The fourth myth in Bizspective’s series “Debunking myths about opening a company in Vietnam” is about the fixed costs. Some foreign investors believe that the fixed costs of running a business in Vietnam are expensive, but is that true?
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Fixed costs are costs that must be paid regardless of the activity or performance of the business. Whether the company has revenue or not, it has to pay fixed costs.
There is a list of maintenance costs when running a business in Vietnam such as additional licence fees, accounting fees, auditing fees, taxes, staff salaries, and so on.
The fixed costs of each company are different depending on the type of business, the size of the operation, the business line, and other factors.
The cost to set up and maintain a company in Vietnam may be expensive to people who want to sponsor their visas. However, for those who want to access the Vietnamese market, it is not very high. In fact, it’s relatively low compared to other countries.
Here are the basic and important fixed costs that you need to keep in mind when you intend to open a company in Vietnam.
There is a list of maintenance costs of running a business in Vietnam including auditing fees, VAT, CAT, etc.
Most companies in Vietnam need staff, and there are two main options when it comes to hiring staff in Vietnam. That is either officially employ them with a labour contract, or make use of freelancers.
In Vietnam, like in most countries, there is a legal minimum salary that you must respect. If you officially hire somebody in Vietnam, you will also need to register them for compulsory insurance which is 21.5% on the employer side and 10.5% on the employee side. Other than that, the salary you need to spend on your staff depends on their position, their skill level, and their experience.
The cost of hiring employees needs to be calculated carefully as it includes other compulsory insurance and taxes.
For small companies, the audit fee is not very burdensome. For VND 4 – 5 million, you can already find a good auditor. Please note that it has to be an independent auditor, it cannot be your in-house tax agent.
If your company in Vietnam has loads of transactions and complicated structures, then the yearly audit fee is a bit more expensive.
For smaller start-ups, in the beginning, when they are not generating cash flow and there is not so much revenue, the bare minimum costs would be for the office (VND 1 million if it’s a virtual office) and yearly financial audit (VND 5 – 10 million per year).
The cost of auditing each business is different depending on the size and number of transactions.
Something else to keep in mind is the tax. If you have registered your company in Vietnam, then you must take care of filing and paying your taxes on a regular basis.
Taxes are one of the most important things that you need to learn when living and working in a foreign country. When running a business in Vietnam, you have to find out what taxes you have to pay, the terms and conditions, how much the tax is, the business tax timeline, and any tax incentives that can be applied.
Some taxes need to be filed and paid monthly like personal income tax and others are paid quarterly like a value-added tax (VAT). And then there are taxes finalised yearly like corporate income tax (CAT).
Some businesses, especially bigger ones, usually hire an in-house accountant to calculate their taxes. Running a business in Vietnam, you can hire an in-house accountant, a full-time position starting from VND 10 -15 million per month. Other business owners of the smaller ones often outsource that service to a third party tax agent.
The costs of running a business in Vietnam are really low compared to other countries for those who want to access the Vietnamese market.
Another fixed cost could be for the registered address. Running a business in Vietnam, you need a location where your company will be addressed. It must be a building that could be used as an office or looks like an office.
For smaller businesses in Vietnam, you could get a virtual office that cost around VND 500.000 to 1.5 million a month, which is kind of cheap.
Generally speaking, the fixed costs of running a business in Vietnam aren’t too bad and it’s quite low compared to other countries.
This is definitely a myth busted.
The fixed cost for running a business in Vietnam is not very expensive.