Vietnam’s IT Industry Growth: A Potential Global IT Hub by 2024

In the last five years, Vietnam has seen a tremendous digital transition, resulting in significant IT industry growth. This beneficial transformation has compelled Vietnam to integrate internet-related industries into its economy. As a result, numerous multinational firms are setting up shops in Vietnam, helping the country’s information technology market grow. According to the German-language business publication Handelsblatt, this Southeast Asian nation has the potential to develop into a significant worldwide IT Hub. By 2024, Vietnam’s information and communication sector is anticipated to generate about USD 23.7 billion.

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Benefits of Starting an IT Company in Vietnam

Captivating Government Incentives

The Vietnamese government offers enticing benefits through incentives to IT companies to promote additional investments in the sector since it wants to take the nation’s IT industry to an entirely new level.

These rewards may take the following forms:

• Services for software development are exempt from VAT
• Corporate income tax exemption for four years.
• Eleven years of reduced corporate income tax following the four-year corporate income tax exemption
• Capital credits

However, a Vietnamese IT company can only profit from the incentive benefits if specific requirements are met. Just the following categories of IT businesses can receive incentives:

• Electronic information goods
• Products produced by software 
• Crucial IT products
• Services for correcting information security incidents
• Information security protection services by Vietnamese IT law.

RELATED: The Developing IT industry in Vietnam, 2021 Update

A Large & Skilled IT Workforce

Generally, it is believed that Vietnam’s IT personnel are a significant asset for the development and success of the sector. Vietnamese IT workers are highly sought after by domestic and foreign businesses due to their unique combination of technical ability, language proficiency, and solid work ethic.

One of the country’s advantages is thought to be the workforce of the IT sector in Vietnam. The industry has a pool of young, talented, and information technology-savvy professionals. In addition, Vietnam offers over 400 institutions and universities that provide IT-related courses, graduating a sizable number of IT professionals each year. These graduates are skilled in software development, programming languages, and other IT areas. Another benefit of this workforce is that they are fluent in English, which is necessary for working with multinational teams and communicating with clients.

How to Start an IT Company in Vietnam

The Vietnamese Law on Investment permits foreign ownership in the IT sector in Vietnam. The Vietnamese government has taken action to ease restrictions on foreign ownership in the IT industry. The government passed a decree in 2020 that lifted restrictions on foreign ownership for businesses engaged in specific industries, notably the IT sector.

Establish an LLC in Vietnam

The following guidelines must be followed under the new legislation if foreign investors are thinking about establishing an LLC in Vietnam with 100% foreign ownership:

• A place of business where a corporation can be registered. To register an IT company in Vietnam, you must have a legitimate business address. You can also use a virtual office address for the IT industry. Most IT companies with physical offices are housed in the IT parks in Hanoi, Da Nang, and Ho Chi Minh City.
• At least one (1) founder. A foreign LLC needs at least one founder. Therefore, there can be up to fifty founders (50).
• An in-house director. A resident director must be present for a foreign LLC. If the resident director is a foreign national and not the company’s founder, a work visa is required
• Founders’ papers. Each founder’s certified passport copy and bank statement copy should be included with the submission.
• No minimum is required, but adequate capital is. The government of Vietnam does not impose any minimum capital requirements on IT businesses. Yet, the proposal must include a suitable quantity of money that can pay for all costs upfront before the IT company begins turning a profit.
• Certificate of Investment Registration (IRC). An IRC is required from the Department of Planning and Investment for all International LLCs.
• Certified Business Registration (BRC). A BRC is required from the Department of Planning and Investment for all overseas LLCs.

Establish an offshore company or a representative office in Vietnam

Any business activity away from an entity’s headquarters is called an offshore office. The possibility of lessening your tax obligation is one of the most significant benefits because many offshore jurisdictions provide reduced tax rates, tax incentives, and other tax benefits, enabling you to save money. In addition, while offshore nations frequently have stricter privacy rules and offer better security against legal actions, they can also provide excellent asset protection.

As a subordinate unit supporting the parent company’s business operations in Vietnam, the foreign representative office can carry out routine business operations like setting up a resident office, hiring staff, managing and promoting local business contracts, conducting market research, etc. To better understand the Vietnamese market, including its clients, rivals, and future possibilities, market research, and analysis can be carried out with the aid of a representative office. A representative office can also improve your presence in the Vietnamese market and help in brand development.

In summary, a representative office is a good choice if you want to promote your business interests in Vietnam. At the same time, an offshore company is an excellent choice to conduct business in Vietnam without forming a local company. To choose the appropriate course of action for your particular circumstance, it is advised that you speak with a nearby law office or our business adviser.

Having an IT Business Without Setting up a Company in Vietnam

In Vietnam, there are more options outside only establishing an IT company:

Hire remote IT workers and software developers in Vietnam through the Employer of Record (EOR).

A third-party service provider known as an EOR acts as the client company’s employer. While the client company maintains control over the employees’ work, the EOR handles all the administrative duties associated with hiring, payroll, and taxes.

Using an EOR service provider can lessen the risks associated with employing remote workers abroad. In addition, to ensure that the client firm complies with local laws and regulations, the EOR takes care of all the legal and regulatory obligations.

The client organization must use the services of an EOR provider with experience in the Vietnamese market to hire remote IT workers and software developers in Vietnam through an EOR. The EOR supplier will handle all the administrative duties related to staff hiring and management, freeing the client company to concentrate on its primary business operations.

How InCorp Vietnam can Assist

Starting an IT business in Vietnam has a variety of advantages and requirements. The one-stop shop provided by InCorp can assist you in familiarizing yourself with the specifics, effectively guiding you through the business registration procedure, and ensuring that you stay on the right path to business success. We only consider what is best for you.

Let the legal and business consulting experts at InCorp relieve you of your legal and commercial concerns so you can focus on building your IT firm in Vietnam. To free you up to focus on what you do best – growing your business – we execute the labor-intensive tasks for you. We may also assist you with various post-registration services for your business, including tax reporting and filing, immigration assistance, license and permit applications, and much more.