FDI Business is what? The most detailed process of establishing an FDI business in 2025

In the context of Vietnam becoming an increasingly attractive destination for foreign investors, FDI (Foreign Direct Investment) businesses play a crucial role in economic development. The establishment of FDI businesses in Vietnam brings numerous business opportunities, tax incentives, and competitive advantages but also comes with legal challenges and complex administrative procedures.

So, what is an FDI business? What are the steps for establishing a foreign-invested company in Vietnam in 2025? Let’s explore the details in the following article to ensure the investment process proceeds smoothly and legally.

What is an FDI business?

FDI (Foreign Direct Investment) refers to foreign direct investment, which means the investment of foreign individuals or organizations in Vietnam through capital contribution, share purchase, business establishment, or production expansion.

An FDI business is a business that has foreign capital, established according to Vietnamese law but with the participation of foreign investors. Depending on the foreign investor’s capital ownership ratio, FDI businesses can be classified as:

• 100% foreign-owned enterprises

• Joint ventures (with foreign and Vietnamese capital)

• Branches or representative offices of foreign businesses in Vietnam

Characteristics of FDI businesses

• Foreign investors participate in the management, operation, and finance of the business.

• They are governed by Vietnam’s Investment Law and Enterprise Law, as well as the international trade agreements that Vietnam is a part of.

• They enjoy incentives and face restrictions depending on the industry: some sectors are favored in terms of taxes and land, while others have ownership restrictions or require special permits.

• They can be established in various forms: LLCs, joint-stock companies, representative offices, or foreign company branches.

Detailed process of establishing an FDI business in Vietnam in 2025

To establish a foreign-invested business in Vietnam, the following steps must be followed:

Step 1: Prepare documents and choose business type

Foreign investors must clearly identify:

• The business sector (whether it falls under restricted categories).

• The foreign investor’s ownership ratio.

• The type of business:

  • 100% foreign-owned LLC

  • LLC with two or more members

  • Joint-stock company

  • Branch or representative office

Documents to prepare include:

• Passport or business registration certificate of the foreign investor

• Investment project proposal

• Office lease agreement (if any)

• Financial statements of the foreign investor (if any)

Step 2: Apply for Investment Registration Certificate (IRC)

Investors must submit their application to the Department of Planning and Investment (DPI) in the province/city where the business headquarters will be located.

• Processing time: 15–30 working days.

• After receiving the IRC, the investor can proceed to register the business.

Step 3: Register business and apply for Enterprise Registration Certificate (ERC)

Documents required:

• Business registration application

• Company charter

• List of founding members/shareholders

• Copy of valid passport, ID card, or business license of the investor

Once the ERC is granted, the FDI business is officially established.

Step 4: Engrave seal and publish business information

The business must engrave a circular seal and register the seal sample on the national business portal.

• Publish the business registration information on the portal within 30 days of receiving the ERC.

Step 5: Open direct investment capital account and contribute capital

The investor must open a direct investment capital account at a Vietnamese commercial bank to transfer capital into Vietnam.

• Capital contribution must be completed within the prescribed time frame (usually within 90 days from the date of establishment).

Step 6: Apply for sub-licenses (if any)

Certain sectors like education, finance, real estate, and e-commerce require sub-licenses before officially operating.

Step 7: Complete tax procedures and employee registration

• Register for a business tax code.

• Register for electronic invoices and tax declaration accounts.

• Register social insurance for employees (if applicable).

Risks when establishing an FDI business in Vietnam

When setting up an FDI business in Vietnam, foreign investors face numerous potential legal risks that could impact business operations and long-term profitability. These risks stem from the complexity of the legal system, changes in policy, and inconsistencies in the application and enforcement of legal regulations.

One of the biggest risks when establishing an FDI business in Vietnam is related to administrative procedures and permits. Although Vietnam has made reforms to facilitate FDI businesses, the process of obtaining investment permits can still face difficulties and delays. Regulations on investment permits, business registration, and related licenses may change or be unclear, leading to delays or permit refusals. Investors may face issues when applying for permits in sensitive or strategic sectors, which require special approvals from the government.

Additionally, changes in policies and laws also pose significant risks. While Vietnam’s legal system is rapidly evolving, policy and legal changes can occur suddenly or unpredictably, affecting FDI business operations. For example, changes in tax regulations, foreign ownership restrictions, or environmental protection policies could create uncertainty and increase compliance costs.

Contract enforcement and protection of rights are also crucial factors for FDI businesses. Although courts and legal agencies may resolve disputes, enforcing contracts can be difficult, particularly in cases involving parties with differences in language, culture, or legal systems. FDI businesses may face a lack of transparency in dispute resolution and inconsistent application of regulations, increasing risks for their rights.

Intellectual property protection is another major concern for FDI businesses in Vietnam. Although Vietnam has signed international agreements on intellectual property protection, safeguarding patents, trademarks, and copyrights remains a significant issue. Copying or infringing on intellectual property rights is still common in some industries, and protection mechanisms are not always robust, creating risks for investors in new products or technologies.

Finally, FDI businesses must also comply with stringent labor and environmental protection requirements. Regulations related to employee rights, minimum wages, and working conditions may change, requiring businesses to adjust personnel policies or invest in green technologies, thus increasing operating costs. Additionally, failure to comply with environmental protection regulations may lead to fines or the loss of exploitation rights, affecting business operations.

Tax incentives for foreign investors establishing FDI companies in Vietnam

Vietnam offers various tax incentives to attract foreign investment, helping FDI businesses reduce operational costs and enhance competitiveness. These incentives include reductions in corporate income tax (CIT), exemptions from import duties, VAT exemptions, and other incentives depending on the industry and investment area.

Corporate income tax (CIT) incentives

Tax rate incentives
The standard CIT rate in Vietnam is 20%, but FDI businesses can benefit from reduced rates of 10%, 15%, or 17% in certain cases:

• • 10% for 15 years for:

    • High-tech projects, scientific research, technology development, and environmental protection.

    • Investment projects in socio-economically disadvantaged areas.

    • Investment in education, healthcare, culture, sports, and the environment.

  • 17% for 10 years for:

    • Investment in areas with socio-economic challenges.

    • Infrastructure development projects prioritized by the government.

Exemptions and reductions

• • Exemption from tax for the first 4 years from when the business has taxable income.

  • 50% tax reduction for the following 9 years (depending on the sector and investment location).

Import duty exemptions

• Exemption from import duties on machinery, equipment, and transport means used for production.

• Exemption on raw materials, supplies, and components imported for producing export goods.

• Exemption from import duties on goods related to investment projects in certain sectors or areas.

VAT incentives

• Export goods and services are subject to a 0% VAT rate.

• Essential goods, healthcare, and education items are subject to a 5% VAT rate, rather than 10%.

• Businesses in export processing zones are not subject to VAT when purchasing goods and services locally for export production.

Personal income tax (PIT) incentives for foreign experts

Foreign experts working in high-tech, science, or education projects in FDI sectors may enjoy a 50% reduction in personal income tax compared to the standard rate.

Special incentives for certain sectors & investment areas

Certain industries such as high-tech, agriculture, renewable energy, and logistics, along with investment in economic zones and disadvantaged regions, are eligible for extended tax exemptions and reductions.

Services to support FDI business establishment procedures at BKC Law

BKC Law is a unit specializing in consulting and supporting the procedures for establishing FDI businesses in Vietnam. We provide comprehensive solutions to help foreign investors easily navigate legal procedures, ensure compliance with Vietnamese laws, and optimize time and costs.

Pre-establishment consulting services

• Advise on business conditions, sectors, and check foreign ownership ratios according to Vietnamese law.

• Assess investment permit possibilities for specific business sectors.

• Provide advice on suitable business structures (LLCs, joint-stock companies, branches, representative offices).

• Advise on investment incentives, tax rates, and legal policies applicable to FDI businesses.

IRC registration services

• Prepare documents as required by the Department of Planning and Investment.

• Represent clients in working with authorities, follow up on and address issues arising during the permit process.

• Assist foreign investors in proving financial capability as required by law.

ERC and company seal registration services

• Draft business establishment documents according to the 2020 Enterprise Law.

• Register and apply for an Enterprise Registration Certificate (ERC) with the Department of Planning and Investment.

• Assist with company seal engraving and publishing business information on the national portal.

Bank account opening & capital contribution support

• Guide on opening a direct investment capital account at a Vietnamese commercial bank.

• Advise and assist with transferring capital into Vietnam in compliance with State Bank regulations.

• Ensure that capital contributions are made within the prescribed timeframe (usually 90 days from establishment).

Post-establishment licensing & procedures support

• Assist with applying for sub-licenses in regulated sectors (real estate, education, e-commerce, etc.).

• Register tax codes, electronic invoices, and initial tax filings.

• Assist with employee social and health insurance registration.

• Provide advice on labor contracts, HR policies, and internal company regulations.

Long-term legal support for FDI businesses

• Advise and update on new legal regulations related to foreign-invested businesses.

• Assist with drafting business contracts, labor contracts, and commercial agreements.

• Resolve disputes and protect the legal rights of FDI businesses in Vietnam.

• Assist with capital transfers, mergers, and changes to investment permits when required.

BKC Law service commitment

• In-depth, legal consultations from experienced attorneys in foreign investment.

• Quick, accurate processing of procedures to save time and costs.

• Representation in dealings with government agencies, sparing clients from direct involvement in complex administrative procedures.

• Absolute confidentiality of client information, ensuring the best interests of investors are protected.

For free legal consultations at BKC Law, please contact our lawyers using the following details:

Phone: 0901 3333 41
Email: info@bkclaw.vn

District 1 Office: 9th Floor, Diamond Plaza, 34 Lê Duẩn, District 1, Ho Chi Minh City
Binh Tan Office: 41 Tên Lửa, Binh Tan, Ho Chi Minh City

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