In the context of global economic integration, Vietnam increasingly attracts foreign investors due to its favorable business environment and investment incentive policies. However, to ensure a balance between domestic enterprises and foreign-invested enterprises, Vietnamese law sets forth specific market access conditions for foreign-invested companies. Below, NPLaw invites readers to explore the legal issues related to market access conditions for foreign-invested companies.
In the context of global economic integration, Vietnam increasingly attracts foreign investors due to its favorable business environment and investment incentive policies. However, to ensure a balance between domestic enterprises and foreign-invested enterprises, Vietnamese law sets forth specific market access conditions for foreign-invested companies. Below, NPLaw invites readers to explore the legal issues related to market access conditions for foreign-invested companies.
I. Understanding market access conditions for foreign-invested companies
Foreign-invested companies wishing to operate in Vietnam must comply with market access conditions as prescribed by law. These conditions may include capital ownership ratio, forms of investment, scope of operations, requirements on land use, labor, and other regulations depending on the business sector. Certain sectors allow 100% foreign ownership, while others require joint ventures with Vietnamese partners or impose limits on foreign capital ownership.
Additionally, foreign-invested companies must meet requirements on investment registration; and comply with laws on tax, labor, environmental regulations, and consumer protection. In general, depending on the industry and operational scope, foreign-invested companies need to carefully review applicable laws to ensure full compliance when entering the Vietnamese market.
II. Legal provisions on market access conditions for foreign-invested companies
1. What are market access conditions for foreign-invested companies?
Market access conditions are requirements or restrictions that foreign-invested enterprises must satisfy when investing in a sector or industry in Vietnam. These conditions aim to ensure State‘s control over important economic sectors and to create a balance between domestic and foreign enterprises.
2. Market access conditions for foreign-invested companies
According to Clause 10, Article 3 of the Law on Investment 2020, market access conditions for foreign investors are requirements that must be satisfied if foreign investors wish to invest in industries and sectors listed in the List of sectors and industries with restricted market access.
This list is provided in Clause 2, Article 9 of the Law on Investment 2020 and is announced by the Government based on Vietnamese laws and Vietnam’s international commitments. Specifically, the list comprises two groups:
- Sectors and industries without opening to market access;
- Sectors and industries with conditional market access.
3. Restrictions on market access conditions for foreign-invested companies
According to Appendix I of Decree No. 31/2021/ND-CP, the list of sectors and industries with restricted market access for foreign investors includes:
- Sectors and industries without opening to market access for foreign investors;
- Sectors and industries with conditional market access for foreign investors.
Under Clause 3, Article 9 of the Law on Investment 2020, foreign investors wishing to invest in sectors and industries with conditional market access must comply with regulations on:
- The capital ownership ratio in Vietnamese enterprises;
- Forms of investment;
- Scope of investment activities;
- Financial capacity and experience of the investor;
- Other conditions under Vietnamese law and international treaties to which Vietnam is a party.
Additionally, under Clause 3, Article 15 of Decree No. 31/2021/ND-CP, foreign investors and foreign-invested economic organizations may have to meet further conditions such as:
- Use of land, labor, and natural resources;
- Production and supply of public goods and services or goods and services under State monopoly;
- Real estate business and housing ownership in Vietnam;
- Participation in the equitization of State-owned enterprises.
Thus, foreign investors seeking to access the Vietnamese market must carefully consider the business sector to ensure compliance with regulations on capital ownership, investment forms, and other special conditions under Vietnamese law.
III. Questions on market access conditions for foreign-invested companies
1. In what cases are foreign-invested companies not subject to the same market access conditions as domestic investors?
Under Clause 2, Article 9 of the Law on Investment 2020, foreign-invested companies are not allowed to freely invest like domestic enterprises if operating in industries listed in the List of sectors and industries with restricted market access for foreign investors. This list includes:
- Sectors and industries without opening to market access;
- Sectors and industries with conditional market access.
Thus, foreign-invested companies cannot apply the same market access conditions as domestic investors if their business sectors fall within this restricted list.
2. What industries are currently not opened to foreign investors?
According to Section A, Appendix I of Decree No. 31/2021/ND-CP guiding the Law on Investment 2020, the Vietnamese Government lists 25 sectors and industries that foreign investors are prohibited from accessing, including:
- Trading of goods and services under State monopoly in the field of commerce;
- Journalism and news gathering in any form;
- Investigation and security services;
- Production and trading of weapons, explosives, and support tools;
- Production of military materials or equipment; trading in military uniforms, military gear, and police equipment;
- Purchasing and handling public assets of armed forces units;
- Fishing and exploitation of marine resources;
- Investigation, assessment, and exploitation of natural forests (including timber harvesting, hunting of rare wildlife, genetic resource management);
- Research or use of new animal breeds’ genetic resources before appraisal by the Ministry of Agriculture and Rural Development;
- Administrative-judicial services (forensic assessment, bailiff, asset auction, notary, bankruptcy trustee);
- Public postal services;
- Direct collection of household waste;
- Labor export services under contract;
- Investment in cemetery and graveyard construction projects for transferring land use rights attached to infrastructure;
- Blasting services;
- Establishment, operation, and maintenance of maritime signaling systems, water areas, public maritime channels;
- Guarantee of maritime safety and maritime electronic information;
- Inspection and registration of means of transport and offshore oil and gas equipment;
- Importing and dismantling used ships;
- Trade of cross-border goods;
- Temporary import for re-export;
- Exercising the right to export, import, and distribute certain restricted goods;
- Public opinion polling services;
- Industrial property representation and intellectual property assessment services;
- Tour operation services (except international tours serving foreign tourists visiting Vietnam).
Thus, the above are sectors where foreign investors are prohibited from accessing the Vietnamese market by law. These mainly relate to security, national defense, natural resources, public services, and trade to protect national interests and ensure tight State management.
3. Which sectors are restricted or prohibited for foreign-invested companies to access in Vietnam?
When foreign investors invest in Vietnam, they enjoy the same market access conditions as domestic investors, except for sectors under the restricted list. This list is announced by the Government in Appendix I of Decree No. 31/2021/ND-CP, comprising two main groups:
- Sectors and industries without opening to market access;
- Sectors and industries with conditional market access.
Market access conditions are provided in Article 15 of Decree No. 31/2021/ND-CP, based on laws, National Assembly resolutions, ordinances of the Standing Committee of the National Assembly, Government decrees, and international treaties to which Vietnam is a member.
In summary, not all sectors in Vietnam are fully opened to foreign investors. Investors must carefully review the restricted list and specific conditions before deciding to invest to ensure compliance with the law.
4. Are there special regulations on tax, labor, or environment for foreign-invested enterprises when entering the Vietnamese market?
Foreign-invested enterprises entering Vietnam must comply with special regulations on tax, labor, and environment, specified in various laws.
- Tax: Foreign-invested enterprises must pay corporate income tax under Article 10 of the Law on Corporate Income Tax 2008 (amended in 2013), which sets the standard rate at 20%. However, investment in incentive sectors or regions may enjoy tax incentives under Articles 13 and 14 of the Law on Corporate Income Tax. They are also subject to VAT under Article 3 of the Law on Value Added Tax 2008 (amended in 2016).
- Labor: Under the Labor Code 2019, Article 151 requires foreign workers in Vietnam to have a work permit unless exempted under Article 154. Minimum wages are regulated by Article 90 and must comply with principles under Article 91.
- Environment: Under the Law on Environmental Protection 2020, especially Article 29, projects with potential for significant environmental impact must undergo a preliminary environmental impact assessment before implementation.
Thus, to legally operate in Vietnam, foreign-invested enterprises must strictly comply with these regulations.
5. Are there differences in market access conditions between 100% foreign-owned companies and joint ventures with Vietnamese partners?
Under Article 9 of the Law on Investment 2020, foreign investors enjoy market access like domestic investors, except in sectors restricted by the Government’s List in Appendix I of Decree No. 31/2021/ND-CP. This list includes sectors requiring maximum foreign ownership ratios, Vietnamese partner participation, or other special conditions.
For joint ventures with Vietnamese partners, market access is often more favorable in certain sectors restricted for 100% foreign-owned companies. For example, in education, healthcare, and transport, having a Vietnamese partner helps meet legal requirements more easily.
IV. Legal consultancy services on market access conditions for foreign-invested companies
The above is NPLaw’s article on market access conditions for foreign-invested companies. With a team of experienced lawyers and legal experts, NPLaw is always ready to accompany, advise, and support clients on legal issues related to market access conditions for foreign-invested companies. If you need support on other legal matters, please contact NPLaw via:
