How do I start a business in Vietnam as a foreigner?
Originally Answered: How do foreigners open a company in Vietnam?
Is is VERY difficult for a non-national to start a company in Vietnam & the rules & regulations attached to it are “mind-blowingly” convoluted & complex.
Do your due diligence & research, research, research, then do some more research…! Then plan, plan, plan & do some more planning.
If you don’t speak the language, you are increasing the difficulty even more.
If you are not good at networking, forget it.
Whereas in the west it’s;
“Lets do some business & along the way we’ll get to know each other”
“In Vietnam it’s, lets get to know each other, then maybe well do some business”
Get used to the term “facilitation” payments
In regard to setting up, there are different rules that apply to different types of companies/industries.
In some cases certain business types are not permitted if you are a foreigner & in other cases it is a legal requirement to have a Vietnamese business partner, who has to have 51% ownership.
Also if you intend to send profits off-shore it gets more complicated.
Salaries paid to a foreigner attracts about a 30% tax rate, taking dividends from a company will also attract a higher tax rate
Creating a company in Vietnam is way more complex than in countries like the US, Australia or Singapore. Vietnam requires multiple layers of restrictions, verification and review.
Please heed my words; you either have to be one of the bravest entrepreneurs on the planet, the type of person that can overcome ANY & EVERY obstacle known to man, or you are certifiably insane.
I have listed some of the general requirements below, this is by no means an exhaustive list
It may take up to 3 months for the creation of a new foreign-owned company. In practice, much of this time may be required to get the necessary documents. Certain documents will need to be authorized both in your home country and locally in Vietnam.
A typical foreign entrepreneur will seek assistance to identify the relevant type of company to register, gather and translate any documents, and engage with authorities throughout the application process. Foreigners also tend to need assistance to open the required bank accounts.
Company registration costs depend on the specific type of business you are opening in Vietnam. The Department of Planning and Investment will review your application and will consider the capital necessary for the business to be established. The minimum capital requirements vary depending on the type of business you intend on opening. Some businesses may require licenses to operate.
Total costs can vary, but for a foreign entrepreneur seeking a new software development company, assume you’ll incur up to $5,000 USD in fees, with a minimum capital value of $10,000 USD. This capital needs to be settled into a bank account in Vietnam and you can then start using it for company expenses once the registration is complete and local bank accounts have been set up.
Taxes
Your startup company in Vietnam will need to pay several types of tax:
Business license tax. This is charged right after your company is registered, and then paid on an annual basis thereafter. For a typical small-capital company, the business license tax is 2m VND per year ($85 USD).
Value Added Tax (VAT): generally assume 10% on most transactions, but the actual rate depends on the product or service your company is using. This can be debited and credited.
Company income tax (CIT): the tax rate is 20% on company profits, but there are some exemptions. For example, software development companies may gain an incentive tax rate and there is discussion of lower tax rates for SMEs.
If you’re purchasing services from a foreign contractor, you will also need to consider Foreign Contractor Tax (FCT). The specific tax rate depends on the service and your company will pay directly to the government on behalf of the foreign contractor.
Don’t forget labor taxes paid by employers. Each month, an employer is required to pay several forms of social security related to its employees. Social insurances are 17.5% of their gross monthly salary. A further 3% is charged for health insurance, 1% for unemployment insurance and 2 % for trade unions.
Finally, your employees are also obligated to pay personal income taxes and insurance. These are separate and additional to the labor taxes paid by the employer (mentioned above), but there can be an expectation by employees that the company will also bear the cost of their obligations. Employees will often negotiate on the basis of a net pay. While this attitude is changing, beware of this expectation during salary negotiations.
I do hope this helps…?
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Can foreigners start a business in Ho Chi Minh?, can they open a bar or coffee shop/restaurant in HCM ? Alex J