If you are working out how to set up an offshore development center in Vietnam, the first decision is a legal one: who employs the engineers. You can open your own Vietnamese company, have a vendor build a team and hand it over later (build-operate-transfer), or run a dedicated team that a vendor employs and hosts for you. Each route puts different obligations on your side, and the rules for the first one changed in 2025 and 2026.
This guide compares the three routes, lists what Vietnamese law asks of a foreign-owned employer as of October 2026, and then walks through the vendor-hosted setup step by step. We are a vendor ourselves: MOHA Software runs delivery from Hanoi and has an office in Yokohama. We sell the third route, so read our view with that in mind. The legal sections cite law firms, PwC and Vietnamese government portals so you can check them. They are a map for your first conversation with counsel and are no substitute for legal advice.
Three ways to set up an offshore development center in Vietnam
| Your own legal entity | Build-operate-transfer (BOT) | Vendor-hosted ODC | |
|---|---|---|---|
| Who employs the engineers | Your Vietnamese company | The vendor first, your company after transfer | The vendor |
| Vietnamese entity needed | Yes, before the first hire | Yes, by the time of transfer | No |
| Registration and licensing | You: enterprise registration and investment registration | The vendor's entity at first, yours later | None on your side |
| Labor contracts, payroll, insurance filings | You | Vendor, then you | Vendor |
| Local tax filings | You | Vendor, then you | Vendor; you pay a service fee under a cross-border contract |
| Day-to-day direction of the work | You | You | You set priorities; the vendor's PM or delivery manager runs the team |
| What you sign | Charter, office lease, labor contracts | Service agreement with transfer terms | Master services agreement and statement of work |
| How you exit | Liquidate or sell the company | Decline the transfer, or wind up after it | End the contract on its notice terms |
| Fits when | You are sure of a long-term presence and have local management | You want your own company eventually but not on day one | You want engineers on your product without becoming a Vietnamese employer |
Route 1: your own legal entity
Owning the company gives you the most control and the most paperwork. Here is what the paperwork consists of.
Registration: the order of steps changed in 2026
Until this year, a foreign investor needed an Investment Registration Certificate (IRC) for a project before it could incorporate. Vietnam's new Law on Investment (No. 143/2025/QH15) was adopted on 11 December 2025 and took effect on 1 March 2026, replacing the 2020 law. According to the government's Invest Vietnam portal, foreign investors can now establish the company first and handle the IRC afterward, provided they meet market access rules.
Allen & Gledhill's summary of the implementing Decree 96/2026 describes two paths:
- Company first. You incorporate under the Law on Enterprises, then obtain the IRC within 12 months. Until the IRC is issued, the company cannot add further business lines to its registration.
- IRC first. You register the project, then incorporate. For projects that do not need investment policy approval, the decree sets a 10-working-day timeline for issuing the IRC.
The Enterprise Registration Certificate (ERC) is the incorporation document. The business registration agency has to examine the file and grant it within 3 working days of receiving a valid dossier. Since 1 July 2025, amendments to the Law on Enterprises (Law No. 76/2025/QH15) also require new companies to file a list of beneficial owners with the registration dossier. A beneficial owner is an individual who directly or indirectly holds at least 25% of the charter capital or voting shares, as Allen & Gledhill explains.
Those statutory clocks start when the authority accepts a complete file. Preparing that file (legalized parent-company documents, a registered office address, proof of financial capacity) usually takes longer than the review itself. Vietnam keeps a negative list for foreign investment, so have counsel confirm how your planned business lines are classified before you file.
Employment under the Labor Code 2019
Once the company exists, every engineer needs a labor contract under the Labor Code 2019. A few rules shape how you hire.
Probation is capped. For roles that need a college-level qualification or higher, which covers most engineers, probation cannot exceed 60 days. For enterprise managers the cap is 180 days. An employee can be put on probation only once for a given position, and probation pay must be at least 85% of the offered salary. During probation either side can end the arrangement without notice or compensation. These points come from Vietnam Briefing's 2026 guide to probationary contracts, which cites Articles 24 to 27 of the code.
After probation, notice periods apply. An employee who resigns must give at least 45 days' notice under an indefinite-term contract and at least 30 days under a fixed-term contract of 12 to 36 months, according to Conventus Law's summary of Articles 35 and 36. An employer can end a contract unilaterally only on the grounds the code lists, such as repeated underperformance against documented criteria or long-term illness, and must generally observe the same notice periods.
For a US manager used to at-will employment, this is a different regime. You cannot shrink the team at short notice because a roadmap changed. Budget and plan for that before you hire.
Mandatory insurance on top of salary
Employers pay social, health and unemployment insurance for employees on Vietnamese labor contracts. PwC's Vietnam tax summary, last reviewed in September 2026, gives these contribution rates:
| Scheme | Employer rate | Employee rate |
|---|---|---|
| Social insurance | 17.5% | 8% |
| Health insurance | 3% | 1% |
| Unemployment insurance | 1% | 1% |
| Total | 21.5% | 10.5% |
The salary base for social and health insurance is capped at 20 times the government's reference level. Unemployment insurance applies to Vietnamese employees only and has its own cap, set at 20 times the regional minimum wage. Run the numbers per person when you build the budget.
Corporate income tax and software incentives
The standard corporate income tax rate is 20%, per PwC. Software production is on the list of sectors the government encourages. PwC's incentives summary describes two common preferential rates, 10% for 15 years and 17% for 10 years, counted from the first revenue, plus tax holidays that begin with a full exemption followed by a period at half rate. A new Law on Corporate Income Tax took effect on 1 October 2025.
Two cautions. First, the incentive attaches to qualifying software production activity. A captive center that bills its parent for engineering services has to show its work qualifies, and that is a question for a tax adviser before incorporation. Second, PwC notes that Vietnam's global minimum tax rules, in effect since 1 January 2024, can reduce the benefit for large multinational groups.
Personal data rules
Vietnam's Personal Data Protection Law (No. 91/2025/QH15) was enacted on 26 June 2025 and has been in force since 1 January 2026. Its implementing Decree 356/2025 was issued on 31 December 2025 and took effect the next day. The law builds on Decree 13/2023, the earlier decree-level regime. Tilleke & Gibbins' review of the law lists the parts a development center will feel:
- It applies to foreign organizations that process personal data of Vietnamese citizens, and to any organization operating in Vietnam.
- Data processing impact assessments and cross-border transfer impact assessments are filed with the Ministry of Public Security and updated on a six-month cycle when things change.
- Violations must be reported within 72 hours of detection.
- Fines for cross-border transfer violations can reach 5% of the previous year's revenue.
- Employers must delete the data of job applicants they do not hire, unless the applicant agrees otherwise.
This matters on every route, because your Vietnamese engineers are data subjects and their HR data may sit in your global systems. It matters more on the own-entity route, where the filings are yours.
Route 2: build-operate-transfer in Vietnam
In a BOT arrangement, a local provider recruits the team, sets up the office and payroll, and runs operations while the engineers work only for you. Later, the employees and assets move to your own company. Vietnam Briefing's overview of the model points to its main appeal: you can start hiring and delivering without first setting up a local legal entity.
BOT delays Route 1's obligations. It does not remove them. By the transfer date you need the company, the registrations and the HR function described above. Settle these points in the contract before the build phase starts:
- What triggers the transfer: a date, a headcount, or your decision.
- How people move. Each engineer signs a new labor contract with your entity, and each one is free to decline. Agree how seniority and accrued leave carry over.
- What transfers besides people: equipment, software licenses, the lease, recruitment data.
- The transfer fee formula, written down at signing.
- What happens if you decide not to take the transfer.
BOT makes sense when owning the entity is a firm goal with a planned date. If ownership is only a possibility, a vendor-hosted team with a transfer option negotiated later is the simpler contract.
Route 3: how to set up an offshore development center with a vendor, step by step
Here the vendor is the employer and carries the obligations in the Route 1 section. Your work is to define the team, wire it into your engineering system and direct it. This is how offshore development center services are normally delivered in Vietnam, and it is the route we run. The steps below describe general practice. Where MOHA's own published material applies, we say so.
1. Define the first team from the work
Start from the next two quarters of your roadmap and derive roles from it. Write down the stack, the seniority you need in each seat, and which decisions stay with your own staff. A first team needs one person who can make technical calls locally, or every question waits a night for your time zone.
A published example of a team's shape: our Laos Edu project, an online learning, exam and e-library system for schools in Laos, lists a team of 10 working for 6 months on Angular, Java Spring Boot and MySQL. The case study describes a project, not an ODC, but a team of that size and stack is a fair reference point when you sketch a first product team.
2. Agree roles on both sides
You need a product owner who sets priorities weekly and a technical counterpart who reviews architecture and code. The vendor provides the engineers, QA and a PM or delivery manager who handles people matters. MOHA's ODC page lists web and mobile development, testing and QA, maintenance, and UI/UX design as the services a team can cover. If you only need one or two specialists inside a team you already manage, staff augmentation is the lighter model. It makes sense to hire a dedicated development team when you want a unit that owns delivery of a backlog.
3. Set up access and security before day one
- Issue named accounts from your identity provider, with SSO and MFA. Avoid shared logins.
- Keep code in your own Git organization from the first commit.
- Give least-privilege access by environment. Keep production data out of development unless it is masked.
- Agree device rules (disk encryption, screen lock, patching) and how offboarding works: who revokes access and how fast.
- Decide who administers CI/CD and cloud accounts. If you want the team to run infrastructure, scope it explicitly. We cover that work under cloud and DevOps.
4. Put IP and data terms in the contract
The master services agreement should assign all work product to you, bind every engineer to confidentiality through their employment terms with the vendor, and state governing law and dispute venue. If the team will touch personal data, add a data processing agreement that names the categories of data, where they are stored, and who files what under Vietnam's data protection law and your home regime. Also write down notice periods for adding and removing seats, and how replacements and handovers work. Remember the vendor is bound by the Labor Code's notice rules toward its own employees, so reasonable notice on your side keeps the arrangement workable.
5. Onboard in your environment
Prepare an architecture walkthrough, a local setup guide that works, and a set of first tickets that touch real code without being on the critical path. Have your technical counterpart review the first pull requests personally. Expect the opening sprints to be slower while the team learns your codebase and domain.
6. Fix the working rhythm
Choose one overlap slot per day and protect it. Hanoi is on GMT+7 all year. Put decisions in writing in the ticket or the pull request, so nothing depends on who attended a call. Ask for a written weekly report covering what shipped, what is blocked, and risks.
For QA, agree on test-case standards early. MOHA built an internal tool, Test-case AI, that drafts test cases from a library of more than a hundred templates written under ISTQB guidelines. Ask us how we would apply it to your product.
7. Grow in steps
Add people when the current team is predictable: estimates hold, reviews are clean, and documentation keeps up. If you later decide you want your own entity after all, the registration steps in Route 1 are your next project, and a transfer can be negotiated then. For how AI tooling changes team shape as you grow, see our post on AI-integrated ODC models.
A decision rule
Three questions settle most cases.
- Do you need to be the legal employer? Some companies do, for equity plans, regulatory reasons or acquirer expectations. If yes, you are choosing between Route 1 and BOT.
- Do you have someone who can run a Vietnamese company? That means a legal representative, an accountant, and HR that knows the Labor Code. If not, and you still want ownership, BOT buys you time.
- Is the need about engineering capacity or about corporate presence? If it is capacity, a vendor-hosted ODC gets engineers onto your backlog with no entity, no insurance filings and an exit that follows contract notice terms.
A vendor-hosted ODC has limits, and you should know them. The engineers are the vendor's employees, so you cannot grant them your equity directly, and their career path runs through the vendor. Your fee includes the vendor's overhead and margin on top of salary and the 21.5% employer contributions. You depend on the vendor's hiring and retention. And as explained above, the vendor cannot remove people overnight, so your contract will carry notice periods too.
Buyer-side readiness checklist
Before the first call, check that you have:
- A named product owner with time every week.
- A technical counterpart for architecture questions and code review.
- A backlog covering at least the next quarter, with priorities.
- Repositories, CI and environments you control, and a way to issue and revoke accounts.
- Documentation good enough for a new engineer to run the system locally.
- A decision on what data the team may access, and any contractual or regulatory limits on sending it abroad.
- Internal agreement on budget horizon and on who signs the contract.
If some of these are missing, tell us which. We would rather plan around a gap than discover it in sprint two.
Common mistakes
Choosing the route by headline cost. An own entity looks cheaper per engineer until you add the legal representative, accounting, HR, office and your own management time.
Treating BOT as outsourcing with an option attached. Without written transfer terms, the transfer becomes a negotiation at the moment you have the least room to negotiate.
Assuming you can hire and fire as you would at home. Probation caps and notice periods apply to whoever the employer is.
Leaving personal data out of the contract. Vietnam's 2026 law reaches foreign companies that process data of Vietnamese citizens.
Starting without a product owner. A team with no clear priorities will build something, and it may not be what you needed.
FAQ
Do I need a company in Vietnam to set up an offshore development center there?
No. With a vendor-hosted ODC the vendor is the employer and you sign a services contract from your home country. You need a Vietnamese company only if you want to employ the engineers yourself, either from the start or after a BOT transfer.
How long does it take to register a foreign-owned company in Vietnam?
The statutory review periods are short: 3 working days for the Enterprise Registration Certificate, and 10 working days for an Investment Registration Certificate on a project that does not need investment policy approval. Those periods start when the authority accepts a complete dossier. Document preparation, and the bank account, tax and labor registrations that follow, add to the total.
Can I convert a vendor-hosted team into my own entity later?
It can be done if both sides agree, and it works like the transfer phase of a BOT: you set up the company, and each engineer chooses whether to sign with it. If this is likely, raise it with us at the start so the contract can anticipate it.
Next step
If you are weighing these routes for a team in Vietnam, contact us to discuss it. Tell us what you are building, the roles you have in mind, and whether owning an entity matters to you.
