The costs of setting up a new company in Vietnam

New incorporation

The costs of setting up a new company in Vietnam

How much does it cost to establish a business in Vietnam?

Before you begin your business registration in Vietnam, you must first comprehend the cost structure of the company formation process. Knowing what you’ll have to spend money on and where you’ll have to spend it will help you see the big picture before making a decision and planning your tour budget. It will also assist you in determining how to cut costs for what is unnecessary or to find a cheaper alternative.

1. Capital investment in Vietnam

This is the biggest cost item of starting a business in Vietnam. It is the initial investment in the business that must be made before it can be self-sustaining. Some businesses have specific requirements for the amount of capital that must be injected into the business (by the law). However, the vast majority of businesses do not specify a minimum number. During the registration process, investors must make a decision and commit themselves to that. This capital investment must be injected into the company within 90 days of the date the business licenses are issued.

The majority of investors choose to begin their businesses in Vietnam with a minimum capital investment of $10,000 USD. In truth, lesser capital corporations (as little as $3,000-$4,000, $5,000) have been successfully registered, particularly for simple businesses such as Consulting, IT, etc. The size of the owner’s capital will also affect the success (or duration) of the visa that permits him or her to remain in Vietnam. The greater the capital, the greater the likelihood of obtaining a long-term stay permit, whereas the smaller the capital, the more likely the immigration office will dispute the visa application.

Please note, the capital is paid up right after the company license is obtained (within 90 days), missing this deadline will put the company and investor under heavy penalty.

2. Business address (use virtual office) for business registration in Vietnam

One of the basic requirements for establishing a company in Vietnam is to have a business address. A business address is not the same as a residential address. It is met by displaying a leasing contract that indicates the reason for business registration. Some businesses have stringent requirements regarding the location of their operations (such as F&B, Warehousing, manufacturing). Others permit the use of a virtual office for registration.

Virtual office is accepted for business registration in most of big cities in Vietnam such as Ho Chi Minh city or Hanoi. Other cities/provinces may not be this flexible. The cost for virtual office rental depends on the location and the grade of the building. It varies between $400-800 per year. For grade A+ office building located in city center (if you need this for business branding), the cost can be $1,000-$1,900/year.

The virtual office service involves the use of the address for business registration, with the company’s name displayed at the location. It does not cover the use of the premises’ space or rooms, which are subject to additional fees.

3. Hiring a resident director in Vietnam

During the registration process, a company must appoint a resident director. If the investor is not in the country at the time of registration, he must delegate or hire someone. You can save on this cost by asking a friend/relative in Vietnam (either Vietnamese or non-Vietnamese) to hold this position. This resident director is a legal representative of the business, not necessary a shareholder of the company. This cost can be zero (if you use your own arrangement) or $250-$450 per month if you hire someone for a nominee role.

4. Company registration admin cost in Vietnam

This includes the cost for paper preparation (documents notarization, legalization), state fees, and the service fee paid to a supporter or agency who will help you complete the registration process. It falls around $100-$200 (one-time fee).

5. Consulting/service fee for business registration in Vietnam

Even for a native Vietnamese, incorporating a firm on one’s own is difficult. The documents required for business registration are intricate and demand a comprehensive understanding of legal jargon and business regulations. Depending on the nature of the firm, the investment proposal or business plan that serves as the basis for the application for company registration would need to contain varied language and explanations. Unless you are a trained business consultant or attorney, this task requires a great deal of time and effort. Our recommendation is to seek professional assistance.

Service fee from different consulting/law firm can vary between $900-$2,500 for a standard and unconditional business registration. For difficult/conditional businesses (such as recruitment service, logistics, tourisms, ect.) which require additional licenses (from the regular licenses), the fee would be higher and the timeline will be longer.

Different consulting firms have different ways to tailor their service packages, the majority will include the establishment of a bank account and initial tax registration along with the acquisition of two business licenses (IRC and BRC).

Please remember, the cheapest option is not necessarily the best. You must consider the balance between the cost and quality. We have witnessed a large number of instances in which a service goes wrong, the client went for the lowest cost and eventually was left unattended and was not given the correct information, resulting in hefty fines or economic harm.

Post-establishment costs in Vietnam

After obtaining business licenses and opening a bank account, your business is regarded legally compliant. These are the deliverables promised by the consulting or law firm whose services you retain. The setup step is nearly complete.

What need to do next is to inject your capital into the company, and setup your accounting system for periodical tax reports.

6. Taxes for business in Vietnam

After successfully registering, the company is subject to the Business License Tax. This business license tax is a yearly fee that must be paid in the first month of the fiscal year (applied from the 2nd year of business). Within the 30-day grace period, a sum of $100-$200 is paid to the State Treasury. Failure to pay this tax will result in a penalty or a tax code block.

When the company begins to generate revenue and profit, it will be required to pay additional taxes such as VAT (8-10%), CIT (20% on profit), FCT(3-5%), and so on.

7. Setting up accounting system for your company in Vietnam

Once a company is registered, it has responsibility to submit periodical reports to the Government. This can be monthly or quarterly reports.

These reports adheres to specific templates, are written in Vietnamese, and precisely follows the accounting records. Therefore, you must configure the system so that these reports may be submitted on time.

Accounting system setup includes registering the company’s e-signature token, e-invoice, and accounting software. Companies that intend to hire full-time employees must also register their Social Security account and software.

At VNBG, we include this setup step in our Accounting and Payroll service, which will be proposed to the client immediately following the completion of the company registration (or before). Our clients are always aware of the potential fees associated with working with us. No hidden fees or unexpected expenditures.

Read more from here to understand How to start a business at the lowest possible cost in Vietnam.

Contact VNBG for more advice on how to plan your business incorporation now.