In this article, we’ll help you navigate buying a business in Vietnam, and we offer essential tips for informed investment.
1. Some of the main advantages of buying a business in Vietnam include:
- Prime location and lease.
- Pre-established operations.
- Immediate cash flow.
- Financial history for predictability.
- Acquiring assets and experienced staff.
2. Where to find listings for businesses for sale in Vietnam?
For the best way to find businesses for sale and investment opportunities, consider using platforms like Smergers.com or Bizspective.com. Smergers.com has a global presence with many listings but limited customer service in Vietnam. On the other hand, Bizspective.com offers a comprehensive list of options and stands out with exceptional support tailored for entrepreneurs in Vietnam. They also provide a wide range of services, including legal, consulting, tax, and accounting support. Here are bizspective’s business for sale listings.
3. Common legal structures
- Family household business: Common among small businesses in Vietnam with tax advantages, but can’t be sold directly to foreigners; must convert to Vietnamese-owned LLC first.
- Vietnamese-owned LLC: Foreigners buying these need investment approval, realistic charter capital, and not all business lines are open to foreign investment.
- Foreign-owned LLC: Easier for new foreign investors to purchase, but approval and realistic charter capital still required.
4. What are ‘business lines’ and why are they important?
In Vietnam, businesses must register specific activities called “business lines,” like management consulting, retail, marketing, etc. They’re restricted to these registered lines but can add or remove them later with some time and fees. Check the online registration database before buying a business, as not all are open to foreign investors.
5. Investment capital requirements.
In Vietnam, companies must register and contribute “charter capital” to operate. The minimum capital requirements vary by location. For instance, cities like Ho Chi Minh and Ha Noi require around USD 15,000 (as of 09/23), while Da Nang and Hoi An demand more, roughly USD 35,000-45,000 (as of 09/23).
If you’re buying an existing company, it often has already met the “sufficient capital” requirement, making the process somewhat less strict. However, local authority approval is still necessary. Ownership change approvals are generally easier than for new ventures. Notably, the amount of registered charter capital also affects your visa options.
6. Main foreign business restrictions in Vietnam.
- Location restrictions: In places like Da Nang and Hoi An, foreign business ownership is restricted for security reasons. Consult with us or your lawyer for guidance.
- Business line restrictions: Certain sectors are off-limits to foreign investment due to security or market protection concerns. Some require Vietnamese co-ownership or specific qualifications. If unsure, contact us for clarification. We can also verify legal status and permitted activities for both Vietnamese and foreign-owned companies.
7. What visas can an investor obtain?
- Investor visa: If your capital contribution is under VND 3 billion, you can get a 1-year multiple-entry visa, renewable annually.
- TRC (Temporary Residence Card): For contributions over VND 3 billion, you can obtain a TRC valid for 3 years, renewable.
- Work permit & visa: Consider this if you meet all requirements, but it’s more complex and costly. Investors with over VND 3 billion are exempt from the work permit. Keep in mind factors like tax implications, social insurance benefits, and payment preferences. Dividend tax (for investors visa and TRC holders) is 5%, while personal income tax varies by salary bracket in Vietnam (for work permit- and visa holders).
8. Buying a business in Vietnam: procedures, time, and costs
To purchase an existing company in Vietnam, you’ll need to complete specific administrative and legal steps. These procedures vary based on factors like current ownership, desired ownership, location, and registered business lines. It’s worth mentioning that purchasing equity in an established business is another viable option. For a more in-depth exploration of this topic, you can refer to this link to access a comprehensive article.
Time frame:
- If the target company is fully Vietnamese-owned, and you want to buy 100%, it may take 3-5 weeks.
- If the company is already partially foreign-owned, and you want full ownership, it could take 4-6 weeks. Adjustments may be needed for business lines not open to foreign ownership.
Fees:
Administrative fees are relatively affordable in Vietnam but procedures can be complex and time-consuming. Most foreigners prefer to work with Vietnamese service providers for a smoother process.
Our Bizspective team can connect you with professional service providers across Vietnam. Fees vary based on complexity but typically range from 500 to 1000 USD.
9. Considerations for business operations:
Successful handover
- Handover: Negotiate a handover period with the current owner for training and knowledge transfer. Request SOPs for crucial tasks and processes.
- Systems: Ensure you have access to and understanding of the business’s systems.
- Data: Collect essential data, including invoicing, POS records, contacts, customer database (CRM), and digital assets like social media accounts and email addresses.
Effective business transition:
- Negotiate a handover period with the owner for training and knowledge transfer. SOPs for recurring tasks can be valuable.
- Monitor employee turnover after acquisition to ensure retention and stability.
Due diligence checklist:
- Review necessary licenses and certificates, including the Investment Registration Certificate (IRC), Enterprise Registration Certificate (ERC), and any required sub-licenses.
- Scrutinize the lease agreement, including the ownership certificate (pink book), duration, priority upon lease expiration, and liquidation clauses.
- Examine financial reports and ask for statements like profit and loss, balance sheet, and cash flow. Consider alternative methods like customer count for businesses with mainly cash transactions.
- Verify tax compliance and reports, including social insurance, VAT, and business license tax.
- Identify the finance and accounting team handling the company’s books, along with any third-party accounting firms involved.
- Evaluate the Point of Sale (POS) system’s readiness and functionality for efficient financial management.
- Validate the company’s bank account balance to match financial reports.