Doing Business in Vietnam

Why Vietnam, honestly

Vietnam stopped being a low-cost story around 2018. What replaced it is more interesting: a manufacturing base deep enough to absorb Apple's supplier diversification, an engineering workforce of roughly 530,000 that ships software to Tokyo and San Francisco, and a domestic consumer market of 100 million people with a median age under 33.

The growth is real and so is the friction. Capital controls exist, the labor code is protective of employees, and the bank account opening process for a new foreign-owned company has gotten slower since 2023, not faster. Companies that succeed here usually share two traits: they pick the right operating structure for their actual headcount plans, and they take local labor law seriously from day one.

The companies that get Vietnam wrong almost always made one of two choices early — they under-estimated labor protections, or they tried to run a regulated business through a Representative Office. Both are recoverable, both are expensive.

Setting up a company

The realistic timeline from a clean set of documents to a working bank account is 8 to 12 weeks. The steps:

1. Investment Registration Certificate (IRC) — 15 to 20 working days. This is the foreign investment approval.
2. Enterprise Registration Certificate (ERC) — 5 to 7 working days after the IRC. This is your legal birth certificate.
3. Seal carving, tax code activation, e-invoice registration — 1 to 2 weeks.
4. Direct Investment Capital Account (DICA) and operating account — 3 to 5 weeks. This is the bottleneck. Banks have tightened KYC on foreign-owned entities, and Tier-1 banks (Vietcombank, BIDV, Techcombank) often ask for documents that were not in the original checklist.
5. Charter capital remittance — must arrive in the DICA within 90 days of the IRC.
6. Social insurance, labor, and union registration — required before your first hire.

Company incorporation walkthrough →

Entity or EOR: how to choose

For most foreign companies, the decision tree is shorter than consultants make it sound.

Use an Employer of Record if any of the following are true: you need someone on the ground within 30 days; you are hiring fewer than 10 to 15 people in the first year; you are testing the market before committing capital; or your global mobility team needs a compliant payroll for a remote employee who happens to live in Vietnam.

Set up a 100% foreign-owned LLC if you have a clear plan for 20+ employees within 12 months, you need to sign local revenue contracts and issue VAT invoices, you are importing or manufacturing, or your business activity is on the "conditional" list and requires a local license that only an entity can hold.

A pattern worth knowing: roughly two thirds of the companies we onboard via EOR convert to their own entity between months 6 and 18, once headcount and revenue justify the fixed compliance cost. Starting with an EOR does not block the entity path. It buys you the runway to do it without rushing.

Read our full guide to Vietnam Employer of Record →

EOR vs. 100% Foreign-Owned LLC

The clean side-by-side most founders actually need. For the full mechanics of the EOR side, see our Vietnam Employer of Record guide; for the entity side, the company incorporation walkthrough covers the 8–12 week path.

Tax incentives worth structuring for

The headline rate of Corporate Income Tax in Vietnam is 20%, but a meaningful share of foreign-invested projects qualify for preferential CIT rates and multi-year tax holidays that can change the unit economics of an investment. Eligibility turns on three things: the activity (priority sectors such as high-tech, R&D, education, healthcare, software and supporting industries), the location (designated industrial parks, economic zones and remote provinces), and the scale of the project. Both new investment projects and qualifying business expansions can apply — but entities formed through acquisitions or corporate reorganisations are excluded and generally inherit the seller's existing tax regime.

The schemes at a glance

Two clocks that catch foreign investors

The preferential rate clock starts from first revenue from the incentivised activity, but the tax-holiday clock starts from first taxable profit. Vietnam's tax authority recognises that incentivised projects often run pre-profit for several years, so there is a built-in safeguard: if a project has not earned taxable profit within 3 years of generating revenue, the holiday and 50%-reduction window automatically begin from the fourth operational year. That single rule is worth modelling into the business plan — it can shift the effective tax burden by a couple of percentage points over the first decade.

See the incorporation & investment certificate walkthrough →

Hiring and the talent market

Ho Chi Minh City is commercial, English-fluent, and faster on offer-to-accept cycles. Hanoi is technical, closer to the regulators, and more measured on compensation. Da Nang is the credible third option for engineering and shared services, with 20 to 30 percent lower cost than HCMC and lower attrition.

Compensation benchmarks (2026, gross monthly USD)

FX rate: 1 USD = 26,300 VND.

• Software engineer, 2 to 5 years: $800 to $2,100
• Senior engineer / tech lead: $1,800 to $4,200
• Finance manager: $1,500 to $3,400
• Sales manager B2B: $1,200 to $3,000 plus commission
• Country manager: $4,500 to $11,500 plus variable
• Factory operator: $300 to $500

Three operational notes. Notice periods are 30 days (definite-term) or 45 days (indefinite-term) and are taken seriously, so a candidate's earliest start is usually 6 to 8 weeks from offer. Counter-offers from current employers are aggressive at the senior level; build a second-choice candidate into your pipeline. Background checks rely on the candidate cooperating to pull their own criminal record extract (Phieu Ly Lich Tu Phap), which takes 10 to 15 business days. For confidential C-suite and country-manager hires, see our Executive Search in Vietnam.

Labor law in practice

Vietnam's 2019 Labour Code (in force since 2021) is more employee-protective than most foreign HR teams expect.

Contracts

Definite-term contracts can be used once, renewed once, and then must convert to indefinite-term. Many companies miss this conversion. It is enforced.

Probation

Maximum 60 days for degree-required roles, 30 days for vocational, 6 days for unskilled. Probation pay must be at least 85% of full salary. The reflexive "3-month probation" from other jurisdictions is not legal here.

Working hours and overtime

Standard 48 hours per week, though 40 is common in white-collar settings. Overtime capped at 40 hours per month and 200 hours per year (300 in some sectors). Overtime pay is 150% on weekdays, 200% on weekends, 300% on public holidays, with an additional 30% for night work. These multipliers stack.

Termination

Not at-will. Lawful unilateral termination requires a statutory ground and registered Internal Labor Regulations (mandatory at 10+ employees). The common settlement path is mutual agreement with one to three months of salary; underestimating this line item is the most common cost surprise for first-time foreign employers.

Payroll, tax, and the real cost of an employee

For a local employee earning VND 30M gross per month, the employer pays roughly an extra 23.5% on top: 17.5% social insurance, 3% health insurance, 1% unemployment insurance, and 2% trade union fee (payable regardless of whether a union exists at your company).

Employee-side deductions: 8% SI, 1.5% HI, 1% UI, plus progressive Personal Income Tax from 5% to 35%.

Three things that matter operationally

• The 13th-month salary is not legally required but is universally expected, paid before Tet. Budget for it.
• Allowance structuring is legitimate and material. Meal, uniform, and phone allowances are PIT-exempt within published limits when properly documented. A well-built compensation package can move 5 to 10% of total cost from taxable income to exempt allowances.
• E-invoicing is mandatory and transmitted to the tax authority in real time. Shadow accounting on spreadsheets gets caught at the first audit.

If you already have a Vietnamese entity but want to take payroll, SI and PIT off your plate, our payroll outsourcing in Vietnam handles monthly run, statutory filings and pay-slip distribution end-to-end. If you have local headcount and need a co-employment structure rather than full EOR in Vietnam, see PEO in Vietnam.

Total employer cost in Vietnam

Move the slider to see the real cost of hiring a local employee — gross salary plus the 23.5% statutory employer contributions, with an estimated employee take-home after Personal Income Tax. Values shown in USD; tax computed in VND under Vietnamese statute and converted at 1 USD = 26,300 VND. Indicative only, based on 2026 contribution rates and a single dependent personal relief.

Work permits and visas for foreign hires

A foreign hire must qualify as a manager, executive, expert, or technical worker. The expert category requires a bachelor's degree plus 3 years of relevant experience, or 5 years of experience with a relevant certificate. Documents must be legalised in the home country, translated, and notarised in Vietnam.

Realistic timeline with clean documents: 4 to 6 weeks for the work permit, then 1 to 2 weeks for the Temporary Residence Card (TRC). The bottleneck is almost always home-country legalisation of the degree and experience letters, not the Vietnam side. Start that step before the candidate signs.

Work permits are tied to one employer and one position; a material role change requires re-application. Spouses receive a dependent TRC but cannot work on it.

Work permit and visa guide →

Banking and moving money

Vietnam has real capital controls. Charter capital comes in through a DICA. Companies that want to operate in Vietnam without immediately moving capital in often start with expansion without an entity and convert later. Profit repatriation is legal, audited annually, and notified to the tax office at least 7 working days before transfer. Plan 2 to 3 months from year-end audit completion to your first dividend out.

Domestic B2B invoicing must generally be in VND. SaaS and service companies invoicing local customers in USD will eventually be asked to restructure.

Sector-specific watch-outs

• Retail and F&B: Economic Needs Test for additional outlets. Provincial discretion.
• Education: Heavy licensing; teacher and curriculum requirements.
• Logistics: Foreign ownership caps in several sub-sectors.
• Fintech and payments: No general non-bank PI framework yet. Sandbox in perpetual draft.
• Manufacturing: EIA and fire safety approvals add 3 to 6 months on top of the standard licensing path.

Common mistakes

1. Using a Representative Office as a hiring vehicle. It is not one.
2. Using consultancy contracts to dodge social insurance. Reclassified routinely under Vietnam's labour law.
3. Splitting salary onshore and offshore. Now a fast track to a PIT audit.
4. Missing the registration of Internal Labor Regulations at 10+ employees. Without it, performance terminations are not defensible.
5. Skipping the annual PIT finalisation, especially for foreign employees leaving mid-year.
6. Under-budgeting Tet: 13th-month salary, two weeks of reduced productivity, and post-Tet attrition.

Frequently asked questions