9th Floor Diamond Plaza Building, 34 Le Duan, Sai Gon Ward, Ho Chi Minh City
info@bkclaw.vn
0901 333 341
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Foreign businesses wishing to do business in Vietnam must satisfy specific conditions prescribed by investment and commercial laws. Depending on the business line, form of investment, and project scale, foreign investors may be required to carry out investment registration procedures, establish a foreign-invested enterprise, or apply for appropriate business licenses. Strict compliance with these conditions not only ensures the enterprise operates legally but also mitigates legal risks during its operations in the Vietnamese market..
The investment and business activities of foreign investors in Vietnam are governed by the following primary legal instruments:
Decree 31/2021/ND-CP guiding the implementation of the Law on Investment
Relevant International Treaties to which Vietnam is a member (WTO, CPTPP, EVFTA, etc.)
Specialized Laws (depending on the sector, e.g., banking, education, insurance, logistics)
Foreign investors can be organizations (enterprises, corporations, financial institutions, etc.) or individuals. They must possess full legal status and financial capacity.
For organizations: Must provide documents proving their incorporation/registration in their home country, which must be consularly legalized.
For individuals: Must be foreign nationals with full civil act capacity under Vietnamese law. Investors must also prove their financial capacity, typically through audited financial statements (for organizations) or bank statements and proof of assets (for individuals).
2. Lawful Business Lines Vietnam classifies investment sectors into three categories:
Banned business investment sectors: Such as the production of narcotics, prostitution services, firecrackers, etc.
Conditional business investment sectors: Comprising over 200 sectors that require foreign investors to meet specific conditions, such as foreign ownership limits, specialized industry licenses, and environmental protection commitments.
Unrestricted sectors: Investors are permitted to register investments freely and equally as domestic investors. (The list of conditional business investment sectors is detailed in Appendix IV of the Law on Investment 2020).
3. Appropriate Forms of Investment Foreign enterprises may choose one of the following forms:
Establishing a new economic organization in Vietnam (a 100% foreign-owned enterprise or a joint venture).
Contributing capital, buying shares, or purchasing capital contributions in an actively operating Vietnamese enterprise.
Investing under a Business Cooperation Contract (BCC).
Investing under a Public-Private Partnership (PPP) contract, typically applicable to infrastructure and energy sectors.
4. Project Location Selecting the investment location is a critical factor, as it affects procedural requirements, processing times, and incentive policies. Investing in Industrial Parks (IPs), Export Processing Zones (EPZs), and High-Tech Zones generally involves simpler procedures and offers more incentives compared to other areas.
1. Applying for the Investment Registration Certificate (IRC)
For investors establishing a new economic organization or acquiring over 50% of the charter capital in an enterprise, obtaining an IRC is mandatory. The dossier includes:
An investment project proposal.
The investor’s legal documents.
A report on financial capacity.
Proposals regarding the investment scale, land use, and environmental protection.
Standard Processing Time: 15 working days from the date of receipt of a valid and complete dossier.
2. Applying for the Enterprise Registration Certificate (ERC)
After being granted the IRC, the investor proceeds with the enterprise establishment procedures to obtain the ERC. The ERC is the legal document certifying the entity’s legal status and tax code. The enterprise can commence operations immediately upon receiving the ERC.
3. Opening an Investment Account and Contributing Capital on Time
Foreign investors must open a Direct Investment Capital Account (DICA) at a permitted commercial bank in Vietnam. Capital contributions must be made via lawful bank transfers (cash is not permitted) and strictly within the prescribed time limit (typically 90 days from the ERC issuance date).
4. Post-Establishment Obligations
Foreign-invested enterprises must fully comply with legal obligations, including:
Registering, declaring, and paying taxes on time.
Implementing accounting and auditing regimes in accordance with Vietnamese standards.
Signing labor contracts and paying social insurance for employees.
Submitting periodic reports on investment activities.
1. Corporate Income Tax (CIT) Incentives
Vietnam applies flexible tax incentives based on the investment sector and location:
A preferential tax rate of 10% for 15 years (instead of the standard 20%) for projects in high-tech, research and development (R&D), healthcare, education, environment, etc.
CIT exemption for the first 4 years from the generation of taxable income, and a 50% reduction for the subsequent 9 years for eligible projects.
Certain large-scale projects or those located in areas with difficult socio-economic conditions may have their incentive periods extended up to 30 years.
2. Import Tax Incentives
Foreign enterprises may be exempt from import tax for:
Machinery and equipment imported to create fixed assets.
Components and raw materials imported for the production of exported goods.
Goods imported for scientific research and technological development.
3. Value Added Tax (VAT) Incentives
A 0% tax rate applies to exported goods and services.
Enterprises are entitled to VAT deductions and refunds if they have significant input VAT.
A preferential 5% rate applies to specific sectors such as software, healthcare, and education.
4. Land Lease Fee Exemptions and Reductions
Exemption from land lease fees for 7 to 15 years, depending on the location.
For IPs and Economic Zones, exemptions may apply for the entire initial lease period (usually 3–5 years).
Lifetime exemption from land lease fees for projects invested in areas with extremely difficult socio-economic conditions
Avoid Nominee Arrangements: Do not establish an enterprise under the name of a Vietnamese individual (using a nominee structure) to “circumvent the law” with the intent to transfer it later. This practice is illegal and carries severe legal risks, including the potential loss of the investment.
Strict Compliance: Ensure full compliance with periodic investment, financial, and tax reporting obligations as prescribed.
Professional Support: Enterprises should partner with professional legal and accounting consultants from the very beginning to minimize errors and ensure strict legal compliance.
For legal consultation related to foreign investment and the establishment of FDI enterprises, please contact our Lawyers via the following information:
Phone: 0901 3333 41
Email: info@bkclaw.vn
District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, District 1, Ho Chi Minh City
Binh Tan Office: 41 Ten Lua Street, Binh Tan District, Ho Chi Minh City
Applying for an Investment Registration Certificate within 30 days
Comprehensive Corporate Law Consulting Services in Binh Tan District
Converting a Vietnamese company into a foreign-invested company
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41 Rockets, Binh Tri Dong B, Binh Tan District, Ho Chi Minh City.
info@bkclaw.vn
0901 3333 41
9th Floor, Diamond Plaza Building, 34 Le Duan, Ben Nghe Street, District 1, Ho Chi Minh City.
info@bkclaw.vn
0901 3333 41