What Are the Requirements for Foreign Enterprises to Do Business in Vietnam?

Foreign enterprises wishing to do business in Vietnam must meet certain requirements in accordance with investment and commercial laws. Depending on the business sector, investment form, and project scale, foreign investors may be required to register for an investment certificate, establish a foreign-invested enterprise, or apply for the appropriate business licenses. Complying with these requirements ensures legal operation and helps minimize legal risks during business activities in Vietnam.

Legal Framework for Foreign Enterprises to Do Business in Vietnam

Foreign investment and business operations in Vietnam are governed by the following key legal documents:

• Law on Investment 2020

• Law on Enterprises 2020

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

• Relevant international treaties to which Vietnam is a party (e.g., WTO, CPTPP, EVFTA)

• Specialized laws depending on the sector (e.g., banking, education, insurance, logistics)

Basic Conditions for Foreign Enterprises to Invest in Vietnam

Legal Status of the Investor

Foreign investors may be organizations (companies, corporations, financial institutions, etc.) or individuals. They must have full legal capacity and financial capability. Organizations must provide documents proving legal establishment in their home country, which must be consular legalized. Individuals must be foreigners with full legal capacity as per Vietnamese law.

Investors must also demonstrate financial capability, usually through audited financial statements (for organizations) or bank statements and asset records (for individuals).

Legitimate Business Sectors

Vietnam classifies business sectors into three groups:

• Prohibited sectors: such as drug production, prostitution, and explosives trading

• Conditional sectors: more than 200 sectors requiring specific conditions such as capital ownership ratios, sector-specific licenses, or environmental commitments

• Unrestricted sectors: investors are free to register and operate equally with domestic investors

The list of conditional investment sectors is detailed in Appendix IV of the Law on Investment 2020.

Choosing an Appropriate Investment Form to Do Business in Vietnam

Foreign enterprises may choose one of the following investment forms:

• Establishing a new economic organization in Vietnam (100% foreign-owned or joint venture)

• Contributing capital or purchasing shares/equity in an existing Vietnamese company

• Investing through a Business Cooperation Contract (BCC)

• Investing under a Public-Private Partnership (PPP), typically used for infrastructure or energy projects

Project Location

The choice of investment location is critical as it affects procedures, processing times, and incentive policies. Investment in industrial zones, export processing zones, or high-tech parks often involves simpler procedures and more incentives compared to other areas.

Legal Procedures Required for Foreign Investment in Vietnam

Obtaining the Investment Registration Certificate (IRC)

For investors establishing a new economic organization or holding over 50% charter capital in a company, obtaining the IRC is mandatory. The application includes:

• Investment project proposal

• Legal documents of the investor

• Financial capacity statement

• Investment plan, land use plan, and environmental protection measures

Processing time: usually 15 working days from the date of receiving a complete application.

Obtaining the Enterprise Registration Certificate (ERC)

After obtaining the IRC, the investor must proceed with business registration to receive the ERC. The ERC serves as proof of legal entity status and tax code for the business. The enterprise can start operating immediately after the ERC is issued.

Opening Investment Account and Contributing Capital on Time

Foreign investors must open a direct investment capital account at a licensed commercial bank in Vietnam. Capital contribution must be made via legal bank transfers, not in cash, and within the required time frame (usually within 90 days of the ERC issuance).

Post-Establishment Obligations

Foreign-invested enterprises must fulfill the following legal obligations:

• Register for and declare taxes, and pay taxes on time

• Comply with Vietnamese accounting and auditing standards

• Sign labor contracts and pay social insurance for employees

• Submit periodic investment activity reports

Tax Incentives for Foreign Enterprises

Corporate Income Tax (CIT) Incentives

Vietnam applies flexible tax incentives depending on the sector and investment location:

• 10% CIT for 15 years (instead of the standard 20%) for high-tech, R&D, healthcare, education, and environmental projects

• CIT exemption for the first 4 years of taxable income, and 50% reduction for the next 9 years for eligible projects

• Large-scale or specially located projects may receive incentives for up to 30 years

Import Tax Incentives

Foreign enterprises may be exempt from import duties on:

• Machinery and equipment forming fixed assets

• Components and raw materials used in manufacturing for export

• Goods imported for scientific and technological research

Value Added Tax (VAT) Incentives

• 0% VAT for exported goods and services

• Input VAT can be credited and refunded for companies with large purchases

• Preferential VAT rate of 5% applies to some sectors like software, healthcare, and education

Land Lease Exemptions and Reductions

• Land rent exemption from 7 to 15 years depending on the location

• In industrial zones or economic zones, investors may receive a full exemption for the initial lease term (typically 3–5 years)

• Lifetime land rent exemption for projects in especially difficult socio-economic areas

Additional Notes for Foreign Investment in Vietnam

• Investors are not allowed to circumvent the law by using a Vietnamese nominee to establish a business and then transfer it. This is illegal and carries legal risks.

• Full compliance with reporting obligations on investment, finance, and taxes is required.

• Enterprises should work with professional legal and accounting consultants from the beginning to avoid mistakes and ensure legal compliance.

Contact Us

For free legal consultation on foreign investment and establishing FDI enterprises in Vietnam, please contact our lawyers via:

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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