I’m sure we have all heard both horror and success stories about foreigners starting a business in Vietnam. Setting up and running a business is already difficult but even more so with the added challenges when doing business in a foreign country.
There is no doubt that there are many opportunities here in Vietnam, it is actually one of the fastest-growing economies in the world. It can, however, be challenging starting a business in Vietnam – which some would call an “organised chaos” market.
Hopefully, this article will give you a bit of a heads up for starting a business in Vietnam. And if any of your questions were not answered you can always request a free business start-up report, just list your questions out and we will get back to you within 24 hours.
1, First things first, let’s debunk some myths
- You need a Vietnamese business partner.
- It must be 51% ownership by a Vietnamese national.
- The costs of setting up a business are high.
- There is a lot of “red tape” and I will get overcharged for everything.
All of the above are in most cases incorrect. There is not as much “red tape” and people trying to swindle you as you may think. The absolute crucial part of starting a business in Vietnam is to find and work with good services providers.
It might be surprising, but there are black and white rules for setting up a business in Vietnam. And yes, not all plans and projects will fit the requirements, but with accurate information and knowledge, you can reassess and adjust your plans accordingly and strategically.
2, What usually happens if you choose unprofessional service providers
Here are a few all too common situations when working with unprofessional service providers when starting a business in Vietnam.
- Your service provider does not inform you about the rules and regulations clearly, therefore you cannot make informed and wise decisions.
- Your service provider decides to cut corners to see if they can “get away” with it. Whilst most of the time you are ill-informed.
In fact, sometimes they might get away with having missed some important documentation or procedures. However, these small errors/mistakes will often come back up when it’s often too late to fix and you will either be fined or worse. The red flags usually come up when the authorities are changing documents, auditing or just checking the overall compliance of your company.
3, Considering what structure is appropriate for your business
Before starting a business in Vietnam, it is important to decide which structure is right for your business. Under the Vietnam Law on Enterprise as well as Law on Investment, foreigners are allowed to determine an appropriate structure to start their businesses in the country.
Therefore, we will cover some fundamental business structures that foreigners can consider.
- A Limited liability company (LLC) is a form of business that allows you to establish a company with 100% foreign capital, also known as a 100% foreign-owned company. Limited liability companies are one of the most common forms of business in Vietnam with a maximum of 50 members. The liability of the members is limited to the extent of the capital they have invested in the company.
- A Joint-stock company (JSC) is also a business structure that allows you to set up a 100% foreign-owned company in the country. However, a joint-stock company is required to include at least three founding partners.
- A Business Cooperation Contract (BBC) is known as an agreement between foreigners and Vietnamese partners for conducting business activities in Vietnam. For this type of structure, foreigners are allowed to start their business in the country and the contract’s participants have unlimited liability for any financial obligations or debts to the company.
Besides, foreigners can set up a private enterprise, a joint-venture company in Vietnam, even make a financial contribution or buy shares to join a domestic enterprise.
4, Required documents for starting a business in Vietnam as a foreigner
Depending on the type of business structure, you are required to prepare specific documents to complete the process of setting up your business in the country.
Here are some of the main documents needed for registering a business in Vietnam:
- Rental contract of registered address of the company.
- Bank statement of the investors showing each member has sufficient capital to invest.
- Passports and valid visas of all the investors.
- List of members of the board of management
5, Costs for starting a business in Vietnam
To start your business, grasping all the necessary information about the costs of starting a business in Vietnam is considered a matter of primary concern as it’s not always very clear. In the article, some basic costs will be mentioned in detail below:
5.1, Market research costs
Before starting a business in Vietnam, spending money and effort on conducting market research on the target customers, competitors, and the market is highly recommended.
Depending on the complexity of the product/service offering and market, the cost that businesses invest to conduct market research will not be the same. However, roughly speaking, it is between 500 and 2.000 USD.
This is not a requirement of course but recommended for most industries. If you have time and you’re on a limited budget, then there are some interesting resources online to conduct sufficient market research by yourself if needed. You can contact our team for these resources.
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5.2, Legal written report
For legal consultancy for your business formation, USD 100 -150 can be considered a comfortable cost to get a professional and high-quality written legal report focusing on your business project for starting a business in Vietnam. This is not a requirement but recommended if you want to plan carefully before investing a substantial amount of capital and if your business has some complex business lines.
5.3, Investment certificate and enterprise certificate costs
To start a business in Vietnam, foreign-owned businesses are required to apply for an enterprise registration certificate (ERC), and an investment registration certificate (IRC).
Commonly, around USD 1,250 to 2500 for foreign-owned enterprises (both the ERC & IRC) and around USD 350 to 1000 for Vietnamese-owned businesses (only an ERC is required)
5.4, Sublicense costs
Starting a business in Vietnam requires you to apply for one or more so-called “sub-licenses” depending on the specific type of business.
Commonly, the cost for these additional licenses varies between USD 60 and 500 depending on a case-by-case basis.
5.5, Charter capital
To start a business in Vietnam, foreigners are required to commit a certain amount of charter capital before establishing their businesses in the country or any other country. Depending on their project’s location, scale, and many other factors, the minimum “passable” amount will dramatically vary.
For example, you are required to meet the minimum charter capital of USD 10,000 or 15,000 to start your business in Hanoi or Ho Chi Minh City and around USD 35,000 to 40,000 for projects in Da Nang and Hoi An. However these guidelines are changed from time to time by the department of planning and investment, if you would like to know what it would cost to start your business in Vietnam don’t hesitate to contact us.
Keep in mind that there may be alternative solutions for your plans if the investment capital is not within your budget.
5.6, Post-certification procedures
To open a corporate account, register a company seal, purchase a company name sign, you only need to spend around USD 150 in total and it could be completed within 7 days. This fee is often included within a package of most service providers.
6, Dealing with tax matters for starting a business in Vietnam
6.1, Business taxes for starting a business in Vietnam
It is necessary to have a thorough grasp of corporate taxes in Vietnam before starting a business. It includes some of the following basic taxes:
- Value-added tax (VAT)
- Corporate income tax (CIT)
- Personal income tax
- Foreign contractor tax (FCT)
- Other taxes
Bizspective™ is the home to the best business experts in Vietnam, so if you need any tax and accounting information you can either contact our team or book a consultation with our tax and accounting expert.
6.2, Vietnam tax filing timeline
Based on your company’s revenue in the previous year, you must determine whether your business belongs to the monthly or quarterly tax declaration.
Basically, enterprises with previous year revenue of less than 50 billion VND or newly established companies are classified as the quarterly tax declaration, and enterprises with previous year revenue of more than 50 billion VND belong to the monthly tax declaration.
After that, you can pay all the taxes according to the Vietnam business tax timeline.
6.3, Tax consultant for foreigners start a business in Vietnam
As already mentioned before starting a business in Vietnam, it is essential to connect with a reputable tax consultant to help you deal with business tax matters and solve any serious difficulties related to corporate taxes as well as accounting.
If you are having trouble finding a reliable tax consultant, we are always here to help you to reach the best service providers for starting your business in Vietnam.
1, Can foreigners start a business in Vietnam?
As a foreigner, you are allowed to start your business in Vietnam through indirect or direct foreign investments.
- Indirect foreign investment: foreigners will hold a position in company management through buying shares from Vietnamese companies, however, this also depends on the agreement between the Vietnamese partner and you.
- Direct foreign investment: foreigners can cooperate with Vietnamese partners in a joint-venture or 100% foreign-owned company. However, foreigners are required to obtain an investment registration certificate (IRC) and complete all legal procedures as stipulated in Vietnam Law before directly investing in the country.
2, What are the challenges of starting a business in Vietnam?
During the process of business operation and development, foreign businessmen often face many challenges including:
- Completing legal procedures: Vietnam is known as one of the most complex start-up environments because foreigners must complete many procedures to start a business in the country. Some of these procedures are quite unfamiliar to foreign businesses such as registration of the seal-sample at the Police Department.
- Paying business taxes: This is something that is difficult in any foreign country as taxes, rules and regulations differ from country to country, dealing with taxes matters is considered a burdensome process, however, having a competent accountant can make things dramatically easier and relatively stress-free.
- Applying for construction permits: On the occasion, you would like to construct on land, the process takes around 110 days as well as 11 legal procedures to obtain construction permits in Vietnam. This is only for external construction that is not already approved.
3, Is Vietnam a good place to start a business?
Vietnam is known as a great place for investing or launching a business for foreigners thanks to its unique strengths including the emerging young and dynamic labour force, low cost of living, infrastructure development, strong economic growth rate, potential market, support of the government, low labour cost, young and fast-growing business environment, and so on.
For these reasons, it is no surprise that Vietnam is a good place for foreigners to start their businesses. Hopefully, with the few general tips mentioned in the article, it will make things easier and prevent you from any future major issues within your company. And of course, if you have any questions don’t hesitate to contact us or you can even register for a free business start-up report below.
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