Fidinam Podcast: Global FDI & Tax Updates

Vietnam: Doing Business in Vietnam – The Case of a German-owned Startup

• FIDINAM • Season 1 • Episode 2

Share episode

In our second episode, we had the privilege of welcoming Felix Süllwold, co-founder and CEO of CODE LEAP Vietnam, as our esteemed guest. Together we explored the complexities of setting up and running a business in Vietnam, with a particular focus on the software consulting industry. Felix's wealth of experience and valuable insights shed light on various administrative aspects, including tax incentives and human resources, while also highlighting the many opportunities and potential challenges within this dynamic Southeast Asian nation.

Felix emphasized the importance of Vietnam's dynamic culture and its people's openness to international business opportunities, which played a key role in his decision to set up a business here. The presence of exceptional software development talent, a strong work ethic and competitive cost advantages made Vietnam the ideal choice for CODE LEAP.

📽️ ⇢ Watch us on YouTube
✉️ ⇢ Contact us directly at info@fidinamgw.com
🌏 ⇢ Download our Company Profile
🚀 ⇢ Download our Business Guide

Thao:

Hello everyone. Welcome to the Fidinam podcast, Unlocking Vietnam, a podcast aimed at sharing the experience of foreign companies and entrepreneurs in doing business in Vietnam. I'm Phuong Thao.

Francesca Severoni, Fidinam Vietnam:

And I'm Francesca Severoni. We are Fidinam Vietnam, a Swiss business and tax consulting firm dedicated to helping foreign businesses and entrepreneurs navigate the exciting landscape of Vietnam. Throughout our podcast, we will explore Vietnam's appeal as a prime investment destination for foreign companies and visionary entrepreneurs.

Thao:

in the first episode, my colleague and our guest just an intensive discussion on Vietnam as a destination for foreign investment. Today we have a special episode that's all about running a business in Vietnam. Our guest today is a businessman who has taken the plunge into the thriving Vietnamese market. He brings a wealth of experience and insight to the table, and we are now excited to pick his brain about the opportunities and challenges. of doing business in Vietnam. So, whether you are budding entrepreneurs looking to explore new markets, or just curious about the business landscape in Vietnam, you are for a treat. Our guest journey is filled with valuable lessons, and practical tips that can benefit anyone in the world of business. Without further ado, let's welcome our guest today, Felix Suellwold, Co-Founder and CEO at CODE LEAP Vietnam. Welcome, Felix. Thank you for joining us today. We truly appreciate your availability and expertise in shedding light on the intricacies of doing business in Vietnam. Now, to kick things off, could you please introduce yourself to our listeners, and give us some insights into the business that you have started in Vietnam.

Felix:

Thanks for having me here. It's a great setup. hi, I'm Felix Suellwold and I'm the CEO and co founder of CODE LEAP. We are a tech consulting firm. We are based here in Vietnam and in Germany, and we are primarily focused on clients in the German speaking area. So the DACH market. Germany, Austria, Switzerland, and we work with large corporate companies to shape their digital transformation process, but also with startups who want to get more firepower to speed up their product development, also German and Austrian SMEs, small medium enterprises that need help to execute their projects. So we have built a team here in Vietnam and also in our offices in Germany and Frankfurt and Berlin.

Thao:

Thank you for your insightful introduction to both yourself and also your business venture in Vietnam. It's clear that our guest will have a lot of insights to share with us today. So before we dive deeper into the topic, I would like to learn a bit about your background. Could you please tell us about where you were based and what you were involved in before embarking on this exciting business journey in Vietnam

Felix:

So before coming to Vietnam, I was mostly working in the SaaS space. So software as a service, especially in e-commerce being a Shopify partner. And previously I worked here in Vietnam as well in Germany. Also had the chance to work a little bit in India and the reason why I came to Vietnam is actually because back in the day in 2012, studying in Switzerland at the University of St. Gallen, I had the chance to do an exchange. here to Vietnam. Um, and already back then, I felt, uh, this is a really interesting environment for me to be in, and I had this idea to eventually start a business. Obviously, back then, being a student, you didn't have any ideas, so to speak. But, uh, I came back in 2014 to Vietnam to work here, and, worked in a small, company that developed Android apps and went back to Germany, came back to Vietnam, you know, went, went back and forth. And whenever working in Vietnam, I felt like missing out on the German aspect, like being German, not being home and being able to capitalize on the German market. But whenever I was working in Germany, I felt, oh, I. really would like to work in Vietnam again and, and make that experience here. So now starting CODE LEAP really gave me the opportunity to, to get the best out of both, having a business in, in Germany, but also spending the most of my time here in Vietnam.

Thao:

So interesting. Thank you for sharing that background with us. And it's great to know that you already had knowledge about Vietnam and you came to Vietnam through a student exchange program before. And even you had some connections and experience related to Vietnam. For me, you know, what it's really interesting to learn about the path that led individuals to explore new horizon. So that's why to move forward, I would like to ask our guest about the reason why he decided to come and start his own business in Vietnam. So Felix, what were the driving factors or opportunities that led you to choose this dynamic market?

Felix:

So we had the idea to start CODE LEAP in Vietnam from the very beginning. So when we started the company in 2021 in Germany, the idea was already there to. Have the company being part of, uh, being part of Vietnam and Germany. So we didn't select between different countries. but the reason why we chose Vietnam from the very beginning is I think three things. So one is that here in Vietnam, you have a really large talent pool for IT professionals, for engineers, but also all the related professions. So if you think about design, product ownership, etc and this probably comes from Vietnam having a really strong education in the STEM programs, so the science and technology, etc And this is really important for us because as a software consultancy firm, we help German companies with their software development. And here in Vietnam, due to the large talent pool, you have a much easier time to hire talent. And in, in Germany, this is usually an issue for our clients. And then the other thing is the attitude of the people. So working here and doing that every day, working with, with a team here in Vietnam, I see that the attitude towards work and the, the responsibility, the ownership that people take for building their product is really high. So you don't have people who like sign off at five and be like, Oh, this is not my problem anymore. But they really identify with the products they built for the clients. And this is something that's also, again, being a consultancy firm is really important for us. And lastly, and this is, I think what probably most people think of is just the competitive advantage, because on one hand, of course, it's the salary levels, but I try to not to focus on that too much, just the availability in the market that you are able to hire software engineers in, let's say two weeks, four weeks, what maybe takes months in Germany and also like advantages like the 0 percent corporate tax rate is a nice bonus that we get here as a business. And this can give us a, or this gives us a competitive advantage over software consultancies who are, for example, only based in Germany.

Thao:

Thank you for sharing your motivations So, in fact, your insights also underscore the compelling reasons behind Vietnam's increasing attractiveness to foreign investors. What our guest has just highlighted aligns with the key driver that make Vietnam a highly appealing designation for foreign investment. In addition to what our guest has mentioned, I would like to contribute some more points. So first of all, I would like to talk about the stable politics in my country. The stable political environment in Vietnam, under the management of a single party, has been always a significant factor that foreign investors consider when choosing Vietnam as their destination for investment. This stable politics creates and provides with a sense of, security and consistency in the business landscape, which is highly attractive to foreign investors. And secondly, Felix, I have a question for you. So, in addition to the corporate income tax, which is 0%, as you have just mentioned in your answer, did you also look around, other International agreements, that Vietnam now is a member, or another taxation, I mean, tax implication, before you decide to set up your own company in Vietnam?

Felix:

Honestly, I, I haven't looked much in, to like agreements and foreign trade agreements, etc The only thing I see from my perspective being a startup founder is that, for example, the processes working with our German company, so our Vietnamese company and our German company obviously have to work together. And all these processes have been very straightforward, easy, obviously there's paperwork involved, but for me as a founder, it's important that things just work, and I feel they work very well for us.

Thao:

Okay, really practical insights. So, I, actually I have two points. So, first of all as you said, for, uh, the smooth export of your products in Vietnam. So, you know that in Vietnam, for the software products, and for the import/export service the VAT will be 0%. Yes, that is one of the incentives that you are having in Vietnam. That Vietnam now is a member of 80 agreements on double taxation avoidance, and 15 free trade agreements, Foreign investors stand to gain significantly from these agreements because they lead to the elimination and reduction of customs duty and the elimination of double taxation burden. When setting up a factory in Vietnam, for example, these free trade agreements will offer substantial advantages, reducing trade barriers and facilitating smoother international business transactions. And the last point that I would like to emphasize here is also another critical aspect that often captures the attention of foreign investors investment incentives in Vietnam. So as you know, our country offers a wide range of attractive investment incentives such as, corporate income tax incentives exemption of customs duty, elimination and reduction of land use fee. These incentives are designed to encourage and support foreign investment in Vietnam granted based on the size of the project, or based on the encouraged sectors, such as, uh, education, healthcare, renewable energies, software development, computer related service, and also based on the encouraged locations, such as economic zone and industrial park. Talking about the corporate income tax in Vietnam, as you already know, the standard corporate income tax in Vietnam is 20%, but if foreign investors invest in one of the encouraged sectors, or invest in one of the encouraged locations, or their project satisfy the conditions to be a huge project in Vietnam, they are subject to a lower corporate income tax rate, which can be 10%, 15% or 17% for a certain period of time, or even for the whole life of the project. In addition, companies in Vietnam might be considered for the tax holidays and tax reduction. So, as you know that the tax holiday in Vietnam takes the form of a complete exemption from corporate income tax for a certain period of time, which can be two years or four years, followed by a further period, which can be four years or nine years, These investment incentives not only enhance the overall business climate in Vietnam, but also contribute to the appeal of Vietnam as the primary destination for foreign capital. So talking about the taxation in Vietnam, Felix, I just mentioned to our listeners that there are a lot of income tax incentives in Vietnam. And because CODE LEAP Vietnam is doing the encouraged sectors in Vietnam. So to illustrate my point, could you please tell our listeners about the corporate income tax incentive that you are having in Vietnam?

Felix:

So, Because we export software services, we have a four year, corporate tax exemption, so that's zero percent, what I mentioned earlier. And now, for the next nine years after that, we will have the, correct me if I'm wrong, I think it's five percent, and then up to... The 15 years or the rest of the 15 years is going to be reduced. So instead of the usual 20%, we only have to pay 10%. And this is, this is great because it makes us invest more in Vietnam, focus more on Vietnam. So I think for us, uh, it's a great incentive.

Thao:

Yes, that's correct. With the software development activities or computer related service. Income from these activities are subject to 15 years of corporate income tax at only 10%, in which you have four years of tax exemption followed by nine years So having said that, among foreign incentives in Vietnam, corporate income tax incentives play a very important role in attracting investors coming to Vietnam. Now we just have explored all the advantages and opportunities that foreign investors can reap in Vietnam. It is also crucial for our listeners to have a comprehensive understanding of Vietnam, including its advantages and challenges. It's agreed that there are numerous opportunities for foreign investors. It is equally important to be aware of all challenges and obstacles that might be encountered along the way. These challenges might vary from the regulatory complexity to cultural difference or even the competition within the market. So, Felix, in order to give our listeners a balanced perspective that enables potential investors to make informed decisions and navigate the Vietnamese market efficiently. Could you please share with us some specific obstacles or challenges that you have experienced during the journey that you are doing business in Vietnam?

Felix:

I think first of all, one thing with regards to the challenges that you face here in Vietnam, I for myself adopted this mindset of, you know, I have all these benefits being here and I think a lot of things from the taxation to the labor market to the Just the motivation of our team, etc I have all these benefits, so then I feel I also have to live with the challenges. And actually looking into the challenges, I think they are few in comparison to the advantages you have. But I think some of the challenges that you could think of, or that I experience every day, and now being in Vietnam running the business for a longer time, uh, it becomes of course less. But you do have these cultural... Differences where you have to align with your team on a lot of different things, how to communicate with each other, how to manage expectations with each other, uh, coming to promotion, hiring, etc So we do internally a lot of trainings to improve communication or to not even improve, align with communication and work with that. So to make everyone, make this a nicer work experience for everyone. And we also do have the things with, language training and in English, what we do. So obviously when we work with German clients, the Germans bring in an accent and you have the Vietnamese team coming with an accent. Uh, so we do a lot of training with that because for us being a consultancy firm, communication is absolutely key and therefore we do a lot of trainings in that area. And you also have, and this probably comes in your area of expertise, all the bureaucracy that is linked to starting a business in Vietnam. I remember I don't even know how long it took, so we, just starting the company in Vietnam, you need a couple of papers, and we had to get like a special confirmation letter from our bank that we actually had enough money, and this had to be translated, I think, and then legalized, and there were some other documents, and then um, our company is not the standard limited company that you have in Germany, but like a limited company on shares. So this was unfamiliar. And, you know, for me, again, as being a startup founder, I just want the things to work. So we, uh, worked with a couple of. We have people, consultants we trust, and CODE LEAP is really good in software consulting, CODE LEAP is not good in bureaucracy, so we have handed this over to experts who we trust, and they figure out the processes for us, and again, I feel having all the benefits from Vietnam, this is just something I have to live with. I don't know, how is your experience with these processes here?

Thao:

Yes, so first of all, thank you for sharing your first hand experience. So actually, I like your mindset which involves embracing challenges. So I believe that it embodies the spirit of all successful entrepreneurs in the world. So back to your question talking about the obstacles when doing business in Vietnam, especially for administrative work. I have to agree with you that there have been challenges. But, on my side, I have also, witnessed remarkable improvement in administrative process over the years. Having supported foreign companies in setting up and doing business in Vietnam for over a decade, I have seen the government's steadfast commitment to reducing the paperwork burden and streamlining the procedure. In the past, setting up a foreign company could involve a mountain of paperwork and times of waiting. However, today, thanks to the government efforts, the process has significantly shortened, and most importantly, a part of the process now can be efficiently handled online. This shift not only enhances the ease of doing business in Vietnam, but also reflects the determination of Vietnam to foster a more business friendly environment for both local and international investors. So that is my opinion for this point. So, in addition to all the obstacles that you have just mentioned, do you, uh, did you encounter some other obstacles that you would like to share with the listeners today?

Felix:

I think with regards to bureaucracy so one thing we have is, uh, working permits. So, because, again, as a software consultancy firm, we really benefit from having an international team here in Vietnam, so it's not only a team of Vietnamese nationals, but we have hired people from Germany, from France as well, and each time, obviously, you need to get a working permit so that the employees can get their temporary residence card, so by now I already know the process, and this takes place. And I am sure it improved as well, but this takes some considerable amount of time. And also in our business, we have constellations where, for example, someone we hire from Germany doesn't have a university degree. So this is something that's not expected in the system because in Germany you can have this other type of education, which is not per se university, but especially for people who spend a lot of time with software development, they may, they may drop out of university, you know, and then explaining this process to the authorities and processing the data. Work permit, uh, is a, is a challenge, however it always works. I don't want to say the process is bad. I think, so far, all the processes we have done, where we needed team members to come here to vietnam and work here, have been working out really fine. And we continue to, to plan to do this more in the future as well.

Thao:

Wow. So for work permit, uh, I would have to again admit that the process of obtaining work permit has presented its own challenges because it is quite time consuming and it requires a lot of documentation for the foreign. Uh, worker because they need to prove with the Vietnamese authority that they're qualified to take up that work in Vietnam. And on the company side, they need to prove that they do not have a qualified Vietnamese employee for that position. So that's why they need foreign employee. But I think at that point is it’s worth mentioning, thanks to the efforts of Chambers of Commerce and Business Associations in Vietnam, many valuable feedback have been shared with the authority, leading to the ongoing amendment of regulations aimed at simplifying the immigration process now. share with our listeners that if you decide to set up a company in Vietnam, you will not feel alone because here we have a lot of chambers commerce and business association dedicated to supporting foreign companies, providing reliable resources, networking opportunities, and advocacy to address all issues that foreign companies encounter along the way. In my opinion, these organizations play a very important part in helping foreign investors to navigate the intricacies of Vietnamese business landscape. We just have very interesting discussion on both advantages and disadvantages of doing business in Vietnam. Let's shift our focus on accomplishment being achieved in this dynamic market. These successes can serve as real life examples to inspire and inform our discussion today. So, Felix, for nearly two years running your own business in Vietnam, I'm quite confident that you have already achieved some significant milestones. Could you please share with me and also our listeners some accomplishments that you are most proud of and your aspirations for the coming years?

Felix:

So even though coming to Vietnam wasn't, it wasn't my first time coming here, but it was the first time for me starting a business. So it was very unclear in the beginning of what was going to happen. But obviously the whole team was like very motivated to build something here. So after two years, I'm really proud of the team growing to 40 people already. So we mostly have, uh, software engineers here in Vietnam and the team is really focused on the, on the Vietnam side. And we have executed some really great projects for our German clients. We worked with a large German retailer to totally reshape the way they process their digital data, review it, enrich it, publish it, etc. And we have helped out a lot of clients in the small medium enterprise segment to finish up their projects when they had really tough deadlines, support the teams, integrate the teams. And this has really been a good challenge for the team here in vietnam to grow. And because they take so much pride in, in doing this and it has also grown their skills and their confidence. And a lot of the team members really feel proud to work on, on such an international level with the German colleagues or with a German client. So this makes me very proud that I see the team growing so much. And another thing is maybe interesting for our listeners. So we have. earlier been in the coworking space here when we started out in Vietnam, which was nice and cozy. But then last year we finished our office build in Binh Thanh district. So for our listeners, if you are around, if you want to grab a coffee or if you just want to open your laptop, get some work done, feel free to shoot me a message. We always have a seat available and like to share that with you as well.

Thao:

Sure, we will. We look forward to seeing your new beautiful office. Of course, congratulations, Felix, on the accomplishments which are really impressive. I wish you continued success on your journey in Vietnam. To our listeners, remember that the journey to success in Vietnam is filled with opportunities waiting to be seized. With dedication, adaptability, and the good guidance, you too can achieve remarkable results in this dynamic market. So, Felix, to end up our discussion today, what would be two or three key messages that you would like to send to potential investors who are interested in entering this Vietnamese vibrant market? I

Felix:

think one thing I would recommend for investors to look into, and this probably goes beyond just investors for the software sector, is to not just do it for the salaries. So of course if you look into your reports and you will see that the salary level here is lower, et cetera. But the soft factor that maybe is hard to measure and that you will only experience once you work with the team here on the ground is that this whole motivation, this open mindedness, this eagerness to, to learn and improve is a really important factor when you start a company here, when you start building a team. So I think this is something that investors should consider on top of just the, the bare facts of maybe the average salary being, you know, lower than in, in other markets in the area. And another thing, I got this from a friend, is that Vietnam is just a nice place to live. So of course, there's also kind of a soft factor and once you're here, you will see it. But if you are building a company outside your typical, you know, European countries, um, one thing that is important is if you want to attract. Uh, international team. If you want to have some expats or some people from your home country working with you, having such a nice place as in Vietnam that is really open minded, that is easy to live in, that is easy to find a good place to live, and the weather is nice, etc. This plays an important soft factor as well. And it will be really good for your team and for growing your company if you can set up an international team as well.

Thao:

Thank you for the message, which were not only helpful and practical, but also thank you for the encouraging comments about Vietnam being an excellent place for living and building international team and for doing business purposes. Also thank you for being our valuable guest today for sharing all valuable insights and experience with us. We look forward to seeing your business grow in this vibrant Vietnamese market. To our listeners, we have just finished an insightful discussion that has allowed to explore both advantages and challenges of doing business in Vietnam. Through this discussion, we have gained valuable perspective from Felix, who has first hand experience as an investor in Vietnam, and from myself, as a lawyer, who has been alongside with foreign investors. Our aim today has been to provide you, our listeners, a well rounded understanding of what it truly entails to navigate the Vietnamese business landscape successfully. Thank you for joining us on this journey of exploration and learning. If you have any questions in the description section, you will find our contact details. Please don't hesitate to reach out to us. We are eager to connect with you. You will also find a link to download our business guide, which mainly provide you the guidance on how to run a business in Vietnam. Stay inspired, stay informed, and stay tuned for further enlightening discussions in the future. Goodbye for now and good luck to you.