Vietnam Ranked Among the Top 10 Countries to Start a Business – Find Out Why

Vietnam was recently ranked 7th in the list of best countries to start a business according to a recent report by UsNews. This ranking is derived from the final outcomes of a global perception-based survey. It takes into account scores from nearly 5000 business decision-makers in a compilation of the following attributes:

• Affordability
• Bureaucratic procedures
• Inexpensive manufacturing costs
• Connectivity with the rest of the world
• Access to capital

Investing in Vietnam? See InCorp Vietnam’s Company Setup Services

Fast Facts on Vietnam’s Economy

Contributing Factors for Why Vietnam is One of the best countries to do business.

1.  A Young Population & Educated Workforce: Vietnam has a population of 100 million people, out of which 70% of people are under the age of 35 years. As a result, the country has the highest rate of labor force participation in Asia at 76%. In the second quarter of 2023, the percentage of trained labor force with degrees and certificates rose to 26.8%. Therefore, Vietnam not only possesses a young and robust workforce but an educated one.
2. A Prospering Economy: Despite subsequent lockdowns during the pandemic, the Vietnamese economy still managed to maintain one of the highest growth rates in the world since the start of the said pandemic. In addition, the World Bank predicts that Vietnam’s GDP would expand by 6.3% in 2023.
3. Strategically Great Location: Vietnam enjoys access to shipping routes that are significant for exports and imports, thanks to its huge coastline in the heart of Southeast Asia. Moreover, the country’s geographical proximity to commercially-viable countries like China, Singapore, Thailand, and Indonesia makes it an ideal investment spot for global manufacturers.
4. Supportive Government Policies: In an effort to foster the inflow of foreign investments in the country, the Vietnamese government strives to provide attractive fiscal and non-fiscal incentives for conducting business in the country. For instance, foreign companies can leverage tax exemption on import duties, corporate taxes, and land use taxes if they invest in healthcare or high-tech sectors deemed essential to the economy.
5. Trade Agreements: Vietnam has various trade agreements with many countries, particularly with its Asian neighbors. The country also plays an active role in the ASEAN (Association of Southeast Asian Nations) to facilitate lower intra-regional tariffs. Moreover, to bolster the investments between Vietnam and Europe, the government recently signedt the EU-Vietnam Free Trade Agreement with the European Union.
6. ​​Progressing Infrastructure: The Vietnamese government is committed to improving the country’s infrastructure and therefore allocated a big budget for it in recent years. Improvement in infrastructure would lead to more efficient and seamless logistics services within Vietnam. Moreover, this will create new opportunities for foreign investors.

The culmination of all these factors acts as a catalyst in attracting foreign investors to start or expand their business in Vietnam. Apart from having these impressive demographic factors and support from the government, Vietnam is host to numerous untapped investment opportunities that can be effectively capitalized by foreign investors.

Check out our latest detailed guide: How to Set Up a 100% Foreign-owned Company in Vietnam 

Latest Investment Opportunities in Vietnam (2023 update)

1. Young & Vibrant Fashion Industry: Owing to its expanding middle-class and rise in sophisticated demands, Vietnam’s fashion market clocked an impressive US$6.52 billion in 2023. With the improvement in the standard of living, companies are trying to keep up with the changing demand in the fashion industry by making judicious use of supply chain analysis and deeply studying consumer experience.
2. Fintech, Leading the Way: Trebling in market size between the years 2017 and 2021, Vietnam has witnessed exponential growth in the fintech sector. The country is home of over 263 fintech companies, providing an array of services like wealth management, mobile payments, and blockchain, among others.
3. Thriving E-commerce Sector: According to a survey by Facebook and Bain & Company, Vietnam is destined to be the fastest-growing e-commerce sector in SEA by the year 2026. Factors like the growing middle-class population and easy access to the internet will aid in driving growth for the e-commerce industry.
4. Burgeoning F&B Sector: As per a report by Business Monitor International Ltd, Vietnam has transitioned to one of the most lucrative foods and beverage markets in 2019. Moreover, in the year 2020, the sector accounted for 15.8% of the country’s GDP and generated an income of USD 42 million. By 2026, the market was expected to reach 938 trillion VND ($40 billion).
5. Bright Prospects in Renewable Energy: The Vietnam Electricity (EVN), according to its most current audited financial report, sold about 372.9 trillion VN worth of electricity in 2022. Moreover, Vietnam is gaining attention from global investors as the country is committed to achieving carbon neutrality by mid-century. 

To combat the threats posed by global warming and climate change, Vietnam has pledged to gradually limit the use of coal-fired power and put curbs on setting-up new plants.

Read More: Vietnam Business Opportunities 2023 & Beyond

Invest in Vietnam: Ease of Doing Business

According to the Doing Business report published in 2020, Vietnam ranks 70th worldwide for the accommodation of business activities. Here is a breakdown of different several aspects of business in Vietnam (scale of 100, higher is better).

Company Registration Entities in Vietnam

• Limited Liability Company (LLC): This is the most typical type of corporation and the best option for the majority of foreign investors that invest in small- to medium-sized firms with between one and fifty employees. Thanks to little paperwork and speedy processing, you may get started in just 45 days.
•  Joint-Stock Corporation (JSC): JSCs are better suited for launching larger firms because they require a minimum of three shareholders but have no maximum. Shares may be bought, traded, or transferred. When the business reaches a specific size, it can also be listed on a public stock exchange.
• Representative Office: If your company is moving to Vietnam, you might want to first conduct market research and create a presence there. A Representative Office provides entry to events, marketing initiatives, hiring opportunities, and TRC sponsorships. It cannot, however, make money or operate as a legitimate business. 
• Branch Office: A branch office doesn’t require a separate legal organization to function under and alongside its parent firm abroad. This indicates that you can begin making money from full-scale commercial operations. To start a branch, you would need to hire a Legal Representative.

Understanding Tax Incentives

Business operations in Vietnam are subject to three types of taxes: corporate income tax, personal income tax, and value-added tax. Other taxes may apply based on your specific business lines.

In Vietnam, companies typically pay 20% as corporate income tax (CIT). This rate is relatively low compared to China or India and on par with other countries in Southeast Asia. Moreover, operating in particular regions and certain industries grant tax incentives to business investors. 

In the case of rare and valuable commodities, namely precious metals and minerals, CIT can go up to 50%. On the other hand, the rate may be reduced by 40% if at least 70% of the allocated area is located in a socio-economically challenging region.

Prior to starting your business, be sure to find out what taxes apply to your sector and location. A few incentives offered by the Vietnam government are as follows:

• Preferential Tax Rates: Under this incentive, companies are allowed to pay lower CIT (corporate income tax) rates than the standard 20%. Depending on the project and its tenure, the preferential rates could be 10%, 15%, or 17%*.
  
• Tax Holidays: It is referred to a pre-defined period in which a business opt not to pay CIT or pay 50% of the tax liability*.

Conclusion

Blessed with abundant natural resources, a young population, political stability, strategic bilateral ties accompanied with robust economic performance, makes up a perfect fusion for foreign businesses looking to make the best use of investment opportunities in Vietnam.

Reach out to the InCorp Vietnam Team for help with market entry services, including tax advising, company registration, corporate outsourcing services, etc.