1. Outstanding advantages foreign investors should know before investing in Vietnam

a. Key advantages in Vietnam

Vietnam is establishing itself as one of the most dynamic economies in Southeast Asia, becoming an ideal destination for foreign investors due to the following outstanding advantages:​

• Impressive economic growth, especially in the post-COVID-19 period, has seen Vietnam experience a strong recovery, with relatively high GDP growth year-on-year;
• Political stability and security provide a solid foundation for long-term investment;
• The country's strategic geographic location not only facilitates global trade but also positions it as a gateway connecting major economies in the region;
• A young, abundant, and skilled workforce is available at a highly competitive cost;
• Vietnam’s participation in 17 new-generation free trade agreements and the ASEAN Economic Community opens up vast market access opportunities and facilitates global economic integration;
• Ongoing efforts to improve the institutional framework and enhance transparency in the business environment have solidified Vietnam's position as a prime investment destination, enabling foreign investors to seamlessly integrate into global supply chains.

b. Investment attraction sectors in Vietnam

Information technology: In the digital age, Vietnam is attracting attention from foreign investors and major global corporations. Key investment areas include software development, hardware manufacturing, cloud computing, artificial intelligence (AI), blockchain, fintech, e-commerce, cybersecurity, and smart city solutions. With a combination of technical talent, cost-effectiveness, and government incentives, Vietnam not only provides a solid foundation but also opens up breakthrough opportunities for investors in the information technology sector.

Manufacturing: The manufacturing sector remains the cornerstone of Vietnam's economy, attracting the majority of FDI. Vietnam has become a global hub for electronics, textiles, and footwear production, benefiting from its strategic location and competitive labor costs.

Food and Beverage: The food and beverage (F&B) industry in Vietnam is experiencing rapid expansion, driven by changing consumer preferences, urbanization, and increasing disposable incomes. Investment opportunities in the F&B sector span various categories, including food processing, food delivery, food services, and beverage production. Each of these areas has its own growth potential and innovation opportunities.

Logistics and supply chain management: With the growth of e-commerce and international trade, the logistics sector in Vietnam is experiencing rapid expansion. Investments are primarily focused on developing infrastructure such as warehouses and transportation networks to support efficient supply chain management.

Automotive industry: The automotive sector is gaining momentum as Vietnam aims to become a manufacturing hub for vehicles and automotive parts. With increasing domestic demand and government support for electric vehicles (EVs), this industry presents significant investment opportunities for both local and export markets.

2. Market access conditions foreign investors should understand before investing in Vietnam

According to Article 3 of the Investment Law 2020, the market access conditions for foreign investors are the requirements that foreign investors must meet to invest in sectors listed under the categories of restricted market access as specified in Clause 2, Article 9 of the Investment Law.

As per Article 9 of the Investment Law 2020 and Decree No. 31/2021/NĐ-CP, the categories of sectors with restricted market access for foreign investors are outlined as follows:​

• For sectors not permitted for market access as listed in Section A of Appendix I of Decree 31: Foreign investors are not allowed to invest;
• For sectors with conditional market access as listed in Section B of Appendix I of Decree 31: Foreign investors must meet the market access conditions published on the National Investment Portal;
• For sectors where Vietnam has not yet made commitments on market access: Foreign investors can access the market under the same conditions as domestic investors.

The conditions for market access for foreign investors specified in the List of sectors and business lines restricted for market access include:

• The ownership ratio of foreign investors in economic organizations;
• Forms of investment;
• Scope of investment activities;
• The capacity of the investor; partners participating in investment activities;
• Other conditions as prescribed by laws, resolutions of the National Assembly, ordinances, resolutions of the National Assembly Standing Committee, Government decrees, and international treaties to which the Socialist Republic of Vietnam is a member.

3. Forms of investment foreign investors should be aware of before investing in Vietnam

Foreign investors can choose one of the following forms of investment according to legal regulations. However, they must meet the market access conditions for foreign investors mentioned in Section 2.

a. Investment in establishing an economic organization in Vietnam

For foreign investors, before establishing an economic organization, they must have an investment project, which means they need to apply for an Investment Registration Certificate (IRC) and comply with specific legal regulations regarding sectors, ownership ratios, investment forms, investment scope, and the capabilities of the investor and participating partners…

The Limited Liability Company (LTD) and Joint Stock Company (JSC) are the most popular types of enterprises that many foreign investors choose when investing in Vietnam. This form is suitable for individual investors or companies legally established abroad that wish to enter the Vietnamese market.

b. Investment by contributing capital, purchasing shares, purchasing capital contribution in other economic organizations in Vietnam

According to the legal regulations on investment, investors have the right to contribute capital, purchase shares, and acquire the capital contributions of legally established economic organizations in Vietnam through the following forms:

• Purchasing of newly issued shares or additional shares of Joint stock companies;
• Investing capital into Limited Liability Company (LTD), partnerships, or other economic organizations;
• Purchasing shares of a Joint-stock company from the company or shareholders;
• Purchasing the capital contribution portion of a member of a Limited liability company to become a member of such Limited liability company;
• Purchasing the capital contribution portion of the capital contributing member in the Partnership to become a capital contributing member of the such Partnership;
• Purchasing the capital contribution portion of members of other economic organizations in addition to above cases.

Note: For certain business sectors, the ownership ratio of foreign investors may be restricted. Therefore, to pursue this type of investment, investors should carefully research the economic organization they intend to partner with, ensuring it is legally established in Vietnam, that its business sectors align with the foreign investor's intended activities, and that the capital ownership ratio for foreign investors is compliant.

c. Investment in the form of a BCC contract in Vietnam

Investing under a Business Cooperation Contract (BCC) involves signing an agreement between investors to collaborate in business, share profits, and distribute products according to legal regulations without the need to establish an economic organization.

A BCC can be signed between domestic investors and foreign investors or among foreign investors themselves, facilitating investment in business activities while saving time and costs since there is no requirement to create a new legal entity.

However, because no economic organization is established, the parties will not have a common seal. This presents a challenge, as in some cases, a seal is required for specific documents.

4. Investment incentives foreign investors should know before investing in Vietnam

In Vietnam, incentives are offered for both domestic and foreign investment projects in certain business sectors and geographical areas.

a. Forms of investment incentives

According to Clause 1, Article 15 of the Investment Law 2020, investment incentives include:

• Corporate income tax incentives, including the application of a corporate income tax rate lower than the standard rate for a limited period or for the entire duration of the investment project; tax exemptions, reductions, and other incentives as prescribed by the law on corporate income tax;
• Import tax exemptions for imported goods to create fixed assets; raw materials, supplies, and components imported for production as prescribed by the law on export and import taxes;
• Exemptions or reductions in land use fees, land lease fees, and land use tax;
• Accelerated depreciation and increased deductible expenses when calculating taxable income.

b. Beneficiaries of investment incentives

• Investment projects in sectors eligible for investment incentives or special investment incentives as specified in Appendix II of Decree No. 31/2021/NĐ-CP.
• Investment projects located in areas with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions as defined in Appendix III of Decree No. 31/2021/NĐ-CP.
• Investment projects with a total investment capital of 6 trillion VND or more are eligible for investment incentives if they meet the following conditions:
  • Disburse at least 6 trillion VND within three years from the date of issuance of the Investment Registration Certificate, Decision approving the investment policy simultaneously with investor approval (for projects not requiring an Investment Registration Certificate) or Decision approving the investor (for projects not requiring an Investment Registration Certificate);
  • Achieve a minimum total revenue of 10 trillion VND per year within a maximum of three years from the year revenue is generated or employ an average of at least 3,000 regular employees annually as stipulated by labor law within a maximum of three years from the year revenue is generated.
• Investment projects to build social housing according to housing laws.
• Investment projects in rural areas employing an average of at least 500 regular employees annually as stipulated by labor law (excluding part-time workers and those with contracts under 12 months).
• Investment projects that employ at least 30% of regular employees annually who are people with disabilities according to disability laws and labor laws.
• High-tech enterprises, scientific and technological enterprises, scientific and technological organizations; projects involving technology transfer listed in the encouraged technology transfer categories; technology incubators and scientific and technological enterprise incubators; enterprises producing and providing technologies, equipment, products, and services that meet environmental protection requirements are all subject to conditions specified by laws on science and technology; high technology; technology transfer; environmental protection.
• Innovative startup investment projects, innovation centers, research and development centers including:
  • The National Innovation Center established by a decision of the Prime Minister;
  • Other innovation centers established by agencies, organizations, or individuals to support innovative startup investment projects, establish innovative enterprises, promote innovation activities, research, and development at centers meeting legal conditions;
  • Innovative startup investment projects as regulated by law;
  • Projects establishing research and development centers.
• Investing in business distribution chains for small and medium-sized enterprises; investing in technical support facilities for small and medium-sized enterprises; investing in coworking spaces supporting innovative startups according to laws on supporting small and medium-sized enterprises

c. Principles for entitling investment incentives

The Investment Law 2020 specifies conditions for projects to receive investment incentives selectively, targeting appropriate beneficiaries while maximizing benefits for investors but aligning with state social and economic policies. According to Clauses 6 and 7 of Article 15 of the Investment Law 2020, investment incentives are applied based on the following principles:

• Investment incentives apply to new investment projects and expanded investment projects.
• Investment incentives are applied for a limited time based on the project’s performance results. Investors must meet eligibility criteria according to legal provisions during the incentive period.
• Investment projects that meet conditions for different levels of investment incentives, including special investment incentives, will receive the highest applicable incentive level.

5. Documents foreign investors should prepare before investing in Vietnam

Before making an investment in Vietnam, investors need to prepare all necessary documents. In particular, documents in foreign languages must be translated into Vietnamese and legalized to ensure their validity when used in Vietnam. Specifically, this includes:

a. Necessary documents for individual investors

• A copy of passport (must be translated, notorized and consular legalized at the Vietnamese diplomatic representative office if abroad);
• A confirmation of the bank account balance corresponding to the intended investment capital in Vietnam (if from a foreign bank, a notarized and legalized copy is required);
• A lease agreement for the office and documents proving the leasing rights of the lessor (including Land use rights certificate, Construction permit, and Enterprise registration certificate of the lessor).

b. Necessary documents for organizational investors

• A copy of Enterprise Registration Certificate or equivalent documents confirming the legal status of the organization (must be translated, notorized and consular legalized);
• Financial statements of the investor for the last 2 years or a financial support commitment from the parent company;
• A notarized passport of the legal representative in Vietnam;
• The charter of the foreign company (must be notarized and legalized);
• A proposal for enterprise registration, company charter, and list of founding members/shareholders.

c. Other documents

• An Investment registration certificate (IRC) for foreign investors as stipulated by the Investment Law;
• Other documents related to specific investment projects that the investor wishes to implement.

6. Related costs foreign investors should understand before investing in Vietnam

a. Capital requirements

• Minimum investment capital: Depending on the industry and form of investment, foreign investors may be required to meet minimum capital requirements or reach an agreement with the parties regarding the minimum investment capital.
• Company establishment costs: These costs can vary by region. According to information from company establishment services, the cost of establishing a foreign-invested company in the North and South typically ranges from 15 million to 30 million VND, while in Central Vietnam, it is around 25 million VND.
• Working capital: Foreign investors need to prepare a working capital amount to ensure the operation of the business during the initial phase. This usually includes expenses for personnel, rent, raw materials, and other operational costs.

Capital contribution timeline and methods: According to the new Enterprise Law, the deadline for capital contribution is 90 days from the date of issuance of the Enterprise Registration Certificate (ERC) for the establishment of an economic organization. If a member does not contribute the full amount of capital and type of assets as committed, the company will adjust its charter capital and/or the actual contribution ratio accordingly. Capital contributions can be made in cash, machinery, patents, etc.

b. Taxes requirements

• Tax rate on investment income: The applicable tax rate for investment income is 5% according to the full tax schedule. This applies to both resident and non-resident individuals who have income from investments in organizations in Vietnam. (Pursuant to Clause 2, Article 10 of Circular 111/2013/TT-BTC);
• Value Added Tax (VAT): The VAT rate is 10% for most goods and services. Some specific goods and services are subject to tax rates of 0% and 5%.

(For details, please refer to Article 8 of the Value Added Tax Law 2008 (as amended by Clause 3, Article 1 of the amended Value Added Tax Law of 2013, Article 1 of the Value Added Tax Law, the Special Consumption Tax Law, and the amended Tax Management Law of 2016, Article 3 of the Law amending tax laws of 2014) and the Decree on VAT rates).

• Other taxes: In addition to taxes on investment income and VAT, investors should also pay attention to other taxes such as business registration tax, capital transfer tax, and fees related to business activities.

The deadline for submitting tax declarations for each arising tax obligation is no later than the 10th day from the date the tax obligation arises.

7. The necessity of hiring a Lawyer for foreign investors in Vietnam

Foreign investment in Vietnam can offer numerous opportunities, but it also comes with significant legal challenges. Here are important reasons why foreign investors should consider hiring a lawyer when entering the Vietnamese market:

Understanding legal regulations: Vietnamese law has many complex regulations related to foreign investment, including conditions, procedures, and necessary documentation for establishing a business. An experienced lawyer can help foreign investors understand these regulations, thereby avoiding mistakes that could lead to legal troubles or financial losses.

Assistance with administrative procedures: The administrative procedures for company formation and obtaining investment licenses in Vietnam can be very complex and time-consuming. Lawyers can assist investors in preparing documents, carrying out necessary procedures, and communicating with government agencies, saving time and effort for the investors.

Investment strategy consultation: Lawyers not only provide legal assistance but can also offer strategic investment advice that aligns with the investor's business goals. They can analyze the market, assess risks, and propose options to optimize profits while minimizing legal risks.

Dispute resolution: During business operations, foreign investors may encounter disputes with partners, customers, or government authorities. Lawyers can represent investors in litigation or negotiations to resolve disputes effectively and protect their legal rights.

Keeping updated on legal information: Laws and regulations in Vietnam frequently change. Hiring a lawyer ensures that foreign investors are always informed about the latest legal updates that could impact their business operations, allowing them to adjust their strategies promptly to comply with the legal environment.

8. Phong & Partners Law firm specializes in consulting services and investment procedures for foreign investors in Vietnam

Vietnam has become an attractive destination for foreign investors due to its strong economic development and improving investment environment. However, investing in Vietnam is not an easy task. Foreign investors often face numerous challenges due to complex legal procedures and stringent government requirements. To overcome these difficulties, many companies and individuals seeking to invest in Vietnam have turned to reputable service firms for assistance with the business establishment process.

Phong & Partners Law firm provides comprehensive services in consulting, drafting, and representing clients in the investment procedures in Vietnam. This helps investors navigate legal barriers and optimize their chances of success in this promising business environment. The services offered include, but are not limited to:

Consulting on conditions, procedures, and processes.

• Consulting on business sectors and the foreign investor's ownership ratio in those sectors.
• Consulting on investment forms and the conditions, procedures, and processes for investing in Vietnam.
• Providing advice on policies supporting and tax incentives for foreign investors when investing in Vietnam.
• Consulting on potential risks and legal issues related to investments.
• Consulting on legal regulations related to investment and business activities in the region.
• Consulting on various issues related to post-investment activities in Vietnam.

Drafting and representing investment procedures

• Drafting applications for Investment Registration Certificates, Enterprise Registration Certificates, and Company Charters.
• Representing clients in dealings with competent authorities to obtain necessary licenses.
• Drafting and amending lease agreements.
• Guiding clients through notarization, authentication, and consular legalization of documents.