Process and Procedures for Establishing an FDI Company in Vietnam Advised by Lawyers

In recent years, with an increasingly improved business environment and more refined investment support policies, our country has become an attractive destination for foreign investors to establish FDI companies in Vietnam. Establishing a joint venture company (FDI) in Vietnam not only requires an in-depth understanding of legal regulations but also an accurate assessment of opportunities and challenges within the local business environment. As professional legal advisors, we are committed to providing up-to-date information and the most optimal investment strategies to help our clients achieve sustainable success in investment and development within the Vietnamese market.

Overview of FDI companies

According to the current law under the 2020 Investment Law, there is no specific definition of a foreign-invested enterprise (FDI). Instead, the concept of a foreign-invested economic organization is defined in Article 3 as follows:

“A foreign-invested economic organization is an economic organization in which a foreign investor is a member or shareholder.”

Thus, a foreign-invested enterprise is one of the types of foreign-invested economic organizations, regardless of the percentage of foreign capital contribution. Foreign direct investment enterprises include:

• Enterprises with 100% foreign capital.
• Enterprises in which individuals of foreign nationality or organizations established under foreign laws invest (through capital contribution or capital acquisition).

Conditions for establishing an FDI company in Vietnam

To establish an FDI enterprise, businesses must meet the following conditions:

Conditions for Foreign Investors Contributing Capital at the Time of Establishment

According to Article 22 of the 2020 Investment Law:

Foreign investors establishing an economic organization must meet the market access conditions for foreign investors as stipulated in Article 9 of this law.

Before establishing an economic organization, foreign investors must have an investment project and complete the procedures for obtaining and adjusting the Investment Registration Certificate, except in the case of establishing small and medium-sized innovative startups and venture capital funds under the laws on supporting small and medium-sized enterprises.

Conditions for Foreign Investors Contributing Capital, Purchasing Shares, or Acquiring Capital Contributions

Foreign investors contributing capital, purchasing shares, or acquiring capital contributions in an economic organization must comply with the following regulations and conditions:

• Market access conditions for foreign investors as stipulated in Article 9 of the 2020 Investment Law.
• Compliance with national defense and security requirements under the 2020 Investment Law.
• Land-related regulations, including conditions for acquiring land use rights and land use conditions in border areas, coastal areas, and certain specific locations.

Additionally, under Decree 31/2024/ND-CP, the government has outlined specific industries and conditions for market access by foreign investors.

Conditions Regarding the Entity and Nationality of Foreign Investors

Foreign investors can be individuals over 18 years old, organizations, or enterprises holding the nationality of a WTO member or a country that has signed a bilateral investment treaty with Vietnam. However, certain industries only allow foreign investors in the form of legal entities to invest in Vietnam.

Foreign individual investors holding passports with the “nine-dash line” content will not be permitted to invest capital in Vietnam or act as representatives managing investment shares in companies or organizations established in Vietnam under legal regulations.

There are no specific nationality restrictions for foreign investors. Investors from any country can invest in Vietnam, provided they comply with Vietnamese laws and international agreements that Vietnam has signed.

The specific provisions on the eligibility and nationality of foreign investors can be found in laws such as the Enterprise Law, the Investment Law, and other legal documents governing foreign investment in Vietnam.

Financial Capacity Requirements for Foreign Investors

Foreign investors must have sufficient financial capacity to invest and must demonstrate financial capability depending on the selected industry.

Requirements for the Company’s Registered Office and Project Location

Foreign investors must have a designated investment project location in Vietnam, verified through lease agreements, land rental contracts, and legal property ownership documents from the lessor for the company’s headquarters and project execution site.

For investment projects in the manufacturing sector, investors must prove they meet the conditions for renting factory space and must have a lease agreement for industrial zones or clusters.

Requirements for Experience and Specific Conditions by Industry

Foreign investors looking to establish an FDI company in Vietnam must meet specific conditions for industries subject to foreign investment regulations.

Additionally, investors must comply with restrictions on prohibited industries. According to Article 6 of the 2020 Investment Law, FDI companies cannot engage in the following prohibited business activities:

• Trading prohibited substances such as narcotics listed in Appendix I of the law.
• Trading prohibited chemicals listed in Appendix II of the law.
• Trading specimens of wild flora and fauna species extracted from nature, as specified in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); and specimens of rare, endangered forest plants, wildlife, and aquatic species extracted from nature as listed in Appendix III of this law.
• Prostitution business.
• Human trafficking, trading of human organs, body parts, or fetuses.
• Business activities related to human cloning.
• Trading in explosive fireworks.
• Debt collection services.

By meeting these conditions, foreign investors can successfully establish and operate FDI enterprises in Vietnam while ensuring compliance with legal and regulatory frameworks.

Forms of establishing an FDI company in Vietnam

In Vietnam, foreign investors can register to establish an FDI enterprise through two forms: direct investment and indirect investment, each with specific conditions.

• Direct investment: Foreign investors establish a company with foreign capital or a wholly foreign-owned company and must meet the conditions stipulated in Article 22 of the Investment Law 2020.
• Indirect investment: Foreign investors contribute capital, purchase shares, or acquire equity in a Vietnamese company. This means establishing a 100% Vietnamese-owned company first and then transferring capital to foreign investors. The conditions for this form of investment are specified in Clause 2, Article 24 of the Investment Law 2020.

Process of establishing an FDI company in Vietnam

Process of Establishing an FDI Company with Foreign Investment from 1% to 100%

Step 1: Prepare Application for Investment Registration Certificate

To obtain an Investment Registration Certificate, foreign investors need to prepare the following documents:

• A written request to implement the investment project
• Legal documents:
  • For institutional investors: A copy of the Certificate of Establishment or an equivalent legal document to verify legal status
  • For individual investors: A copy of ID card, Citizen ID, or passport
• Investment project proposal, including details such as investors, investment objectives, scale, capital, funding plan, location, duration, progress, labor needs, investment incentives, and economic-social impact assessment
• Proof of financial capacity:
  • For institutional investors: Financial statements for the last two years, a commitment of financial support from the parent company or financial institution, or a guarantee of financial capability
  • For individual investors: Bank balance confirmation or savings account statement
• Documents proving the legal right to use the project location, such as a lease contract, land use rights certificate, construction permit, planning approval decision, or land lease decision
• Proposal on land use needs for the project
• Explanation of technology usage, including technology name, origin, process diagram, key technical specifications, and the condition of main machinery and equipment

Step 2: Submit the Application for the Investment Registration Certificate

For projects that do not require investment policy approval, the Investment Registration Certificate is applied through the following process.

Investors must declare project information on the National Foreign Investment Information System before submitting the application. The application must be submitted to the investment registration agency within 15 working days from the online declaration date.

Upon receiving the application, the investment registration agency provides an account for investors to track their application status. The agency will process the application and assign an investment project code through this system.

Step 3: Issuance of the Investment Registration Certificate

Within 15 working days of receiving a complete application, the investment registration agency will issue the Investment Registration Certificate. If the application is rejected, the agency must provide a written explanation.

Step 4: Prepare and Submit the Business Registration Application

After obtaining the Investment Registration Certificate, investors must apply for a Business Registration Certificate, similar to establishing a Vietnamese-owned company.

Required documents:

• Business registration application form
• Company charter
• List of members or shareholders
• Copies of:
  • ID card, Citizen ID, or passport for individuals
  • Establishment decision, business registration certificate, or equivalent document for organizations, along with an authorization letter and legal representative’s personal documents
  • For foreign institutional members: A legalized copy of the business registration certificate or equivalent document
  • Investment Registration Certificate (if applicable)

Step 5: Public Disclosure of Business Registration Information

After receiving the Business Registration Certificate, the company must publicly announce its information on the National Business Registration Portal and pay the publication fee.

The disclosure includes business activities, a list of founding shareholders, and foreign investors (if applicable). Failure to disclose or inaccurate disclosure may result in penalties under Decree 122/2021/ND-CP.

Step 6: Company Seal Engraving

The company can create its seal at a seal engraving service or use a digital signature as per e-transaction laws.

The company decides on the seal’s form, quantity, and content. The management and use of the seal must comply with the company’s charter or internal regulations and be used in transactions as required by law.

Step 7: Obtain Business Licenses or Operational Permits

Business licenses are required for companies engaged in retail or establishing retail outlets. Additionally, some industries require specific operational permits, such as:

• Food safety permits for food businesses
• Environmental permits for manufacturing enterprises
• Educational permits for training institutions
• Travel licenses for tourism businesses

To obtain a business license for retail, foreign investors must meet the following conditions.

The investor’s home country must have market access commitments in agreements signed with Vietnam. Compliance with market access conditions under Vietnam’s international agreements. Financial capability for business operations. No overdue tax debts (if operating in Vietnam for at least one year).

Other factors considered for retail business licensing include compliance with specialized laws, competition with domestic enterprises in the same sector, job creation for local workers, and contribution to state budget revenue.

The process for obtaining a retail business license involves:

• Business license application form
• Explanation of business licensing conditions as per Article 9 of Decree 09/2018/ND-CP
• Business plan with operational details, market impact assessment, and economic benefits
• Financial plan, including audited financial reports and current financial status
• Tax debt clearance certificate
• Copies of the Business Registration Certificate and Investment Registration Certificate (if applicable)

The Department of Industry and Trade, where the business is headquartered, processes the license application within approximately 30 to 45 working days.

Step 8: Open a Foreign Direct Investment (FDI) Capital Account

This account is used for transferring capital according to the investment schedule stated in the Investment Registration Certificate. Additionally, an operational transaction account is required for daily business transactions.

Process of Establishing an FDI Company via Capital Contribution or Share Purchase

Step 1: Establish a Vietnamese-Owned Company

Foreign investors can only acquire shares or capital in an existing Vietnamese company. If no such company exists, a Vietnamese partner must establish a company with 100% local capital first.

Step 2: Prepare the Application for Capital Contribution or Share Purchase Registration

Required documents:

• Application for capital contribution or share purchase, detailing the economic organization receiving the investment and the post-investment foreign ownership ratio
• Copies of investor’s personal documents (ID or passport for individuals, business registration certificate for organizations)
• Agreement on capital contribution or share purchase
• Copy of the land use rights certificate of the recipient company (if applicable)

Step 3: Submit the Application for Capital Contribution or Share Purchase Registration

The application is submitted to the Investment Registration Office at the provincial Department of Planning and Investment. Within 15 working days, a confirmation notice is issued if all conditions are met.

Step 4: Execute the Capital Contribution or Share Purchase

If foreign investors acquire more than 51% ownership, the company must open an FDI capital account for transactions. Investors and transferring shareholders must declare and pay applicable personal or corporate income taxes.

Step 5: Update the Business Registration Certificate

After the transaction, the company must update its registration details with the authorities, including:

• Notification of business registration changes
• Company resolution on changes (if applicable)
• Meeting minutes of the General Meeting of Shareholders or Members’ Council (if applicable)
• Transfer contract and supporting documents
• Updated list of foreign shareholders or members
• Copies of foreign investors’ passports or business registration certificates

Step 6: Obtain Business Licenses and Operational Permits

If operating in regulated industries like retail, food, education, or tourism, foreign investors must obtain the necessary permits as in the direct investment process.

Comparison of direct investment and indirect investment in establishing an FDI company in Vietnam

Key considerations when establishing an FDI company in Vietnam

• Legal Compliance: Ensure that your company fully complies with Vietnam’s laws on FDI establishment. It is crucial to thoroughly research the Investment Law and other related regulations while completing the necessary registration procedures.

• Registration and Licenses: Setting up an FDI company requires obtaining both an Investment Registration Certificate and a Business Registration Certificate. The registration process must be completed accurately and with full documentation to avoid delays.

• Charter Capital: Determine the required charter capital for company establishment and transfer funds from abroad to Vietnam in accordance with legal requirements.

• Tax Policies: Understand the applicable tax policies for FDI enterprises in Vietnam, including import duties, value-added tax (VAT), corporate income tax, and possible tax incentives for specific industries or locations.

• Labor and Recruitment: Compliance with labor laws, social insurance, and employee benefits is essential. Additionally, planning for recruitment and workforce training should be in place.

• Financial and Accounting Management: Ensure transparent financial and accounting management to comply with legal regulations and assess business performance effectively.

• Environmental Protection: Companies engaged in production must adhere to environmental protection regulations and natural resource conservation requirements.

• Local Regulations and Policies: Apart from national laws, businesses must comply with the policies and regulations of the local jurisdiction where the company is registered.

With a team of highly experienced lawyers, solid legal expertise, and strong bilingual consulting capabilities, BKC LAW is confident in being one of the best legal partners to support foreign investors in establishing and operating FDI companies in Vietnam.

For free legal consultation, you can contact our lawyers through the following information:

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

Related Articles:

Forms of Commercial Dispute Resolution

Divorce dispute resolution in Ho Chi Minh City.

Land Dispute Lawyer and Current Types of Land Disputes