Entering Vietnam: Compliance vs Reality for Foreign Businesses
Entering Vietnam business operations often looks straightforward on paper. Government guides highlight attractive tax rates, growing consumer markets, and clear incorporation steps. As a result, many foreign companies assume that once legal compliance is met, operations will run smoothly.
However, in reality, Vietnam’s regulatory framework and day-to-day business practices do not always align neatly. Companies that prepare only for formal compliance often face delays, unexpected costs, and operational friction after incorporation. This article explains the gap between compliance and reality when entering Vietnam — and how businesses can plan more effectively.
Why Vietnam Attracts Foreign Businesses
Vietnam continues to attract foreign investors because of:
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A fast-growing domestic market
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Competitive labour costs
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Strategic ASEAN location
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Participation in major trade agreements
On paper, these advantages make Vietnam an appealing destination. Nevertheless, regulatory compliance is only the starting point, not the finish line.
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Compliance on Paper: What the Law Requires
From a legal perspective, entering Vietnam typically involves:
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Company incorporation and investment registration
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Business licensing and sector approvals
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Tax registration and accounting setup
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Employment and payroll compliance
Foreign-invested enterprises usually interact with authorities such as the Ministry of Planning and Investment during setup and the General Department of Taxation for ongoing tax matters.
On paper, timelines and requirements appear clear. In practice, execution varies.
Compliance vs Reality: Key Gaps Businesses Face
1️⃣ Company Incorporation Timelines
Compliance expectation:
Incorporation can be completed within a stated timeframe if documents are in order.
Reality:
Approval timelines often depend on:
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Industry sensitivity
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Local authority interpretation
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Experience of local advisors
As a result, approvals may take longer than expected, especially for regulated sectors.
2️⃣ Licensing Scope vs Actual Activities
Compliance expectation:
Business activities must match licensed scopes.
Reality:
Vietnam authorities interpret scopes very strictly. Activities that seem minor or incidental may still require additional approvals.
Therefore, companies often discover that:
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Marketing activities fall outside scope
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Trading rights are limited
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Amendments are required before expansion
3️⃣ Accounting Standards vs Practical Reporting
Compliance expectation:
Accounts follow Vietnamese Accounting Standards (VAS).
Reality:
Many foreign companies prepare management accounts under IFRS or other standards. However:
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VAS reporting is mandatory for tax
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Adjustments are frequent
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Translation and reconciliation add cost
Consequently, accounting complexity is higher than expected.
4️⃣ Tax Compliance vs Tax Administration Practice
Compliance expectation:
Correct filings ensure smooth tax compliance.
Reality:
Vietnam tax compliance is highly document-driven.
For example:
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Expenses require strict supporting documents
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Intercompany charges face scrutiny
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Transfer pricing documentation is critical
Even compliant filings may trigger queries if documentation is insufficient.
5️⃣ Employment Law vs Workforce Reality
Compliance expectation:
Labour contracts and payroll follow statutory rules.
Reality:
Employment practices vary widely by region and industry.
Companies often face challenges such as:
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Labour contract rigidity
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Social insurance contribution disputes
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Termination procedures that differ from expectations
As a result, HR compliance requires local expertise.
6️⃣ Banking and Cash Management
Compliance expectation:
Corporate bank accounts can be opened after incorporation.
Reality:
Banks conduct extensive due diligence, especially for foreign-owned companies.
Delays may arise due to:
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Ultimate beneficial owner checks
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Business model clarification
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Source-of-funds documentation
This can slow down operations significantly.
7️⃣ Enforcement Consistency
Compliance expectation:
Rules are applied consistently nationwide.
Reality:
Local enforcement may differ between provinces.
Therefore:
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Practices accepted in one region may be questioned in another
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Local interpretation matters as much as written law
This makes local guidance essential.
Common Mistakes When Entering Vietnam
Foreign businesses often struggle because they:
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Rely solely on incorporation guides
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Underestimate documentation requirements
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Assume regional practices are uniform
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Delay investment in proper advisors
These mistakes increase friction and cost over time.
How to Bridge the Gap Between Compliance and Reality
To manage the difference between compliance and reality, businesses should:
Plan Beyond Incorporation
Treat incorporation as the start, not the goal.
Invest in Local Expertise
Local advisors help interpret enforcement practice, not just law.
Build Documentation Discipline
Vietnam places strong emphasis on paperwork and formality.
Allow Buffer Time and Budget
Timelines and costs often exceed initial estimates.
Vietnam vs Other ASEAN Jurisdictions
Compared to jurisdictions like Singapore, Vietnam:
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Offers lower operating costs
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Requires more administrative effort
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Has higher documentation intensity
Therefore, many regional groups adopt hybrid structures, using Vietnam for operations and other jurisdictions for holding or treasury functions.
Final Thoughts
Entering Vietnam business operations requires more than legal compliance. The real challenge lies in navigating the gap between written rules and practical enforcement.
Companies that acknowledge this gap early — and plan for it — operate more smoothly and avoid costly surprises. In Vietnam, success comes from preparation, patience, and local understanding, not shortcuts.
How uSafe Can Help
uSafe advises businesses on:
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Vietnam market entry planning
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Cross-border structuring
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Compliance coordination
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ASEAN expansion strategies
If you are considering entering Vietnam, speak with us to assess both compliance requirements and operational reality before committing.
Sources: https://www.vietnam-briefing.com/doing-business-guide/vietnam/taxation-and-accounting
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