Conditions and Procedures for Converting a Foreign-invested Project to Vietnamese Capital

Vietnam remains an attractive destination for foreign investors, thanks to its open policies, deep global integration, and an increasingly improved business environment. However, during the course of investment and business operations, for various reasons—such as corporate restructuring, changes in business strategy, internal transfers, or capital withdrawal—some foreign investors may wish to transfer their entire equity to domestic investors. This leads to an investment project conversion, where a foreign-invested project is transformed into a domestically funded one.

This conversion is not merely a financial transaction but a legal process involving several key steps that must fully comply with Vietnamese law. The article below offers a comprehensive overview of the legal conditions, procedures, and required documentation for an investment project conversion from foreign to domestic capital.

Legal Basis for Foreign-to-Domestic Investment Project Conversion

• Law on Investment 2020

• Law on Enterprises 2020

• Law on Tax Administration 2019

• Circular 03/2021/TT-BKHĐT guiding investment documentation

• Circular 111/2013/TT-BTC guiding the implementation of the Personal Income Tax Law

• Decree 31/2021/ND-CP guiding the implementation of the Investment Law

• Guidelines issued by the Ministry of Finance and local Departments of Finance (in case responsibilities are decentralized from the Department of Planning and Investment)

Conditions for Foreign-to-Domestic Investment Project Conversion

A foreign-invested project can be converted into a domestic investment project when the following conditions are met:

• The foreign investor transfers all of their equity (shares or capital contributions) in the enterprise to a Vietnamese investor (individual or organization).

• After the transfer, there are no foreign investors holding any equity in the enterprise. The enterprise becomes fully Vietnamese-owned.

• The project does not fall under a conditional investment sector for foreign investors; or if it does, the Vietnamese party must meet the applicable conditions.

• The capital transfer must be clearly recorded in the legal documents and updated with the competent authorities.

Procedures for Foreign-to-Domestic Investment Project Conversion

This process involves several important legal and administrative steps:

Step 1: Agreement and execution of the capital or share transfer

• The involved parties (foreign and Vietnamese investors) sign a capital transfer agreement, which forms the legal basis for subsequent steps.

• In a limited liability company (LLC): update the member list after the capital contribution transfer.

• In a joint-stock company (JSC): transfer shares and record changes in the shareholder register.

• The transfer agreement may need to be notarized/certified and should be accompanied by appendices such as company valuation, financial confirmations, and tax commitments.

Step 2: Declaration and payment of personal income tax on capital transfer

According to Circular 111/2013/TT-BTC, foreign investors transferring capital in Vietnam must fulfill their tax obligations.

• Tax rate: 0.1% of the total transfer value (regardless of profit or loss)

• Filing method: the investor may self-declare or authorize the company to declare on their behalf

• Tax filing is submitted to the local tax authority managing the enterprise

Step 3: Submission of updated business registration documents

The enterprise must file for business registration updates at the Department of Finance (in some provinces) or the Business Registration Office under the Department of Planning and Investment.

Required documents include:

• Notification of changes in business registration

• Updated member/shareholder list

• Notarized capital transfer agreement

• Confirmation of fulfilled tax obligations (if available)

Step 4: Termination of the foreign-invested project

According to Article 48 of the Investment Law 2020, the foreign-invested project ceases to be valid once there are no foreign investors remaining. Therefore, the enterprise must carry out procedures to terminate the foreign investment project.

Required documents submitted to the Department of Finance:

• Request for project termination

• Investor’s resolution on project termination

• Asset liquidation report (if applicable)

• Original Investment Registration Certificate

• Documents proving completion of financial obligations to the State

Processing time: typically 10–15 working days depending on the locality

Step 5: Recognition of the enterprise as a domestic company

After completing all procedures, the enterprise will no longer be subject to foreign investment regulations. It will officially be classified as a domestic (Vietnamese-owned) enterprise and operate under the general legal framework applicable to local companies.

Important Legal Notes

• Do not skip the step of terminating the Investment Registration Certificate. This is a mandatory condition for converting from a foreign-invested to a domestic enterprise.

• Carefully monitor the timing of the capital transfer and legal registration to avoid retroactive tax assessments or legal liabilities.

• Re-examine business lines post-conversion, as some industries have different ownership requirements for domestic vs. foreign-invested companies.

• In some provinces, the Department of Finance has taken over responsibilities from the Department of Planning and Investment for handling investment-related procedures. Businesses should contact the appropriate authority in advance to confirm.

Professional Support Services from BKC Law

At BKC Law, we offer comprehensive legal consulting and end-to-end services for the conversion of foreign-invested projects to domestic capital, including:

• Case-by-case analysis and strategic consultation

• Drafting capital transfer agreements and complete legal dossiers

• Representing enterprises in working with the Department of Finance, tax authorities, and related government bodies

• Tax declaration and compliance support

• Managing and tracking the entire process until completion

With a team of experienced lawyers deeply familiar with Vietnam’s investment procedures, BKC Law is committed to supporting investors through a fast, compliant, and efficient legal transition process.

For free legal consultation on this matter, please contact us at:

Phone: 0901 3333 41

Email: info@bkclaw.vn

Head Office (District 1): 9th Floor, Diamond Plaza, 34 Lê Duẩn, District 1, HCMC

Branch Office (Bình Tân): 41 Tên Lửa, Bình Tân District, HCMC

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