Before you incorporate an offshore company in Vietnam, you must first understand the cost structure of the company formation process. Knowing what you will have to spend money on and where you will have to spend it will help you see the big picture before making a decision and planning your budget. It will also help you determine how to cut costs for what is unnecessary or to find a cheaper alternative.
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Capital Investment In Vietnam
Capital investment is the biggest cost item of incorporating an offshore company in Vietnam. It is the initial investment that must be made in the company before it can become self-sustaining. Some businesses have specific legal requirements for the amount of capital that must be injected into the business, but the vast majority do not. During the registration process, investors must decide on and commit to a capital investment amount. This capital investment must be injected into the company within 90 days of the issuance of the business licenses.
The majority of investors choose to start their businesses in Vietnam with a minimum capital investment of USD 10,000. However, businesses with lower capital (as low as USD 3,000, USD 4,000, or USD 5,000) have also been successfully registered, especially for simple businesses such as consulting and IT, etc. The size of the owner’s capital will also affect the success (or duration) of the visa that allows them to stay in Vietnam. A larger capital investment increases the likelihood of obtaining a long-term stay permit, while a smaller capital investment makes it more likely that the immigration office will challenge the visa application.
Please note that the capital must be paid within 90 days of obtaining the company license. If this deadline is not met, the company and investor will be subject to severe penalties.
Using a Virtual Office Address for Business Registration in Vietnam
A business address is a basic requirement for offshore company registration in Vietnam. It is not the same as a residential address. It can be met by providing a lease contract that specifies the purpose of business registration. Some businesses have strict requirements regarding the location of their operations (such as F&B, Warehousing, Manufacturing, etc.), while others allow the use of a virtual office for registration.
Virtual offices are accepted for business registration in most major cities in Vietnam, such as Ho Chi Minh City and Hanoi. Other cities/provinces may not be as flexible. The cost of renting a virtual office varies depending on the location and the grade of the building. It ranges from \$400 to \$800 per year. For a grade A+ office building located in the city center (if you need this for business branding), the cost can be \$1,000 to \$1,900 per year.
The virtual office service includes the use of the address for business registration, with the company’s name displayed at the location. It does not include the use of the premises’ space or rooms, which are subject to additional fees.
Finding A Resident Director In Vietnam
During the incorporation process of an offshore company in Vietnam, a resident director must be appointed. If the investor is not in the country at the time of registration, they must delegate or hire someone to take on this role. You can save money on this cost by asking a friend or relative in Vietnam (either Vietnamese or non-Vietnamese) to hold this position. The resident director is the legal representative of the business, but they do not need to be a shareholder. The cost of this can be zero if you use your own arrangement, or $250-$450 per month if you hire someone to act as a nominee.
Administrative Costs Of Company Registration In Vietnam
The administrative costs of offshore company registration in Vietnam include the cost of preparing the necessary paperwork (such as notarizing and legalizing documents), government fees, and the service fee paid to a service provider or agency that will help you complete the registration process. These costs typically range from $100 to $200 (one-time fee).
Consulting/Service Fee For Business Registration In Vietnam
Even for a native Vietnamese, incorporating an offshore company in Vietnam can be difficult. The documents required for business registration are complex and require a comprehensive understanding of legal jargon and business regulations. The investment proposal or business plan that serves as the basis for the application for company registration may need to contain different language and explanations depending on the nature of the business. Unless you are a trained business consultant or attorney, this task requires a significant amount of time and effort. We recommend seeking professional assistance.
The service fees from different consulting/law firms can vary between \$900 and \$2,500 for a standard and unconditional business registration. For difficult/conditional businesses (such as recruitment services, logistics, and tourism), that require additional licenses (from the regular licenses), the fee will be higher and the timeline will be longer.
Different consulting firms have different ways to tailor their service packages, but most will include setting up a bank account and initial tax registration, as well as obtaining two business licenses (IRC and BRC).
Please remember that the cheapest option is not always the best. You must consider the balance between cost and quality. We have seen many cases where clients have gone with the lowest-cost option and ended up being left unattended or not given the correct information, resulting in hefty fines or financial losses.
Post-Establishment Costs In Vietnam
Once you have obtained your business licenses and opened a bank account, your business is considered legally compliant. These are the deliverables that the consulting or law firm you hired has promised. The setup process is almost complete.
The next step is to inject your capital into the company and set up your accounting system for periodic tax reporting.
Taxes For Business In Vietnam
After successfully incorporating an offshore company in Vietnam, it is subject to the Business License Tax. This is a yearly fee that must be paid in the first month of the fiscal year (starting from the second year of business). A sum of \$100 to \$200 must be paid to the State Treasury within the 30-day grace period. 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.
You can read more about Vietnam’s business taxation.
Setting Up Accounting System For Your Company In Vietnam
Once an offshore company in Vietnam is registered, it is required to submit periodic reports to the government. These reports can be monthly or quarterly and must adhere to specific templates, be written in Vietnamese, and accurately follow the accounting records. Therefore, the accounting system must be configured to submit these reports on time.
The 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 accounts and software.
At Iris International, our Accounting and Payroll service includes the accounting system setup step, which we will propose to the client immediately after the company registration is completed (or even before). We will always disclose the potential fees to our clients in advance.
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