In the initial stages of preparing to establish a business, investors need to survey the area where they plan to locate their headquarters to select a suitable location. The location of operations affects the long-term development of the business. From a legal perspective, businesses are free to choose their operating location, but they must still comply with certain requirements and limitations as prescribed by the law. In this article, we want to address the choice of a location for the headquarters of operations in Vietnam.

1. Headquarters

According to the provisions of the 2020 Law on Enterprises, the headquarters of a business is the contact address of the business, located within the territory of Vietnam, and determined according to administrative unit boundaries; it includes a telephone number, fax number, and email address (if available).

The address of the headquarters is one of the mandatory pieces of information that must be provided to the business registration authority when completing the procedures for establishing a business and will be reflected on the Certificate of Business Registration.

During the operation, if a business changes its headquarters address, it must complete the procedure to amend the contents of the business registration with the business registration authority within 10 days from the date of change. When changing the headquarters address of the business, the rights and obligations of the business do not change.

2. Prohibited locations for headquarters

When choosing the location for the headquarters, businesses should note that not all locations can be registered as the headquarters. Businesses are not allowed to use residential apartments as their headquarters because the 2014 Law on Housing prohibits the “use of apartments for purposes other than residential.” Violation of this prohibition can result in administrative penalties as prescribed by law.

However, if an apartment serves a mixed-use purpose for both residential and business activities, a business can use a portion of the space for business and register it as the headquarters. In this case, before renting the location, businesses should communicate with the apartment owner and request documents confirming the mixed-use purpose of the apartment to avoid legal consequences later on.

3. Business sector and headquarters

Businesses have the freedom to choose their operating location; however, due to the specific nature of certain industries, the law imposes conditions on the operating location to ensure public order, safety, and social security. Currently, some industries have limitations on their operating locations. In some areas, certain types of activities may not be permitted. This depends on the planning of each region. Therefore, when a business registers its activities in multiple sectors, the business registration authority will seek the opinion of the local management agency or request that the business commit not to operate at the headquarters, depending on the specific case. Investors should also consider this issue when choosing a location for their investment project.

In addition, some specific industries, particularly those related to manufacturing, may require businesses to operate within industrial zones or export-processing zones. This regulation is in place to ensure environmental protection, as manufacturing is subject to strict environmental regulations. However, it’s important to note that each industrial zone or export-processing zone may have different functions and scopes of activities.

Therefore, before entering into lease agreements, investors need to check the scope of industries and the types of businesses allowed in the respective industrial zones. For example, an export-processing zone focuses on manufacturing products for export, while a supporting industrial zone specializes in producing industrial support products.

4. Operating location and tax incentives

According to the current laws on corporate income tax, based on the location where a “new investment business project” is carried out, a business may be entitled to tax incentives or exemptions and reductions.

For businesses established in the form of business registration, the location where the new investment project is implemented can be either the registered headquarters or the business location. Some tax incentives for new investment projects include:

  • A preferential tax rate of 10% on corporate income tax for 15 years if the business has a new investment project in areas with difficult socio-economic conditions, economic zones, high-tech zones, including information technology concentrated areas, as specified by law.
  • A preferential tax rate of 20% on corporate income tax for 10 years if the business conducts a new investment project in areas with difficult socio-economic conditions, as prescribed by law. Exemption from corporate income tax for 4 years, and a 50% reduction in the payable tax amount for the next 9 years if the business has a new investment project in areas with difficult socio-economic conditions, economic zones, high-tech zones, including information technology concentrated areas, as specified by law.

In practice, many investors encounter difficulties when choosing a location for their operations when establishing a business in Vietnam. This arises from the fact that there are many regulations related to location scattered across various legal documents, not only specified in laws and decrees but also governed by specific policies at the local level. Therefore, to choose a suitable location that complies with the regulations and offers tax advantages and other incentives, investors should conduct a thorough survey of the location and seek advice from consulting firms. This is to ensure that the chosen location is legal and approved by the business registration authority, and to avoid administrative penalties for violations of the law.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.