Starting a Business in Vietnam: A Guide for Investors

Conditions for Establishing a Foreign-Invested Company

To legally conduct business in Vietnam, foreign investors must comply with not only the general conditions for all enterprises but also specific requirements tailored to foreign investors.

1. Conditions for Establishing a New Company

• According to Article 22 of the Law on Investment 2020, a foreign-invested company must meet market access conditions as stipulated in Article 9 of this law. This means foreign investors are only permitted to engage in business sectors that are open to foreign investment and are prohibited from engaging in others.
• Before establishment, foreign investors must have an investment project and complete the procedures to obtain an Investment Registration Certificate (IRC).

2. Conditions for M&A Transactions

• Per Article 24 of the Law on Investment 2020, foreign investors must meet market access conditions as stipulated in Clause 3 of Article 9 of this law, as well as Articles 15, 16, and 17 of Decree 31/2021/ND-CP.
• The transaction must ensure national defense and security, as regulated by the Law on Investment 2020.
• Investors must comply with land laws regarding land use rights and land use conditions in border or coastal areas.

3. Investor’s Legal Status and Nationality

Foreign investors can be individuals over 18, organizations, or businesses from WTO member countries or countries with a signed bilateral investment treaty with Vietnam.

While there are no specific nationality restrictions, all foreign investors must comply with Vietnamese laws and international agreements. It’s important to note that a foreign investor’s background and origin country may be subject to review by state authorities during the approval process for national security and defense purposes.

4. Financial Capacity Conditions

Foreign investors must demonstrate sufficient financial capacity for their investment in Vietnam. Specific financial requirements can vary depending on the business sector. Investors should conduct due diligence and familiarize themselves with relevant laws and regulations to ensure they meet all necessary financial requirements before proceeding with their investment plan. Additionally, consulting with legal and financial advisors is highly recommended to ensure compliance.

5. Office and Project Location Conditions

Foreign investors must secure a legal and valid location to execute their investment project in Vietnam. This can be done through a lease agreement or a land use right certificate. The lease contract must be legal and verifiable to be used as a company’s headquarters and project location. For manufacturing projects, investors must demonstrate a valid lease contract for a factory in an industrial cluster or park.

6. Experience and Specific Industry Conditions

Foreign investors must meet specific conditions for business sectors that are subject to conditional market access. For instance, in the fields of commercial trade, wholesale, and retail, investors need to demonstrate relevant experience.

Procedure for Establishing a Foreign-Invested Company through Initial Capital Contribution

The procedure for establishing a foreign-invested company, where foreign investors contribute from 1% to 100% of the charter capital from the beginning, consists of 9 specific steps.

Step 1: Prepare the Application File for an Investment Registration Certificate (IRC)

Foreign investors must prepare an application file for an IRC, which includes:

• A written request for the implementation of the investment project.
• Documents proving the legal status of the investor:
  • For an organizational investor: A copy of the establishment certificate or other equivalent legal document.
  • For an individual investor: A copy of the identity card, citizen identity card, or passport.
• A proposal for the investment project, including: investor information, investment objectives, investment capital, scale and capital mobilization plan, location, duration, investment schedule, labor demand, socio-economic impact assessment, and proposals for investment incentives.
• Documents proving the investor’s financial capacity:
  • For an organizational investor: Financial statements for the last 2 years / A financial support commitment from the parent company / A financial commitment from a financial institution / A guarantee on the investor’s financial capacity / Other documents proving the investor’s financial capacity.
  • For an individual investor: A bank account balance confirmation / Savings passbook, etc.
• A house lease contract (headquarters), and documents proving the lessor’s right to lease (Land Use Right Certificate, Construction Permit, Real Estate Business License of the lessor, or other equivalent documents).
• A proposal for land use demand (if the project does not receive land/land lease from the state/allow land use purpose conversion, it should be replaced with a copy of the premises lease agreement or a related document confirming the investor’s right to use the land at the project location).
• An explanation of technology usage (if the project uses technology from the list of restricted technology transfers): technology name, process diagram, origin, main technical parameters, main equipment and technology lines, and the condition of the machinery.
• A BCC business cooperation contract (for an investment project under a BCC contract).

Step 2: Submit the Application for an Investment Registration Certificate (IRC)

To apply for an IRC for projects not subject to an investment policy decision, investors must follow these steps:

Declare information on the National Foreign Investment Information System

• Before applying for the IRC, investors must enter the investment project information online on the National Foreign Investment Information System. Within 15 days of online submission, the investor must submit the physical IRC application to the Investment Registration Authority.
• Upon receiving the application, the Investment Registration Authority will provide the investor with an account to access the National Foreign Investment Information System to track the application’s progress.
• The Investment Registration Authority will use the system to receive, process, and return registration results, update the status, and issue a code for the investment project.

Submit the application directly to the competent investment registration authority

• Investors must submit the IRC application directly to the Department of Planning and Investment of the province where the company will be headquartered for business lines regulated by the Law on Investment 2020 and Decree 99/2003/ND-CP on the Management of High-Tech Zones, specifically for:
  • Investment projects located outside industrial parks, export processing zones, high-tech zones, or economic zones.
  • Projects developing infrastructure in industrial parks, export processing zones, high-tech zones, and projects within those zones in localities without a Management Board.
  • Investment projects implemented across multiple provinces under the management of the central government.
  • Investment projects implemented both inside and outside industrial parks, export processing zones, high-tech zones, and economic zones.
• Investors must submit the application directly to the Management Board of industrial parks, export processing zones, high-tech zones, and economic zones where the company is headquartered for:
  • Investment projects developing infrastructure within the zone.
  • Investment projects carried out within the zone.

Step 3: Issue of the Investment Registration Certificate (IRC)

The processing time for an investment project depends on the project type and the process of the competent authority. Specifically:

• Investment projects directly from the central government have a processing time of 15-20 working days from the date of receiving a complete application.
• Investment projects under an investment decision have a processing time of 5-10 working days from the date of receiving the investment decision.

Note that the above timeframe only applies to investment projects directly from the central government. For investment projects in other provinces, the processing time may vary depending on local procedures and authorities as per the Law on Investment 2020 and Decree 99/2003/ND-CP on the Management of High-Tech Zones.

Step 4: Prepare and Submit the Application for an Enterprise Registration Certificate (ERC)

After the foreign-invested company receives its IRC, the foreign investor must proceed with the ERC application. The application for an ERC includes:

• An application for business registration.
• The company’s charter.
• A list of members or shareholders.
• Copies of documents: ID card/Citizen Identity Card/Passport or other legal personal authentication documents for individuals.
• Establishment decision, business registration certificate, or other equivalent documents of the organization, and a power of attorney; a copy of a legal personal authentication document for the representative in the case of an organization.
• For a foreign organizational member, a copy of the business registration certificate or equivalent document must be legally authenticated.
• The Investment Registration Certificate that has been issued to the foreign investor.

Place of Submission: The Department of Planning and Investment of the province where the company is headquartered.

Processing Time: From 03 to 06 working days from the date of receiving a complete and valid application.

Step 5: Publicize Business Registration Information

After the ERC is issued, the investor must publicly announce the information on the National Business Registration Portal and pay the required fee. The content to be publicized includes:

• Information on the business lines of the enterprise.
• A list of founding shareholders and a list of foreign-investor shareholders for a joint-stock company (if any).

The request to publicize the business registration information and the payment of fees must be completed at the time the enterprise submits its business registration application.

Failure to publicize information on the National Business Registration Portal will result in a fine of 1,000,000 VND to 2,000,000 VND according to Article 26 of Decree 50/2016/ND-CP, which applies a fine for investors who fail to disclose or disclose inaccurate information on the national business registration portal. This is a punitive measure of which investors need to be aware, and enterprises must also comply with all legal regulations and procedures related to their business operations.

Step 6: Company Seal

The seal can be either a physical seal created at a seal-making facility or an electronic signature in accordance with e-transaction laws. The company decides on the type, quantity, form, and content of the seals for the enterprise, its branches, representative offices, and other units.

The enterprise can either authorize a third party or perform the seal-making procedure itself and submit the seal’s sample to the Department of Planning and Investment. This process involves the following 3 steps:

• Design the seal sample: The enterprise has the right to choose the form, quantity, and content of the seal. However, it must fully display the enterprise’s name and ID number.
• Seal making: The enterprise must bring a copy of the ERC and the seal design to a seal-making facility to make the corporate seal.
• Receive the corporate seal: After the seal-making process is complete, the enterprise must bring the original ERC to the seal-making facility to receive the seal. The Business Registration Office will then provide a receipt to the enterprise. Simultaneously, the seal’s information will be posted on the National Foreign Investment Portal, and an official announcement about the posting will be provided to the enterprise.

The management and storage of the seal are governed by the company’s charter or a regulation issued by the enterprise, its branches, representative offices, or other units that have a seal. The enterprise uses the seal in transactions as prescribed by law.

Step 7: Obtain a Business License or Operational License

If the enterprise operates in the field of retail or establishes a retail outlet, it will need to apply for a Business License. Additionally, for certain conditional business lines, the enterprise must obtain other relevant licenses to operate.

For example, an enterprise operating in the education sector must obtain a training license, while an enterprise in the food sector must obtain a food safety and hygiene license, and so on.

General Conditions for Obtaining a Business License in the Retail Sector for Foreign Investors:

• The investor must be a foreign national, organization, or enterprise from a country or territory that has committed to opening its market for the purchase and sale of goods and related activities under international agreements to which Vietnam is a member.
• The investor must meet market access conditions under international treaties to which Vietnam is a member.
• The investor must have a financial plan to carry out the business activities.
• The investor must not have overdue tax debts if the company has been established in Vietnam for one year or more.

Sector-Specific Conditions for Obtaining a Retail Business License:

• Compliance with specialized laws.
• Consistency with the level of competition from domestic enterprises in the same sector.
• The ability to create jobs for local workers.
• The ability and level of contribution to the state budget.

Documents for a Retail Business License for a Foreign-Invested Enterprise:

• An application for a Business License (Form No. 01 in the Appendix of Decree 09/2018/ND-CP).
• An explanation report that includes the following contents:
  • An explanation of the conditions for obtaining a Business License as per Article 9 of Decree 09/2018/ND-CP.
  • A business plan: describing the content and method of business activities; presenting the business and market development plan; labor needs; and an assessment of the socio-economic impact and effectiveness of the business plan.
  • A financial plan: a report on business performance based on the audited financial statements of the most recent year (if established in Vietnam for one year or more); an explanation of capital, capital sources, and the capital mobilization plan; along with financial documents.
  • The business situation for the sale and purchase of goods and related activities. The financial situation of the foreign-invested economic organization up to the time of the Business License application.
• A document from the tax authority confirming no overdue tax debts.
• Copies of the following documents: The Enterprise Registration Certificate; The Investment Registration Certificate for the project related to the sale and purchase of goods and related activities (if any).

Competent Authority for Issuing a Retail Business License for a Foreign-Invested Enterprise:

• The Department of Industry and Trade in the province where the enterprise is headquartered.
• Processing Time: Approximately 30-45 working days.

Step 8: Open a Foreign Direct Investment (FDI) Capital Account

After completing the above steps, the foreign investor must open a Foreign Direct Investment (FDI) capital account and transfer the capital to this account within the capital contribution deadline specified in the Investment Registration Certificate.

Additionally, the foreign-invested company needs to open a transaction account to receive money from the FDI capital account for future domestic payments and receipts in Vietnam.

Step 9: Complete Post-Establishment Procedures

The post-establishment procedures for a foreign-invested company are similar to those for a Vietnamese company, including:

• Displaying the company’s nameplate at the headquarters.
• Registering a digital signature.
• Requesting the issuance of electronic invoices.
• Reporting the project’s implementation status as specified in the Investment Registration Certificate.
• Filing and paying taxes.

Procedure for Establishing a Foreign-Invested Company through Capital Contribution or Share Purchase

In the case where an enterprise establishes a foreign-invested company through capital contribution or a share purchase, the procedure consists of 6 steps:

Step 1: Establish a Vietnamese Company

A foreign investor is only entitled to invest or purchase shares in a Vietnamese enterprise after the enterprise has been legally established in Vietnam. If the establishment procedures have not been completed, the Vietnamese partner needs to establish a new company with 100% Vietnamese capital first.

Step 2: Prepare the Application File for Capital Contribution or Share/Capital Purchase

A foreign investor must prepare the following application file:

• An application for capital contribution or share purchase registration, including detailed information about the enterprise in which the foreign investor intends to contribute capital or buy shares. The application must specify the percentage of foreign ownership after the capital contribution or share/capital purchase.
• For an individual investor, the file must include copies of legal personal documents; for an organizational investor, it requires a copy of the business registration certificate or other legal documents.
• A written agreement on the capital contribution/share purchase/capital contribution purchase between the foreign investor and the Vietnamese economic organization.
• A document (with a copy) declaring the Land Use Right Certificate of the Vietnamese economic organization receiving the foreign investor’s capital contribution/share/capital contribution purchase.

Step 3: Submit the Application

After preparing the complete file, the foreign investor submits it to the Investment Registration Office, under the provincial Department of Planning and Investment where the enterprise is headquartered. Within 15 working days of receiving a complete and valid file, the Department of Planning and Investment will issue a Notice confirming that the necessary conditions for capital contribution or share/capital contribution purchase have been met.

Step 4: The Foreign Investor Executes the Share/Capital Purchase Transaction

If the foreign investor contributes more than 51% of the charter capital, the Vietnamese company must open a direct investment capital account. The investor will then transfer the contributed capital through this direct investment capital account. Additionally, the members and shareholders who have transferred their capital must declare and pay personal and corporate income taxes (if applicable) in accordance with the law.

Step 5: Amend the Enterprise Registration Certificate

After the capital contribution or share/capital contribution purchase is completed, the company must carry out the necessary procedures to amend its business registration. This requires updating the information related to the foreign investor’s capital contribution and share purchase in the business registration file at the competent authority. The required documents include:

• A notification of the change in business registration content.
• A company resolution regarding the change (if any).
• A meeting minutes of the General Meeting of Shareholders or the Board of Members regarding the change (if any).
• The transfer contract and documents certifying the completion of the transfer, with the confirmation of the company’s legal representative.
• A list of foreign capital-contributing members/shareholders.
• A notarized copy of the investor’s passport or business registration certificate.

The procedure to amend the Enterprise Registration Certificate must be carried out at the Department of Planning and Investment where the company is headquartered.

Step 6: Obtain a Business License or Operational License

An enterprise operating in the field of retail or establishing a retail outlet must apply for a Business License. For certain conditional business lines, additional licenses are required for the enterprise to operate.

Benefits of Establishing a Foreign-Invested Company through Capital Contribution or Share Purchase

When foreign investors establish a company by contributing capital or purchasing shares, they receive the following benefits:

• They are not required to obtain an Investment Registration Certificate, which reduces related procedures when there are changes to the business registration information at state agencies.
• The procedures for making changes are quick and simple, similar to those for a Vietnamese enterprise.
• They are not required to update investment information on the investment management system.
• The procedure to prove financial capacity is simpler and easier to execute.
• When foreign investors contribute capital to or purchase shares of a Vietnamese company that has already been issued an Enterprise Registration Certificate, they do not need to perform the procedure to obtain an Investment Registration Certificate (even when purchasing 100% of the company’s capital). Note: There is an exception in the case of a Vietnamese company operating in the education sector, where a foreign investor must apply for an Investment Registration Certificate even when purchasing 1% of the charter capital.

When a Foreign Investor’s Capital Contribution or Share Purchase Must Be Registered

According to Article 26 of the Law on Investment 2020, a foreign investor is required to register their capital contribution or share/capital contribution purchase in a Vietnamese company in the following cases:

• The capital contribution or share/capital contribution purchase increases their ownership ratio in an economic organization or target company operating in business sectors with conditional market access for foreign investors.
• The capital contribution or share/capital contribution purchase results in the foreign investor and/or an economic organization holding more than 50% of the charter capital, where that capital is held by:
  • A foreign investor or a partnership company with a majority of foreign individuals as general partners.
  • An economic organization with more than 50% of its charter capital held by foreign investors or a partnership company with a majority of foreign individuals as general partners.
• As regulated in points a, b, and c of Clause 1, Article 23 of this Law, when a foreign investor’s capital contribution, share purchase, or capital contribution purchase increases their charter capital ownership ratio to over 50% in the economic organization, the following cases apply:
  • An increase in foreign investor ownership from below or equal to 50% to above 50%.
  • An increase in foreign investor ownership when they already hold more than 50% of the charter capital in the economic organization.
• A foreign investor must also meet the conditions and obtain a Land Use Right Certificate when contributing capital to, or purchasing shares of, an economic organization in areas such as islands, communes, wards, and towns in border or coastal areas, and other areas that affect national defense and security.

Notes for Establishing a Foreign-Invested Company

• A foreign investor establishing a company in Vietnam must be a citizen of a WTO member country or a country that has a signed trade cooperation treaty with Vietnam. In addition, they must have documents verifying their legal status as well as prove their financial capacity (bank account balance confirmation).
• Each business sector has different conditions regarding capital contribution ratios, investment capital, and investment forms, as well as specific procedures.
• A foreign investor must register their capital contribution in the following cases:
  • The foreign investor contributes capital to enterprises/companies operating in conditional business sectors for foreign investors.
  • The foreign investor holds 51% or more of the charter capital of a Vietnamese company after the capital contribution.

LawPlus’s Foreign-Invested Company Establishment Services

LawPlus provides foreign-invested company establishment services in Vietnam. With a team of professional and experienced legal advisors, we assist foreign investors in establishing their companies quickly and conveniently by combining international resources and expertise. LawPlus is committed to providing reliable and high-quality legal services to both domestic and international clients. LawPlus is dedicated to becoming a leading legal partner for large-scale enterprises in Vietnam, through its integrity, understanding, and relentless innovation.

With our vision and deep understanding of the Vietnamese business environment, LawPlus always seeks to provide optimal legal solutions to ensure the long-term benefits of our clients. In addition, LawPlus continuously innovates to meet the new challenges and opportunities in this dynamic business environment.

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