietnam Legislation

vietnam

As one of the fastest and most stable-growing economies in Asia, Vietnam is an attractive market to explore and open up other developing markets in Southeast Asia. Vietnam’s macroeconomics alone are convincing, with a population of 90 million, consistent GDP growth of 5-6% over the last decade, relatively low costs and a literacy rate of over 90%. 

To help entrepreneurs open a company and invest in Vietnam and prepare for business, Links has created a legislative page of the main employment laws and best practices in Vietnam. Please note that all the information listed below are to be used as a general guideline, for more detailed accounts of laws and regulations, please visit the official government websites.

Company Setup

Company registration is required for any person/ company conducting business in Vietnam in accordance with Article 5, Decree No. 78/2015/NĐ-CP.

Rep office and branch office of a foreign company must also register for a Licenses of Establishment of rep office/ branch office.

After obtaining a business license, a company is required to register its company stamp with the Police Office. The company stamp should display the name of the company and the company identification number. The required documents for company stamp registration are as follows:

  • Notarized copy of business license;
  • POA letter

According to Article 6, Part II, Circular No. 95/2016/TT-BTC, a taxpayer has to register for tax code within 10 days from the date on Business license/ Licenses of Establishment of rep office/ branch office.

A company is able to open a bank account in Vietnam after obtaining a business license, tax code and company stamp registration. The required documents are different between different banks.

Normally, the required documents are as follows:

  • Notarized copy of business license;
  • Chief accountant’s and legal representative’s ID/passport
  • Proof to certify legal representative of the company

A company is required to register its bank accounts with Investments and Planning Department within 10 days from the date of opening a bank account.

Benefits of Registering a Company in Vietnam

links_vietnam-business

Location

Vietnam is at a favourable location with proximity to some of the world’s most active and flourishing economies in Asia such as Singapore, Hong Kong, Malaysia, Japan, Taiwan, India and China.

The long coastline adjacent to the South China Sea gives some of the major coastal cities a locational advantage in trading, especially via shipping routes.

 

Growing Economy & Government Support

Since the launch of economic reform in 1986, Vietnam has been displaying consistent economic growth over the last decades. The effort and commitment of the Vietnamese government to improve the ease and transparency of doing business and investing in Vietnam are shown through numerous amendments of regulations, signed agreements with foreign countries and initiatives to support businesses such as funding and grant programs.

 

Young, Tech-savvy Workforce

Vietnam’s population is among the largest in South East Asia, a relatively young population with a median age of 30.9 years, along with an over 90% literacy rate and high levels of internet penetration, it is not hard to find well-educated, tech-savvy and young workers in the country at a relatively low cost.

Considerations when Starting a Company in Vietnam

A newly set-up company has to obtain Social Insurance (“SI”) code in order to make declaration and payment of Social, Health and Unemployment Insurance (SHUI) contributions for its employees.

A company is required to use digital signature for submitting social insurance reports to SI Department as well as submitting tax declaration to the Tax Office.

According to current regulation, an employer has to obtain PIT withholding receipt book to issue PIT withholding certificate to employees.

According to Article 119, Labour Law 2012, a company is required to register an internal labour rule with relevant authorities if employing for more than 10 employees.

According to current regulation, an employer has to set up and inform their salary scales to the authorities.

Labour Law in Vietnam

Social, Health and Unemployment Insurance (SHUI) Contributions

There are three elements in the Vietnam social security system including Social Insurance (“SI”); Health insurance (“HI”)’; unemployment insurance (“UI”); Trade Union (“TU) and accident insurance (“AI”).

Employers and employees are obligated to contribute social security at the rate below:

Social Insurance Rates in Vietnam

(Period from June 2017)

SI HI UI TU AI Total
Employee 8% 1.5% 1% 1% N/A 10.5%
Employer 17.5% 3% 1% 2% 1-2% 21.5%

 

From January 01, 2018, the salary base for calculating social security contributions shall include basic salary and fixed allowances (excluding bonus/incentive, innovation bonus, meal allowance, childcare allowance, housing allowance, gasoline allowance, transportation allowance, mobile phone allowances and child support allowance). The current cap for salary base for social security contributions are as follows:

Current Cap 1 July 2019
SI and HI Contributions VND 27,800,000 VND 29,800,000
UI Contributions VND 83,600,000 /

Trade Union Contributions

According to Article 4 of Decree 191/2013/NĐ-CP, an employer has to contribute trade union at the rate of 2% of employee’s salary (with its cap) regardless of having grassroot trade union or not.

 

Work Permits

Foreigner staff is required to have a work permit/work permit exemption certificate to work in Vietnam before they start working in Vietnam as well as a temporary resident card to stay in Vietnam. Considerations for visa approval for each applicant include:

  • Over 18 years old and have an adequate health condition to match the demand of the job.
  • A high degree of specialized knowledge, qualification and technology; experienced in management, business and other professions that the domestic laborers cannot currently conduct efficiently.
  • If foreigners want to work in special jobs in education or health, they are required to meet all requirements of conducting health and education work of the Vietnamese authorities.
  • Have no criminal record in their living country, Vietnam or other countries; being not under any warrant of arrest or jailing by the Vietnamese or foreign policemen.

However, there are some foreigner employees who are not required to apply for a work permit/work permit exemption certificate provided are professors, experts, directors, technicians and come to Vietnam for less than 30 days per time and accumulated staying days is under 90 days per year.

 

Vietnam Minimum Wage

Common Minimum Wage

The first type is the common minimum wage, which is used to calculate salaries for employees in state-owned organizations and enterprises. The common minimum wage in Vietnam goes from 1,390,000VND /month to 1,490,000 VND /month, starting 1 July 2019.

 

Regional minimum salary

The second type of minimum wage is used for employees in all non-state enterprises and is based on regions as defined by the government. From 1 Jan 2019, the National Wages Council has finalized the regional minimum salary rates for 2019, as follows:

  • Region I: VND 4,180,000/month.;
  • Region II: VND 3,710,000/ month;
  • Region III: VND 3,250,000/ month;
  • Region IV: VND 2,920,000/ month.

Region I covers the rural and urban districts of Hanoi, Ho Chi Minh City, Hai Phong, Bien Hoa City, Thu Dau Mot City, Vung Tau City of Ba Ria-Vung Tau Province, and some rural districts of Dong Nai and Binh Duong Province.

Region II covers the remaining rural districts of Hanoi, Hai Phong, Hai Duong City, Hung Yen City, and some rural districts of Hung Yen Province.

Region III covers the remaining provincial cities, Chi Linh town, and some rural districts of Hai Duong and Vinh Phuc Province.

Region IV covers the remaining localities.

 

Paid Annual Leave

According to Labour Law 2012, employees who have worked for a full 12 months are entitled to paid annual leave as follows:

  • 12 leave days for employees working in normal conditions;
  • 14 leave days for employees who are working on heavy, hazardous or dangerous job positions or working at harsh living conditions as regulated by related laws.
  • 16 leave days for employees who are working on extremely heavy, hazardous or dangerous job position or working at extremely harsh living conditions as regulated by related laws.

 

Working Hours

The normal working hours should not exceed 8 hours per day and 48 hours per week 

 

Rest Day

According to Article 110, Labour Law 2012, employees are entitled to at least one rest day per week.

Read more on Vietnam’s Labour Code.

Overtime

As regulated in Article 106, Labour law 2012, any working hours beyond the normal working hours are regulated by law, collective labour agreements or internal labour rules will be counted as overtime hours.

Overtime should not exceed 50% of regular working hours per day. Different pay schemes apply to overtime work according to the time of which the work was conducted, which should be properly indicated for payroll. 

Read more on Vietnam’s Labour Code.

 

Probationary Period

The length of probation will depend on job requirements and range from six days to 60 days as follows:

  • 60 days: a probationary period of up to 60 days for positions which require professional and technical qualification of collegial or higher level.
  • 30 days: probation period of up to 30 days for positions which require professional and technical qualifications of intermediate vocational level, professional secondary level, or technical workers and skilled employees.
  • 06 days: for all other employment in Vietnam

Salary during the probationary period will depend on the agreement of employee and employer, but must not be lower than 85% salary of the job. SHUI contributions are not required during the probationary period. During the probationary period, employer and employees have the right to terminate the probation contract without notice in advance.

Read more on Vietnam’s Labour Code.

 

Termination

An employer can terminate labour contract with employees before expiration if the employee dies, goes missing, loses civil capacity, reaches retirement age, is sentenced to prison or prohibited from performing the job in a court ruling, reaching mutual agreement to terminate labour contract early; a dismissal of the employee under a disciplinary procedure; a restructuring of the company or based on the right of the employer to terminate the labour contract unilaterally.

In case of employer unilaterally terminate labour contracts with the employee, the employer is obligated to give notice in advance before unilaterally terminating. The notice period is 45 days for an indefinite term labour contract; 30 days for definite term contract and 3 days for contracts under 12 months.

 

Severance Payment

An employee who has worked for the company for over 12 months is eligible for a severance payment. The severance payment consists of a half month’s salary for each year worked that is not contributed to unemployment insurance (i.e. probationary period, maternity period, etc.).

 

Employees

Benefits in Kind

Volunteer private health insurance is not required by the law. However, it is common practice in Vietnam for employers to offer insurance to employees. 

 

New Employees

When hiring a new employee, the employer is obligated to register the new employee with relevant authorities (i.e. Social Insurance Department, Department of Statistics, etc.)

Statutory Benefits

Female employees are entitled to 6 months of maternity leave with 100% of salary (the average salary of the last six preceding months) paid by Vietnam Social Insurance’s authority. In case of multiple births, there shall be an extension of 1 month on the leave period for each child from the second child onwards.

When the female employee has taken at least 4 months of maternity leave, she can return to work, provided that the employer agrees. In this case, besides the wage of the working days paid by the employer, the female employee shall continue to receive the maternity allowance, in accordance with the Social Insurance Law.

Read more on the Law on Social Insurance.

A male employee is entitled up to 14 days of paternity leave within the first 30 days after the day of childbirth. The number of days off depends on whether it is a single child or multiple births and if it is natural or surgical birth.

Read more on the Law on Social Insurance.

The number of days off depends on working conditions and the length of the social insurance contribution period.

 

Sick pay is covered by the social insurance fund, not by the employer (applicable to Vietnamese employees only).

 

Vietnamese employees entitled to sick pay are entitled to 75% of their salary or remuneration on which social insurance premiums were based in the month preceding their leave.

 

  • For employees working under normal working conditions:
     

    • 30 days if they have paid social insurance premiums for less than 15 years;
       
    • 40 days if they have paid social insurance premiums for 15 years to less than 30 years; and
       
    • 60 days if they have paid social insurance premiums for 30 years or more.
       
  • For employees working in heavy, hazardous or toxic occupations or jobs on the list promulgated by the Ministry of Labour and the Ministry of Health, or working regularly in specified regions:
     

    • 40 days, if they have paid social insurance premiums for less than 15 years;
       
    • 50 days if they have paid social insurance premiums for 15 years to less than 30 years; and
       
    • 70 days if they have paid social insurance premiums for 30 years or more.
       

Read more on the Law on Social Insurance.

Tax

Income Tax Calculation

Resident taxpayer is subject to Personal Income Tax (“PIT”) on worldwide employment income at progressive rates regardless of where the income is paid or earned.

Vietnam’s Progressive Rates 

Tax Bracket Monthly Taxable Income (Million VND) Tax Rate
1 Up to 5 5%
2 Over 5 to 10 10%
3 Over 10 to 18 15%
4 Over 18 to 32 20%
5 Over 32 to 52 25%
6 Over 52 to 80 30%
7 Over 80 35%

Non-resident taxpayer is subject to PIT at a flat rate of 20% on income earned in Vietnam.

http://www.itpc.gov.vn/investors/how_to_invest/law/2009-02-24.416897/view

Tax Payment to Authority

An employer is obligated to withhold PIT from employee’s salary and transfer to tax authorities on behalf of their employees.

Tax payment will be paid on a monthly or quarterly basis.

  

PIT Finalisation

An employer is obligated to conduct PIT Finalization on behalf of employees who are qualified to authorize the employer to conduct their PIT finalization on their behalf at the end of the year.

 

Submission Deadline

The deadline for submission PIT reports depend on the type of tax reports, guidelines as follows:

  • No later than 20 of the following month for monthly PIT declaration;
  • At the end of the first month of the following quarter for quarterly PIT declaration;
  • 90 days after the end of the year for PIT Finalization declaration.

More Information Here

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Payment

Bank Accounts and Paying Salaries

In Vietnam, it is common practice to pay salary to employees via their bank account. The payment period will depend on company policies or practices, but employees should be paid at least once per month.

 

13th Month & Bonus Payments

13th month and bonus payments are not required by the current law. However, employers usually offer 13 months of pay to employees in Vietnam.

Banking Industry

Local Information

Vietnam Public Holidays 2020

Employees are entitled to public holidays as follows:

Date Holiday
January 1 New Year’s Day
January 24 Vietnamese New Year’s Eve
January 25 Vietnamese New Year
January 26, 27, 28, 29 Tet Holiday
April 2 Hung King’s Temple Festival
April 30 Reunification Day
May 1 International Labour Day
September 2 National Day

Local Office Working Hours and Time Zone

Working Hours: 08.00/09.00-17.00/18.00

Standard time zone: UTC + 7 hours

 

Useful Web Links

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