Minimum investment capital is often confusing and the internet often provides conflicting information. In this article, we will clarify what are the minimum investment capital requirements for opening a business in Vietnam.
Why is there an investment capital requirement?
The minimum investment capital requirement for setting up a company as a foreigner in Vietnam is aimed at ensuring that businesses have a certain level of financial stability and commitment before entering the market. Here are a few reasons why this requirement exists:
Encouraging long term investments.
helps prevent short-term speculative investments and encourages businesses that are serious about their operations and long-term growth.
Protecting domestic businesses.
helps protect local businesses from unfair competition prevents businesses from underpricing their products or services due to inadequate capitalization, which could potentially harm local businesses
Ensuring financial stability.
To reduce the risk of companies shutting down quickly due to insufficient funds, protecting employees and customers.
To prevent “shell” companies for visa purposes.
Some people might take advantage of the investor’s visa / TRC, if there were no minimum investment capital requirements (and relaxed visa laws) it would be possible to open a business and obtain a long term residence without any substantial investment or serious interest to run a successful business that benifit help the economy.
So what are the minimum capital requirements?
In Vietnam, it is important to note that there are no specific minimum capital requirements mandated by law. Internet sources may suggest that starting a company with as little as $1,000 is possible, but in practice, the situation differs. From our experience, around $15,000 – $20,000 minimum is usually accepted.
It is worth mentioning that actual capital requirements can vary significantly based on factors such as the sector, nature of business lines, and geographical location. The Department of Planning and Investment (DPI) has established guidelines for minimum investment requirements and they can use their discretion.
What type of businesses allow the minimum capital requirements.
Below are a few examples of business types that might be possible to start with an investment of less than $20,000
- IT Services (e.g., web design or development)
- Management Consulting
- Market Research
It is important to note that these examples are provided to highlight potential business opportunities within the given investment range. It is advisable to conduct thorough research and consult with professionals to assess the specific requirements, market conditions, and financial feasibility of the chosen business endeavour.
Why have I heard the minimum capital requirement is 3 billion VND?
Your investment capital determines the visa you’re eligible for. If your investment is less than 3 billion VND, you can get a 1-year investor’s visa. For investments exceeding 3 billion VND, you can apply for a TRC, which is valid for 2 to 5 years depending on your capital contribution as an investor.
There are no visible differences between these 2 visas other than the duration. Please keep in mind that visa laws change regularly so its best to contact us or your trusted visa agent for the latest updates on visas.
What types of business lines affect the minimum capital requirements?
Examples of business sectors in Vietnam that have minimum capital requirements for foreign investors include the education sector, mutual insurance organisations, and financial institutions.
For foreign language schools in Vietnam, foreign business owners are required to have a minimum capital of at least VND 20 million or US$850 per student. (Clause 3, Article 35 of Decree 86/2018/ND-CP)
In the case of foreign mutual insurance companies, the legal capital requirement is a minimum of VND 10 billion or US$434,000. This amount serves as the baseline capital necessary to establish and operate such an insurance company. (Article 149 Law on Insurance Business)
What can I do with the capital in the company?
The capital in the company can of course be spent for business expenses. So make sure you keep all the invoices for any expenditures in your company so your accountant can help you report those costs. Your personal accommodation can not be used as capital expenditure however business meetings, meals, equipment and possibly vehicles can be. Contact our team for more information about tax and accounting.
How can I contribute the investment capital amount to the company?
You can either transfer from your personal bank account in Vietnam, your personal account in your home country or it’s even possible that a foreign owned company overseas contributes the capital.
Investors are required to complete the full capital payment within 90 days following the company’s registration date. Failure to meet this deadline by the company’s investors/founders will result in mandatory adjustment of the contributed capital to the appropriate amount, accompanied by fines. The company will not be dissolved, except in cases falling under case as specified in Point c, Clause 1, Article 207 of the Enterprise Law 2020.
Documentation: Prepare and submit the necessary documentation to the relevant authorities in Vietnam, such as the Department of Planning and Investment (DPI), to demonstrate the legitimacy of the capital transfer. This may include bank statements, investment certificates, or other supporting documents.
Capital Verification: The DPI or other relevant authorities will verify the capital contribution based on the submitted documentation. They may also conduct inspections or audits if required.
Capital Utilisation: Once the capital is successfully transferred and verified, it can be used for the intended business purposes, such as purchasing assets, paying for business operations, or covering start-up expenses.
Record-Keeping: It is crucial to maintain proper records and documentation related to the investment capital, including bank statements, receipts, and relevant financial records. These records will be important for financial reporting, audits, and compliance with Vietnamese regulations.
What are the next steps to find out the exact capital I will need?
If you are planning to establish a business in Vietnam, please contact our team, we have qualified lawyers and tax / accounting experts that can help you with everything you need.
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