Vietnam holds a prominent position as an attractive market entry destination for global investors due to its strategic location, robust economic climate, and the government’s commitment to fostering international partnerships. Recent economic reforms, political stability, and active participation in favorable agreements and treaties have created a compelling opportunity for international investors to tap into Vietnam’s regional growth potential.
Setting up a company in Vietnam necessitates a designated location as a fundamental requirement for incorporation. This article delves into the prerequisites and regulations surrounding the establishment of a location for entities operating in Vietnam. It aims to provide clarity on the conditions, guidelines, objectives, and best practices when selecting a suitable and compliant location during the company registration process.
The Significance of Choosing the Correct Business Location
Understanding the significance of the location in Vietnam is vital for investors, as it has several key implications:
1. Inclusion in Official Certificates
The location is a crucial piece of information included in both the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) for foreign-owned companies in Vietnam.
2. Capacity Assessment
Authorities use the location as a criterion to evaluate an investment project’s implementation capacity, especially for activities like manufacturing, real estate, education, and agriculture. Specific conditions must be met, as discussed later in this article.
3. Eligibility for Incentives
Business location plays a pivotal role in determining a company’s eligibility for government financial investment incentives, such as those for projects in disadvantaged areas, industrial parks, export-processing zones, high-tech zones, and economic zones.
4. Regulatory Scrutiny
The authorities may subject applications to stricter review and request additional documentation when the investor’s chosen location is in proximity to borders, shorelines, security zones, or national defense areas, potentially complicating the incorporation process.
Key Considerations for Lease Agreements
For investors choosing the indirect approach, careful consideration of the following factors is essential when signing lease agreements:
1. Landlord’s Ownership Rights
Investors must ensure that the landlord, whether an individual or a company, complies with real estate trading regulations and conducts business in accordance with their registered lines of business. This helps avoid potential compliance issues or costly legal disputes.
2. Type of Leased Space
The type of leased space must align with the nature of the business. Residential rooms in apartment buildings are prohibited as locations, and authorities scrutinize the leasing area’s purpose. Commercial purpose buildings generally face fewer challenges during approval.
3. Sensitive Areas
Business locations near borders, shorelines, security zones, or national defense areas entail a more complex incorporation process, with additional documentation and scrutiny.
Special Cases Affecting Business Location Selection
Specific operational objectives and business lines may influence the choice of business location for investors entering the Vietnamese market. In addition to considering the above factors, investors must ensure that the chosen business location meets legal requirements for their specific activities. Here are some common examples:
1. Medical Field
Hospitals and pharmacies must adhere to specific construction and location criteria, depending on their size and scope of services.
2. Education
Kindergartens, preschools, and primary schools must meet safety and environmental standards, with prescribed land area requirements.
3. Sports
Facilities for fitness and training must meet certain standards, including room size, ventilation, and equipment spacing.
4. Manufacturing
While the area is not a primary factor, environmental impact assessments and local planning regulations often dictate that manufacturing industries are located in industrial parks or clusters.
Conclusion
In summary, selecting the right business location is a critical step for international investors looking to establish a presence in Vietnam. It involves considering various factors, adhering to regulations, and aligning the choice with specific operational objectives and business lines to ensure a smooth and compliant incorporation process. Contact us today, to learn more about selecting the ideal business location in Vietnam