Legal provisions on establishing foreign-invested enterprises in vietnam

In the context of deepening international economic integration, Vietnam has become an attractive destination for foreign investors thanks to its stable political environment, competitive labor costs, and numerous investment incentive policies. However, the establishment of enterprises with foreign investment requires compliance with Vietnamese laws, ranging from market access conditions, permissible business sectors, to investment registration and enterprise registration procedures. This article by NPLaw analyzes the prevailing legal provisions regarding the establishment of foreign-invested enterprises in Vietnam.

This article by NPLaw analyzes the prevailing legal provisions regarding the establishment of foreign-invested enterprises in Vietnam.

I. The demand for establishing foreign-invested enterprises in Vietnam

The establishment of foreign-invested enterprises in Vietnam has become a significant demand due to:

Stable and attractive investment environment: Vietnam offers political stability, strong economic growth, a large consumer market, and a young population, making it a promising destination for foreign investment.
Liberal foreign investment policies: The Government issues various incentives on taxation, land use, and technology transfer to attract foreign-invested enterprises.
Deep international economic integration: Vietnam’s participation in numerous free trade agreements (FTAs) enables investors easier access to regional and global markets.
Competitive labor and production costs: Compared with many countries in the region, Vietnam offers relatively low labor costs with continuously improving workforce quality.
Growing demand for market expansion, production, and supply chain diversification: Foreign enterprises seek to diversify supply chains and avoid overdependence on a single country, particularly following the COVID-19 pandemic.

II. Legal provisions on establishing foreign-invested enterprises in Vietnam

1. Conditions for establishment

To establish a company in Vietnam, foreign investors must satisfy conditions concerning legal capacity, nationality, capital, and registered business sectors in accordance with Vietnamese law:

Regarding legal capacity and nationality:

Must be of full age (individuals aged 18 and above);
Must have full civil act capacity;
Must not be serving a prison sentence;
Must not be subject to other administrative sanctions as prescribed by law;
Must be nationals of WTO member states or from countries that have signed bilateral treaties on investment with Vietnam.

Regarding business sectors:

Foreign investors may only register in sectors permitted under Vietnamese law;
Registration in sectors restricted or not yet open to foreign investors is prohibited;
Must comply with basic requirements under the Law on Enterprise.

Regarding market access conditions:

Establishment of companies must comply with Vietnam’s WTO Schedule of Commitments (CPC 318) applicable to the scope of operation and services;
If the business sector falls under the List of Sectors with Restricted Market Access for Foreign Investors (as per Decree No. 31/2021/ND-CP), investors must meet statutory conditions (e.g., ownership ratio of charter capital, form of investment, scope of operation);
The List of sectors not yet open or restricted for foreign investors is published in Appendix I of Decree No. 31/2021/ND-CP.

In addition, foreign investors must demonstrate financial capacity and secure a project location (through a lease agreement for premises or office space in Vietnam for company headquarters).

2. Procedures for establishment of foreign-invested enterprises in Vietnam

a. Approval of investment policy

Investment policy approval is the process whereby competent state authorities approve the objectives, location, scale, progress, duration, investor identity or selection, and any special mechanisms or policies applicable to an investment project.

Foreign-invested enterprises must obtain investment policy approval if the project falls under cases requiring such approval by the National Assembly, the Government, or the Provincial People’s Committee pursuant to Articles 30, 31, and 32 of the Law on Investment 2020.

b. Investment Registration Certificate (IRC)

Foreign investors must apply for an Investment Registration Certificate (IRC) before implementing investment projects in Vietnam.

For projects subject to investment policy approval, the investment registration authority issues the Investment Registration Certificate within 5–15 days, depending on the specific case, after approval has been granted.
For projects not subject to investment policy approval, the procedure to establish a 100% foreign-owned company includes:
Submitting one (01) set of application documents to the investment registration authority;
The Investment Registration Certificate shall be issued within 15 days from receipt of valid documents, provided the project meets statutory conditions.

c. Enterprise Registration Certificate (ERC)

After obtaining the Investment Registration Certificate, foreign investors must prepare documents for enterprise establishment in accordance with the Law on Enterprise 2020 and submit them to the Business Registration Office.

Processing time: 3 working days from receipt of complete and valid documents.
Upon registration, the company must publish its enterprise registration details as required by law.

3. Timeframe for completion of establishment procedures

Investment policy approval: 60–90 days;
Investment Registration Certificate: 15 days from receipt of valid application;
Enterprise Registration Certificate: 3 working days from receipt of valid application.

III. Questions on establishing foreign-invested enterprises in Vietnam

1. Which business sectors are prohibited for foreign-invested enterprises?

Prohibited sectors are those not open to market access. Section A, Appendix I of Decree No. 31/2021/ND-CP lists such sectors, including:

Trading in goods and services under State monopoly in commerce;
Press activities and news gathering in any form;
Fishing and exploitation of marine resources;
Investigation and security services, etc.

2. Is proof of financial capacity required when establishing foreign-invested enterprises?

Under the Law on Investment 2020, investors must adhere to registered capital contribution schedules and project implementation timelines. Proof of financial capacity is required in two cases:

When applying for an Investment Registration Certificate to establish a foreign-invested enterprise;
When an existing foreign-invested enterprise applies to adjust its Investment Registration Certificate due to capital increases, additional contributions, or registration of new projects.

3. Is investment policy approval always required?

Approval is required only if the investment project falls under cases requiring such approval by the National Assembly, the Government, or the Provincial People’s Committee under Articles 30, 31, and 32 of the Law on Investment 2020.

4. Can foreign investors wholly own a company in Vietnam, or must they form a joint venture?

In most sectors such as manufacturing, trade, IT services, construction, import–export, etc., foreign investors may establish wholly foreign-owned enterprises.

However, certain sectors restricted under WTO commitments and Vietnamese law require joint ventures with domestic investors, including:

Passenger road transport and taxi services;
Retail distribution of certain sensitive products;
Advertising, film production, education, domestic tourism, press, publishing, etc.

5. Are there restrictions on the location of foreign-invested enterprises?

The location of foreign-invested enterprises depends on:

Business sectors: Some industries may only operate within industrial parks or export processing zones;
National security and defense: Enterprises cannot locate in sensitive areas without approval;
Urban and regional planning: Locations must align with local development and infrastructure planning.

Foreign investors should carefully verify location requirements before establishing enterprises.

IV. Legal support services for establishing foreign-invested enterprises in Vietnam

The above information provided by NPLaw aims to support clients in understanding the legal framework governing the establishment of foreign-invested enterprises in Vietnam. Should you have any further questions regarding this matter or other legal issues, please contact NPLaw for direct consultation and tailored legal assistance.