Minimum capital level for establishing a company in Vietnam

The minimum capital requirement for establishing a foreign-invested company in Vietnam is an important factor that businesses need to consider when planning their investment in Vietnam. According to the current regulations, the minimum legal capital is for different types of foreign companies. Complying with the minimum capital requirements is not only a prerequisite for obtaining a business license but also helps to demonstrate the financial capacity and sustainability of the enterprise. In the article below, Viet An Law will clarify for clients about minimum capital level for establishing a company in Vietnam.

What is the minimum capital?

The minimum capital when establishing a foreign direct investment (FDI) company in particular and an enterprise, in general, is the minimum amount of money that an organization or individual needs to establish and operate a legal enterprise in a specific business sector.

Normally, direct investment capital will be used to carry out company establishment tasks such as renting headquarters, purchasing physical equipment, paying for business establishment services, and other activities to open a company. Therefore, when applying for an investment registration certificate, the investor’s expected capital level must ensure that it fully meets these tasks to explain to the registration agency.

Minimum capital level for establishing a company in Vietnam

Currently, according to the Enterprise Law 2020, there are no regulations on minimum capital when establishing a business. Conditions for contributing capital to establish a business depend on the economic capacity and operational purposes, and the business must provide an appropriate capital level based on the following criteria:

Currently, Vietnamese law only stipulates minimum capital conditions for several conditional business sectors. In the remaining cases, regulations on minimum capital will be implemented according to the regulations, needs, and policies for foreign investors of each province.

In Hanoi city in 2024, comply with Official Dispatch No. 599/UBND-KH&ĐT of Hanoi City People’s Committee dated March 6, 2024, on monitoring investment programs and projects of economic organizations with capital Foreign investment, the scale of investment capital, and capital contributed to project implementation are required to be considered closely to ensure the principle of selectively attracting direct investment capital from foreign countries, raising the issue of ensuring national defense and security come first, preventing the phenomenon of investment evading origin. Therefore, normally the regulations on investment capital to be licensed in Hanoi will be higher than in provinces and cities that do not have this policy.

Types of capital when establishing a company in Vietnam

Investment

According to Vietnam’s international commitments, some industries have minimum investment capital requirements so that foreign investors can access Vietnamese market.

For example, for medical examination and treatment services, according to Vietnam’s WTO commitment schedule, to obtain an investment license in  Vietnam, foreign investors must meet capital conditions as follows :

• Minimum investment capital for a hospital is 20 million USD;
• Minimum investment capital for policlinic is 2 million USD;
• Minimum investment capital for a specialized treatment facility is 200 thousand USD.

Investment capital can be easily distinguished from legal capital based on the currency in which the regulations are expressed.

Charter capital

• According to Clause 34, Article 4 of the Law on Enterprises 2020, charter capital is understood as the total value of assets contributed or committed to be contributed by company members and owners when establishing a limited liability company or partnership company. Charter capital is the total par value of shares sold or registered to buy when establishing a business.
• Charter capital can be equal to investment capital and legal capital, but they are essentially different.

Legal capital

Legal capital is the minimum capital level prescribed by a competent authority, which is necessary to establish a business according to the provisions of law. This is the amount of capital needed to start a business project when establishing a business and often fluctuates depending on each specific field and industry.

Legal capital is specifically applied to certain business sectors such as Securities, Insurance, banking and finance, and real estate business. The purpose of regulating legal capital is to minimize risks during business operations. Therefore, contributed capital or business capital needs to reach or exceed the minimum legal capital in that industry.

Some professions that require minimum capital according to specialized laws include:

Securities sector

• Securities brokerage: 25 billion VND;
• Self-trading of securities: 50 billion VND;
• Securities issuance guarantee: 165 billion VND;
• Securities investment consulting: 10 billion VND.

Insurance sector

• Life insurance business (except unit-linked insurance, pension insurance) and health insurance: 750 billion VND;
• Insurance business as prescribed in point a of this clause and unit-linked insurance or pension insurance: 1,000 billion VND;
• Insurance business as prescribed in point a of this clause, unit-linked insurance and pension insurance: 1,300 billion VND.

Postal sector

5 billion VND

Real estate business field

• Not less than 20% of total investment capital for projects with land use scale of less than 20 hectares.
• Not less than 15% of total investment capital for projects with land use scale of 20 hectares or more.

Capital used for deposit

Deposit is the amount of demand or term deposit that a company or organization places at a bank according to the provisions of law. This is a measure to ensure a company or organization’s finances against banks and related parties in financial transactions and commitments. This form often appears in business investment projects, especially in uncommon transactions in the civil sector.

For example: The business line for international travel services as prescribed in Decree 168/2017/ND-CP detailing the 2017 Law on Tourism stipulates the deposit level to apply for a Business License as follows:

• For inbound tourists: 250 million.
• For outbound tourists: 500 million.

How long does an investor have to contribute capital?

When applying for an investment license, the application will have to demonstrate evidence of the investor’s financial potential to meet the registered capital amount. After being granted an investment license and continuing to carry out business establishment procedures, foreign investors will have to follow the same capital contribution period regulations as domestic investors.

According to the provisions of the Enterprise Law 2020, investors must contribute sufficient capital and the right type of assets as committed when registering to establish a business within 90 days of receiving the Enterprise Registration Certificate, excluding the time to transport and import contributed assets and carry out administrative procedures to transfer asset ownership.

How to founding capital transferred to Vietnam

For making capital contributions in cash, investors will transfer money to a direct investment account opened at a legal bank in Vietnam specifically for businesses established from registered investment projects. Normally, this account will be opened based on the issued investment registration certificate.

For other capital sources such as loans, mobilized capital, and capital contributed by assets, investors must comply with relevant regulations to contribute capital to the enterprise. If you need any information related to this procedure, please contact Viet An Law for the most detailed and accurate instructions.

Consulting on foreign investment forms in Vietnam

There are many types of businesses for foreign entrepreneurs to invest in Vietnam. However, limited liability company (LLC) and joint stock company are the two most chosen types of businesses (JSC). Depending on the business line and investment field, the company can establish a company with 100% foreign capital or a contributing company, joint venture, or share purchase.

• Type of limited liability company (LLC): Suitable for small and medium-sized businesses. LLC has a simple organizational structure. Instead of dividing shareholders with complicated regulations, each capital contributing member of the company will be legally responsible for his or her capital ownership ratio in the company.
• Type of joint stock company (JSC): Suitable for medium and large sized businesses. JSC has a more complex corporate structure. The capital contribution members of the company must be from three or more individuals or organizations.
• Company branch: The company branch will be limited in the activities of the parent company. Suitable for foreign businesses that want to conduct commercial business activities in Vietnam but do not want to establish a legal entity.
• Representative office (RO): RO of a foreign company in Vietnam does not have the function of production and business activities. RO has the function of liaising, conducting research, providing information, and supporting businesses in accessing new markets and partners.

Note: The choice between establishing a company branch or RO will depend on the business purpose of the enterprise:

• If a business wants to expand its scope of operations, promote business, increase profits, and create favorable conditions for client care, it should choose to establish a company branch.
• If a business wants more convenience in document exchange, product display, client care, or support in speeding up project construction progress… then it should consider choosing to establish RO.

Clients who need advice or learn more about the minimum capital level for establishing a company in Vietnam, please contact Viet An Law Firm for the best support.