Setting Up a Small Business in Vietnam

The process of starting a business in Vietnam is simple and relatively easy. This makes the country a good place to open a small business like a restaurant or consulting firm. Learn about what to expect when you open a small business in Vietnam in this article.

Can Foreigners Own a Business in Vietnam?

Foreigners may own businesses in Vietnam. Some industries such as tourism, advertising, and entertainment require a local partner. But most businesses can be 100% foreign-owned.

Examples of industries that allow full foreign ownership:

• Wholesale trading
• Retail trading
• Manufacturing
• Service
• Short-term training centers
• Food and beverage
• Information Technology

While a foreigner can be the owner of the business, it must have at least one director who is a resident. If the business owner is not a resident of Vietnam, he or she must appoint a resident director.

Minimum Capital Requirement in Vietnam for Small Businesses

Most business lines do not have a set minimum capital requirement. However, your planned capital should be reasonable and realistic. It should also take the expected costs and revenue into account. So if your company’s overhead is low, the capital does not have to be high.

When planning your capital, consider the following:

• Capital contribution is a tax-free method to invest in a company;
• If the company runs out of money it is possible to increase the capital, but this process can take up to 3 weeks;

Starting July 2020, the company’s capital must be at least USD 130,000 for its founder and his or her dependents to get a resident card. The founder will be eligible for an investor visa but this visa is not applicable to his or her dependents. The founder can then get a work permit exemption until January 2021 or work permit after that.

Consulting and IT Services

An investor can start a consulting or market research business on a small scale. The capital for this business can be as low as USD 3,000 because it does not need a specific location. The same applies to IT businesses like website design.

Wholesale and Retail Trading, E-commerce

Wholesale and retail trading is also a good option for someone who wants a small business. These businesses do not need a specific location which keeps costs down. The minimum capital for these businesses can range from USD 10,000 to 20,000.

Restaurants

The capital in the food and beverage industry, like a restaurant, should be around USD 20,000. The location of the restaurant plays a huge role in the costs of this kind of business. You must consider the location rental fee for your restaurant.

Language Schools and Training Centers

Language schools are also quite popular among foreign investors. The minimum required capital for this business is VND 20 million, or roughly USD 900, per student. To determine the required capital, the business owner must first estimate the number of students. If the total number of students exceeds the estimate, the business owner can increase the capital.

These businesses should also have a management office and a teachers’ room. The location should have the necessary function rooms and enough space for teaching. The teaching space must allow each student to have 2.5m2 of space.

Business tax rates in Vietnam

The corporate income tax rate for businesses in Vietnam is 20%. However, companies that operate in energy or mineral resources pay anywhere from 32% to 50% depending on location.

On the other hand, a lot of businesses have tax incentives like tax exemptions or reduced tax rates. This depends on the business’ industry or location. For example, there is a tax exemption for up to 4 years for companies in the education and training industry. The tax rate for these companies can also be as low as 5% depending on the business’ location.

Other industries with tax exemptions include agriculture, healthcare, and manufacturing of high priority products.

After settling corporate income taxes, all founders in a company receive dividends on the net profit of the company. If the company has more than one founder, each founder must pay a 5% tax on his or her dividend. If the company only has 1 founder, he does not need to pay additional taxes.

Dividends received by an investor from each of his or her businesses are separate. An investor’s dividends in one business do not affect the dividends from another business.

Let us help you with starting your small business in Vietnam. Get in touch with us using the form below or by emailing [email protected]. One of our consultants will be happy to assist you!