Tiếng ViệtVietnam has become one of Southeast Asia’s fastest-growing destinations for foreign direct investment (FDI). With an open investment environment, competitive labor costs, and attractive tax incentives, thousands of global businesses are looking to establish an FDI company in Vietnam.
However, the process is not just paperwork. Navigating the Vietnam investment law requires a clear understanding of legal procedures, licensing conditions, and market access rules. Any mistake may result in delays, rejections, or even revocation of licenses.
In this guide, Lexconsult & Partners provides a comprehensive overview of how to set up a foreign-invested company (FIE) in Vietnam, covering legal requirements, restricted sectors, step-by-step registration, risks, and strategic recommendations.
1. Overview of FDI Enterprises in Vietnam
FDI stands for Foreign Direct Investment, a common term in international economic activities. In essence, an FDI enterprise refers to an economic organization that receives capital from foreign investors.
According to Clause 22, Article 3 of the 2020 Law on Investment:
22. “foreign-invested business organization” means an organization whose members or shareholders are foreign investors.
Accordingly, an FDI enterprise is a company in which a foreign investor holds at least 51% of charter capital or exercises controlling power over corporate decisions. These enterprises must follow a separate legal process for investment and business registration, different from that of domestic enterprises.
There are two main forms of FDI enterprises:
– 100% foreign-owned enterprises;
– Joint ventures between Vietnamese entities and foreign investors.
For a practical overview of investment structures and benefits, see our related guide on Establishing a 100% foreign-owned company in Vietnam.
2. Legal conditions to establish an FDI company in Vietnam (Update 2025)
Establishing and operating a foreign-invested enterprise (FIE) in Vietnam is not merely a matter of filing for business registration. The enterprise must fulfill specific legal conditions as stipulated in the 2020 Law on Investment, the 2020 Law on Enterprises, and related regulations such as Decree No. 31/2021/ND-CP. Key requirements include:
2.1. Having a valid foreign investor
As defined in Clause 19, Article 3 of the Law on Investment:
19. “foreign investor” means an individual holding a foreign nationality or an organization established under foreign laws and carrying our business investment activities in Vietnam.
To qualify, a foreign investor must present sufficient legal documents proving their status:
– For individuals: A valid passport with clear identification details;
– For organizations: Certificate of Business Registration issued in the home country and valid power of attorney for the representative in Vietnam.
This legal verification is the first and mandatory step to ensure transparency and lawfulness in the investment registration process.
2.2. Possessing an eligible investment project in Vietnam
Before forming an FDI company, the foreign investor must register an investment project and obtain approval in accordance with Article 22 of the Law on Investment.
The project dossier must include:
– Project objectives, size, and location;
– Land use requirements (if any);
– Total investment capital and implementation timeline;
– Funding sources and investor’s financial capacity.
Competent authorities will assess the project’s feasibility and legal compliance before issuing the Investment Registration Certificate (IRC).
Having an approved investment project is a prerequisite for enterprise registration.
2.3. Not engaging in prohibited business lines
Under Article 6 of the Law on Investment, foreign investors are not permitted to engage in sectors listed as prohibited, including:
– Narcotics and precursors for illegal drug production;
– Prostitution or prostitution brokerage services;
– Debt collection services (fully banned from 2021);
– Human trafficking or trade in human organs;
– Production and trade in military explosives or fireworks;
– Human cloning…
If the project includes any prohibited activities, the licensing authority will immediately reject the application.
Note: “Conditional business lines” are not prohibited but require fulfillment of additional legal criteria (see Section 3).
2.4. Complying with market access conditions for foreign investors
According to Article 17 of the Law on Investment and detailed in Appendix I of Decree No. 31/2021/ND-CP, foreign investors may only access the Vietnamese market under specific conditions, including:
– Capital ownership limits: In certain sectors, foreign ownership is capped. For example, commercial banks (max. 30%), broadcasting or press sectors (must have Vietnamese controlling shareholder).
– Investment form restrictions: Some sectors only allow joint ventures, business cooperation contracts (BCC), or capital contribution excluding wholly foreign-owned enterprises.
– Local partner requirements: Sectors such as logistics, education, and retail distribution may require partnership with qualified Vietnamese enterprises.
– Licensing and technical conditions: Fields like transportation, finance, insurance, healthcare, and education may require additional sector-specific licenses and compliance.
Therefore, before registering a business in Vietnam, foreign investors must carefully assess whether their intended business line is subject to any restrictions or special market access conditions. These limitations are set out in Vietnamese law and in Vietnam’s commitments under international trade agreements such as the WTO, CPTPP, and EVFTA.
3. Restricted & Conditional Sectors
According to Appendix I of Decree No. 31/2021/ND-CP, business sectors in Vietnam are classified into:
– Unrestricted market access sectors: Foreign investors may participate under the same conditions as domestic enterprises;
– Conditional market access sectors: Investors must satisfy additional legal requirements under Vietnamese law;
– Sectors not yet opened under international commitments: Or restricted under Vietnam’s WTO, CPTPP, EVFTA schedules.
3.1. Sectors prohibited for foreign investment under the 2020 Investment Law
Pursuant to Article 6 of the 2020 Law on Investment, foreign-invested enterprises (FIEs) are prohibited from operating in the following business sectors:
– Narcotic substances;
– Chemicals and minerals on the restricted list;
– Wildlife species and their derivatives sourced from the wild;
– Prostitution and related services;
– Human trafficking or trading in human tissues, corpses, or body parts;
– Cloning-related activities in humans;
– Firecrackers and military explosives;
– Debt collection services.
If an FIE attempts to register for any prohibited business activity, its investment project will be denied approval from the outset.
3.2. Conditional business sectors – Requirements for FIE licensing
Some common requirements that foreign-invested enterprises must meet include:
– Capital ownership limits:
Retail distribution (may be limited to 49–51%);
Press and telecommunications with infrastructure (≤ 49%);
Air transport services (≤ 30%).
– Mandatory joint ventures with Vietnamese partners:
Advertising, education and training, multimodal transportation.
– Requirements for international experience or minimum charter capital:
Insurance, banking, real estate.
– Specialized sub-licenses:
Education, medical examination and treatment, securities.
Licensing will only be granted to FIEs that submit complete documentation proving financial capacity, relevant experience, eligible joint venture partners (if applicable), and fulfillment of sector-specific requirements.
3.3. Sectors with restricted market access for foreign investors
Beyond conditional sectors, some industries remain restricted due to the following:
– Specialized legal regulations: Capital ownership limits, Vietnamese practitioner requirements, or mandatory joint ventures.
– Lack of market-opening commitments under international treaties: Certain sectors are not fully liberalized under WTO, EVFTA, CPTPP, and only permit limited investment forms.
Examples:
– Telecommunications with infrastructure: Max. 49% foreign ownership;
– Education: Foreign investors can only enter general education through joint ventures, and cannot own 100% in preschools or primary schools;
– Banking, insurance, securities: Require licenses from regulatory bodies such as the State Bank of Vietnam or Ministry of Finance and must meet stringent capital and management conditions;
– Accounting, auditing, legal consultancy: Must employ licensed Vietnamese professionals and limit foreign practitioner participation.
These are high-barrier sectors requiring careful legal consideration before entry.
3.4. Consideration of WTO and international commitments when investing in Vietnam
Foreign investors must assess Vietnam’s commitments under WTO, EVFTA, CPTPP, RCEP, etc., in parallel with domestic regulations, as such treaties may:
– Expand market access rights (e.g., EVFTA liberalizing logistics and distribution sectors);
– Impose restrictions on investment forms or foreign equity ownership.
If a sector is not committed or remains restricted, prior approval from relevant authorities is mandatory, and certain limitations may apply.
3.5. Strategic guidance for selecting suitable business sectors
Before registering a project, FIEs should take the following steps:
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Review the list of prohibited and conditional sectors under the 2020 Law on Investment and Decree No. 31/2021/ND-CP;
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Cross-reference WTO and treaty commitments Vietnam has made under EVFTA, CPTPP, etc.;
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Consult with investment lawyers to select the optimal structure – 100% foreign-owned, joint venture, or M&A;
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Prepare a complete and compliant Investment Registration Certificate (IRC) dossier based on the selected sector, including all legal prerequisites.
Strategy: If your target sector is conditional, consider a staged approach (JV → raise stake) or M&A of a licensed local entity. See M&A legal services in Vietnam.
4. Step-by-step guide to registering an FDI company in Vietnam (2025)
Establishing a foreign-invested enterprise (FIE) in Vietnam not only requires compliance with legal investment conditions but also adherence to strict procedures for investment registration and enterprise formation. Below is a step-by-step overview of the standard process for foreign investors to establish an FIE in Vietnam:
Step 1: Apply for Investment Registration Certificate (IRC)
According to Articles 38 and 41 of the 2020 Law on Investment, foreign investors must register an investment project before establishing an enterprise.
IRC application dossier includes:
– A written request to implement the investment project;
– Investment project proposal (including objectives, scale, capital, location, duration, etc.);
– Documents proving the investor’s financial capacity (financial statements, capital commitment documents, etc.);
– Documentation confirming land use rights or lease agreements (if applicable);
– A copy of the investor’s passport (individuals) or business registration certificate (organizations);
– Other documents depending on the specific business sector.
Licensing authorities:
– Management Boards of Industrial or Economic Zones: for projects located within such zones;
– Department of Planning and Investment (DPI): for projects located outside industrial/economic zones.
Processing time: Approximately 15 working days from the date of receiving a complete and valid dossier.
Step 2: Apply for Enterprise Registration Certificate (ERC)
After being granted the IRC, the investor proceeds to register the enterprise with the Business Registration Office under the provincial Department of Planning and Investment.
ERC application dossier includes:
– Enterprise registration application form;
– Company charter;
– List of founding members or shareholders;
– A copy of the Investment Registration Certificate;
– Copies of identification documents (individuals) or legal documents (entities) of the foreign investors;
– Power of attorney (if applicable).
Processing time: Approximately 3 – 5 working days from the date of submitting a valid dossier.
Note: If capital contribution is made via assets from abroad, investors must obtain confirmation of capital transfer via a direct investment capital account opened at a licensed Vietnamese bank.
Step 3: Create company seal & Public disclosure
Once the enterprise registration certificate is issued, the FIE must:
– Create a corporate seal and publish the seal specimen on the National Business Registration Portal;
– Publish its enterprise registration details in accordance with Article 32 of the 2020 Law on Enterprises.
Step 4: Open FDI Capital Account
All FIEs are required to open a direct investment capital account in foreign currency or Vietnamese dong at a licensed commercial bank in Vietnam. This account is used for capital contributions and for remitting profits back to the investor’s home country. This is a mandatory requirement under the foreign exchange control regulations of the State Bank of Vietnam.
Step 5: Tax, Invoicing & Labor registration
– Apply for a tax code and register for electronic tax filing;
– Register for electronic invoicing with the tax authority;
– Register labor usage and participate in social insurance (if employing staff);
– Declare charter capital contribution within 90 days from the date the Enterprise Registration Certificate is issued.
These procedures form the legal foundation for lawful and sustainable operations of an FIE in Vietnam. Investors are strongly advised to work with professional legal advisors to ensure full compliance and avoid administrative delays.
5. Common Legal Risks for FDI Companies
Although Vietnam has increasingly opened its market to foreign investment, many foreign-invested enterprises (FIEs) still encounter significant legal risks due to lack of knowledge or negligence during their establishment and operation. Below are key legal pitfalls that foreign investors should pay close attention to:
5.1. Incorrect business line registration
One of the most frequent mistakes is registering business lines that are inconsistent with the actual business activities. Inaccurate industry codes or vague activity descriptions may lead to:
– Denial of investment licensing or requests for dossier revision;
– Ineligibility to apply for related sub-licenses;
– Sanctions for operating outside the registered scope, which can damage the enterprise’s reputation, especially when raising capital or pursuing an IPO.
Choosing appropriate business lines requires referencing Decision No. 27/2018/QĐ-TTg and cross-checking with Appendix I of Decree 31/2021/NĐ-CP regarding market access conditions for foreign investors.
5.2. Missing sub – licenses or failure to meet conditional business requirements
Many business sectors in Vietnam require special operational licenses (e.g., international travel license, e-commerce platform license, payment intermediary license), professional certificates, or minimum charter capital (such as in education, healthcare, logistics, or e-commerce).
Operating without obtaining these conditions may lead to inspections, administrative penalties, or forced suspension under Decree 122/2021/NĐ-CP.
5.3. Exceeding foreign ownership limits
Failing to comply with foreign ownership caps stipulated in Decree 31/2021/NĐ-CP can have serious consequences, especially in sensitive sectors such as:
– Postal services, broadcasting, aviation, publishing, e-commerce, banking and finance, etc.
Exceeding permitted thresholds may result in:
– Suspension of operations;
– Mandatory restructuring of ownership;
– Revocation of the Investment Registration Certificate and related business licenses.
Thus, careful structuring of shareholding ratios aligned with the applicable business sector is essential.
5.4. Illegal profit remittance abroad
An FIE is only permitted to remit profits abroad when the following conditions are met:
– All tax obligations have been fulfilled;
– Financial statements have been audited;
– A formal notification has been submitted to the tax authority.
Violations of these conditions may lead to penalties under the Law on Foreign Exchange Management, affecting the investor’s financial rights and reputation. Investors may face administrative fines or encounter delays in remittance procedures.
5.5. Risks in dispute resolution and investment protection
Although Vietnam has signed various bilateral and multilateral agreements on investment protection, disputes may still arise due to issues such as:
– Poorly drafted joint venture agreements;
– Undocumented capital transfers;
– Lack of investor protection clauses in contracts.
Common legal disadvantages for foreign investors include:
– Failure to comply with the Law on Investment, company charter, or internal regulations;
– No pre-agreed dispute resolution mechanisms (e.g., international arbitration) in contracts;
– No contingency planning for shareholder conflicts or equity transfers.
Understanding these legal risks is crucial for any foreign investor aiming to operate long-term in Vietnam. Proper legal setup and compliance can minimize exposure to regulatory penalties and commercial disputes.
6. Legal strategies for foreign investors in Vietnam (FDI success guide)
To avoid legal risks and ensure sustainable investment in Vietnam, foreign investors should adopt a well-planned strategy that is legally compliant and operationally efficient. Below are practical legal and strategic recommendations for establishing and operating a successful FDI business in Vietnam:
Choose the appropriate investment structure
Depending on business goals and the nature of the targeted sector, foreign investors may choose:
– A 100% foreign-owned enterprise; or
– A joint venture with a local Vietnamese partner.
In sectors with market access restrictions, forming a joint venture is often the most viable option. Selecting the wrong investment form may result in licensing rejection or loss of control over the business.
Analyze the legal and operational costs of each model
Each investment model comes with distinct licensing procedures, regulatory requirements, and timelines. For example:
– A wholly foreign-owned company may offer faster setup and fewer constraints but higher legal compliance costs.
– A joint venture requires thorough negotiation of rights and obligations but may expedite licensing in restricted sectors.
Investors should assess both short-term and long-term implications before making a decision.
Build a comprehensive legal and financial framework
Right from the start, FIEs should establish:
– A proper corporate governance structure;
– A well-drafted charter and internal regulations;
– A legal and tax compliance plan covering profit repatriation, labor laws, intellectual property protection, and transfer pricing.
Early legal and financial planning can significantly reduce operational risks and support long-term business expansion.
Partner with a professional legal advisory firm
Collaborating with an experienced law firm like Lexconsult & Partners offers clear advantages:
– Accurate legal classification of business lines and market access conditions;
– Legal representation in dossier preparation and communication with licensing authorities;
– Drafting of investment contracts, joint venture agreements, and optimal capital structures;
– Mitigation of legal risks in disputes, equity transfers, or IPO processes.
Legal compliance is the key to FDI success in Vietnam
Ultimately, the success of a foreign-invested enterprise in Vietnam is not solely determined by capital or business strategy – but by its ability to comply with Vietnamese laws.
Setting up an FDI company in Vietnam offers immense opportunities but requires strict compliance with investment laws, licensing procedures, and market access rules.
At LexConsult & Partners, we provide end-to-end FDI services in Vietnam: from IRC/ERC registration, opening DICA accounts, obtaining licenses, to ensuring full compliance for long-term growth.
Contact us today for a consultation: Lexconsult & Partners
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