In the first stage of preparing to establish an enterprise, investors need to survey the area where they plan to locate their headquarters. The business location affects the long-term development of the enterprise. Legally, enterprises can freely choose where to operate but must comply with some requirements and limitations as prescribed by law. In this article, we explain how to select headquarter locations in Vietnam.
According to the ‘Enterprise Law 2020’, the headquarter of an enterprise is its contact address located in the Vietnamese territory and determined according to the boundaries of the administrative unit. The headquarters must have phone number, fax number and email (if any).
The headquarter address must be provided for carrying out procedures for business establishment and will be shown on the Enterprise Registration Certificate.
In the course of operation, if an enterprise changes its headquarter address, it is necessary to register such changes at the business registration authority within 10 days from the date of change. By doing so, the rights and obligations of the enterprise do not change.
Locations where the headquarters are not located
When choosing a location for headquarters, enterprises should keep in mind that not all locations can be registered as headquarters. Enterprises are not allowed to use apartment buildings as their headquarters because the ‘Law on Housing 2014’ prohibits “using apartments for non-residential purposes”. If violated, enterprises may be administratively sanctioned according to the provisions of law.
However, if the apartment building is eligible for mixed purposes i.e. for living and doing business, the enterprise may register it as its headquarter. In such a case, before renting the premises, the enterprise needs to negotiate with and request the apartment building owner to provide documents proving that the apartment is eligible for mixed puposes to avoid legal consequences later.
Registering heaadquarters in different business sectors
Enterprises have the right to freely choose a business location. However, due to the specific nature of some industries, the laws sets out conditions on the location of operation for ensuring social security, order, and safety.
Currently, some industries are not allowed to operate in some locations. This depends on the planning of each geographical area. Therefore, when an enterprise registers to operate in multiple business sectors, depending on the specific sector, the business registration authority may consult with the local management authority and ask the enterprise for commitment against operating in its headquarters. Investors should keep this in mind while choosing an operating location for their investment projects.
In addition, some industries like manufacturing are allowed to operate only in industrial parks and export processing zones. This ensures environmental safety and protection from industrial by products which is strictly controlled by regulations on environmental protection. However, each industrial park and export processing zone has different functions and scope of activities. Prior to registering a location for business operations, investors need to check which industries are allowed to operate in those industrial zones. For example, an export processing zone is an industrial park for production of export products, while a supporting industrial park is an industrial park for production of supporting industrial products.
Tax incentives on specific locations
According to the current ‘Corporate Income Tax Law’, tax incentives or tax exemption or reduction are granted for new investment projects operating in specific locations. To establish an enterprise, the location of the investment project may be the headquarters or business location of the enterprise.
Some tax incentives for new investment projects are as follows:
- Preferential tax rate of 10% of corporate income tax for 15 years if the enterprise invests in a business project in an area with extremely difficult socio-economic conditions, or economic zones, or industrial parks of high technology including concentrated information technology zones as prescribed by law.
- Preferential tax rate of 20% of corporate income tax for 10 years if the enterprise invests in a new project in an area with difficult socio-economic conditions as prescribed by law.
- Tax exemption for 4 years and 50% reduction on payable tax for the next 9 years if the enterprise invests in a new business project in an area with extremely difficult socio-economic conditions, or economic zones, or high-tech parks including concentrated information technology zones as prescribed by law.
Thus, investors may face difficulties in choosing the right location when setting up a business in Vietnam. This is because the regulations related to business locations are scattered in different legal documents and also depend upon policies & planning of each locality. Therefore, in order to choose the right location and obtain tax incentives, investors should conduct site surveys and consult with consultative agencies. This is to ensure that the location chosen is legally permitted and approved by the business registration authority. This also prevents sanctions and administrative violations.
Date of authoring: 27/08/2021.
The article is based on applicable laws at the time noted above and may no longer be relevant at the time the reader approaches this article due to the change in applicable law and the specific case to which the reader wishes to apply. Therefore, the article is for reference only.