The term “investor” has become increasingly familiar in recent years as the number of foreign investors continuously rises in the Vietnamese business market, including individual investors. This article will provide an overview of the legal framework applicable to foreign individual investors in Vietnam.
I. Understanding foreign individual investors
1. Are foreign individual investors permitted to invest in Vietnam?
Pursuant to Article 9 of the Law on Investment 2020, the sectors and conditions for market access applicable to foreign investors are regulated as follows:
- Foreign investors shall enjoy the same market access conditions as domestic investors, except in cases provided under Clause 2 of this Article.
- Based on laws, resolutions of the National Assembly, ordinances, resolutions of the Standing Committee of the National Assembly, decrees of the Government, and international treaties to which the Socialist Republic of Vietnam is a member, the Government shall publish a list of sectors with restricted market access for foreign investors, including:
- Sectors not yet open to market access;
- Sectors subject to conditional market access.
2. Market access conditions for foreign investors
The market access conditions specified in the list of sectors with restricted market access for foreign investors include:
- The ratio of charter capital ownership by foreign investors in an economic organization;
- Forms of investment;
- Scope of investment activities;
- Capacity of the investor and its business partners;
- Other conditions as prescribed by laws, resolutions of the National Assembly, ordinances, resolutions of the Standing Committee of the National Assembly, decrees of the Government, and international treaties to which Vietnam is a member.
Accordingly, foreign individual investors are permitted to invest in Vietnam provided that the above conditions are satisfied.
II. Legal regulations applicable to foreign individual investors
1. Which licenses are required for foreign individual investors to invest in Vietnam?
Under Point a, Clause 1, Article 37 of the Law on Investment 2020, a foreign individual investor must obtain an Investment Registration Certificate (IRC) in order to conduct investment activities in Vietnam.
2. Conditions for foreign individual investors to invest in Vietnam
Pursuant to Clause 2, Article 9 of the Law on Investment 2020, the Government publishes a list of sectors with restricted market access for foreign investors, which includes:
- Sectors not yet open to market access;
- Sectors subject to conditional market access.
3. Forms of investment available to foreign individual investors in Vietnam
Article 21 of the Law on Investment 2020 provides the following forms of investment:
- Establishment of an economic organization;
- Capital contribution, share purchase, or capital contribution purchase;
- Implementation of investment projects;
- Investment under a Business Cooperation Contract (BCC);
- Other forms of investment or types of new economic organizations as prescribed by the Government.
Thus, foreign individual investors may choose the investment form most suitable to their needs.
III. Questions regarding foreign individual investors
1. What is the maximum charter capital ownership ratio for foreign individual investors?
According to Clause 10, Article 17 of Decree No. 31/2021/ND-CP, restrictions on foreign ownership ratios, as provided under international investment treaties, shall be applied as follows:
- Where multiple foreign investors contribute capital, purchase shares, or purchase capital contributions in an economic organization and are subject to one or more international investment treaties, the aggregate foreign ownership ratio shall not exceed the highest threshold specified in any of the treaties applicable to a particular sector;
- Where multiple foreign investors from the same country or territory contribute capital, purchase shares, or purchase capital contributions in an economic organization, the aggregate foreign ownership ratio shall not exceed the limit prescribed under the applicable international treaty;
- For public companies, securities companies, fund management companies, securities investment funds, or securities investment companies, if the law on securities provides otherwise, the related provisions of securities law shall prevail;
- Where an economic organization engages in multiple business lines subject to different foreign ownership limits under international treaties, the maximum foreign ownership ratio shall not exceed the lowest threshold applicable to any of those business lines.
2. What procedures must a foreign individual investor follow to contribute capital to a company in Vietnam?
According to Clause 2, Article 26 of the Law on Investment 2020, the investment procedures under a form of capital contribution by foreign investors, as follows:
- Where capital contribution, share purchase, or capital contribution purchase increases the foreign ownership ratio in an economic organization engaged in conditional market access sectors;
- Where such capital contribution, share purchase, or capital contribution purchase results in foreign investors, or the economic organizations defined in Points a, b, and c, Clause 1, Article 23 of this Law, holding more than 50% of the charter capital of the economic organization, including:
- Increasing foreign ownership ratio from 50% or less to over 50%;
- Increasing foreign ownership ratio where the investor already holds more than 50% of the charter capital;
- Where the foreign investor contributes capital, purchases shares, or purchases capital contributions in an economic organization holding land use rights in islands, communes, wards, or townships located in border or coastal areas, or other areas affecting national defense and security.
Conclusion
The above provides an overview of the legal regulations and procedures applicable to foreign individual investors in Vietnam. For further support or to obtain detailed legal advice, clients may contact NPLaw for consultation from our experienced team of lawyers and legal specialists.
