Establishment of a 100% Foreign-Owned Company in Vietnam: Rights and Risks

16 March, 2026 49 Views

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With an impressive growth rate and a consistently open-door policy, the opportunity to establish a 100% foreign-owned company in Vietnam is becoming increasingly attractive, affirming Vietnam’s position as one of the top investment destinations in the region. Amidst the wave of Foreign Direct Investment (FDI), this is the preferred form of investment for many investors. The primary advantage of this model is that it allows investors full control and autonomy in all operational decisions and business strategies.

However, full ownership means facing all challenges independently—from complex legal frameworks and specific administrative procedures to tax and market risks. The following article provides a comprehensive overview of the rights and risks when establishing a 100% foreign-owned company in Vietnam.

Overview of 100% Foreign-Owned Companies in Vietnam

Definition of a 100% Foreign-Owned Company

A 100% foreign-owned company is a type of enterprise in Vietnam entirely owned by foreign investors. Accordingly, the foreign investor establishes the company in Vietnam, holds 100% of the charter capital, and maintains full authority to manage all company activities.

When operating in Vietnam, a 100% foreign-owned enterprise must be an independent legal entity with its own name, assets, and a legally registered transaction office. The establishment and operational process of the enterprise must strictly comply with the Vietnamese legal system, guidelines from State management agencies, and the influence of international treaties to which Vietnam is a member.

Primary Legal Sources Governing Establishment

Law on Enterprises 2020 and its guiding documents.
Law on Investment 2020 and its guiding documents.
Decree No. 09/2018/NĐ-CP detailing the Law on Commerce and the Law on Foreign Trade Management regarding the purchase and sale of goods and activities directly related to the purchase and sale of goods by foreign investors and foreign-invested economic organizations in Vietnam.
WTO Schedule of Specific Commitments.
Free Trade Agreements (FTAs): EVFTA, AFTA, AJCEP, RCEP, etc.

Dossier and Procedures for Opening a Foreign Company in Vietnam

The implementation of an FDI project in Vietnam is a chain of strict legal procedures regulated by both the Law on Investment 2020 and the Law on Enterprises 2020. This process aims to establish a solid legal basis to ensure the investor’s activities proceed smoothly.

The core steps in this process:

1. Online Declaration of Project Information

Before submitting physical documents, investors are mandatory required to declare detailed information about the investment project on the National Investment Portal.

2. Application for Approval of Investment Policy (If required)

For projects subject to the Approval of Investment Policy (typically large-scale projects, those with environmental impacts, or sensitive sectors), investors must submit a dossier to the competent state authority. The main dossier includes: An application form, documents on the investor’s legal status, financial statements for the last 2 years (or financial support commitments), and a detailed project proposal (objectives, scale, capital, technology, environmental impact, etc.).

3. Application for the Investment Registration Certificate (IRC)

Submission Venue: Investors submit the dossier (directly or via the public service portal) at:
- Department of Planning and Investment (DPI) (if the project is located outside special zones).
- Management Board of Industrial Parks (IPs), Export Processing Zones (EPZs), High-Tech Zones, etc. (if the project is located within these zones).
Processing Time: Within 15 working days from the receipt of a valid dossier, the Investment Registration Authority will either grant the IRC or provide a written notice of refusal/request for supplementation.

4. Enterprise Establishment & Application for the Enterprise Registration Certificate (ERC)

After obtaining the IRC, the investor proceeds with enterprise establishment.

Submission Venue: Business Registration Office (under the DPI).
Main Dossier: Application form, Company Charter, List of members (for LLCs) or founding shareholders (for JSCs), and a copy of the IRC.
Processing Time: Within 03 working days, if the dossier is valid, the Business Registration Office will issue the ERC. The number on the ERC also serves as the company’s Tax Code.

5. Completion of Post-Establishment Procedures

Once both the IRC and ERC are obtained, the enterprise must immediately perform the following:

Opening a Direct Investment Capital Account (DICA): This is a mandatory account (in foreign currency and/or VND) at a licensed bank in Vietnam to perform transactions for capital transfers, profit repatriation, and other related transactions.
Other procedures: Including registering digital signatures, announcing business registration contents, initial tax declaration, and contributing charter capital within the committed timeline.

Rights and Risks of 100% Foreign-Owned Companies

Benefits and Incentives for Investors:

To enhance competitiveness and attract quality investment, the State has enacted various incentive policies:

Tax Incentives:
- Corporate Income Tax (CIT): Preferential tax rates (10%, 15%, 20%) depending on the industry and location. Specifically, encouraged projects may receive a tax holiday for up to 4 years and a 50% reduction for the following 9 years.
- Import/Export Tax: Exemptions or reductions for machinery, equipment, materials, and spare parts serving production and business activities within the project framework.
- Other Taxes: VAT exemptions/reductions for certain exported goods/services and land-use tax exemptions for eligible projects.
Administrative Incentives: Simplified, transparent investment and establishment processes. Access to public investment support services (consulting, information provision, and procedural assistance).
Land Incentives: Access to land funds through leasing at preferential prices with long-term, stable lease terms. State support in site clearance and technical infrastructure construction to the project fence (especially in IPs/EPZs).
Labor and Foreign Exchange Incentives: Autonomy in recruiting local and foreign labor. State support for vocational training for local labor. Foreign exchange policies guarantee the right to convert currency and repatriate profits after fulfilling tax obligations.

Risks when Establishing a 100% Foreign-Owned Company:

Legal Barriers for Conditional Sectors: Vietnam regulates many conditional sectors for foreign investors. Failure to research these thoroughly may lead to IRC rejection or forced restructuring post-operation.
Complexity of the Legal System: The process is a multi-stage chain (registration, establishment, sub-licenses). As the legal system is still evolving, varying applications across management levels require investors to stay updated on timelines and procedures.
Business Culture Risks: Differences in local policies and business practices present strategic challenges. Investors may face difficulties in understanding the local work culture, leading to conflicts in personnel management or difficulties in contract negotiations and building trust with local partners.

BKC’s Consulting Services for 100% Foreign-Owned Companies

BKC Law provides comprehensive solutions for entrepreneurs and investors, ensuring all procedures are performed quickly, accurately, and in compliance with the law. With a team of senior lawyers and bilingual consulting capabilities, we are a leading legal partner in the market.

Contact Information:

Phone: 0901 3333 41
Email: info@bkclaw.vn
District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan, Sai Gon Ward, District 1, Ho Chi Minh City.
Binh Tan Office: 41 Ten Lua, An Lac Ward, Binh Tan District, Ho Chi Minh City.