Establish foreign enterprise in Vietnam

Establishing foreign invested enterprise in Vietnam is often the first step to help foreign investors establish a commercial presence with full legal status to conduct investment and business activities in Vietnam. Viet An Law will help clients better understand this procedure to establish foreign invested enterprise in Vietnam in the article below.

Conditions for establishing a foreign invested enterprise in Vietnam

Under the provisions of Vietnamese law as well as the WTO Commitments and relevant multilateral and bilateral international treaties, the general conditions for foreign investors to establish a company in Vietnam are as follows:

Conditions on subjects and nationality of foreign investors

• Individuals over 18 years old, organizations, and enterprises with nationality that are the WTO’s members or have signed bilateral treaties related to investment with Vietnam. However, in Vietnam, some industries only allow foreign investors who are legal entities to invest in Vietnam.
• Currently, individual investors holding passports with the “nine-dash line” cannot contribute capital to invest in Vietnam or be the representative to manage the capital contribution of an organization or the legal representative of a company established in Vietnam.

Conditions on the company’s headquarters intended for registration and project implementation location.

Unlike Vietnamese capital companies, when establishing a foreign invested enterprise, foreign investors must have documents proving the company’s headquarters and the location of the company’s project when submitting the company establishment application. Accordingly:

• Investors must have a location to carry out the investment project in Vietnam through a location lease contract, house lease contract, land lease contract, and legal real estate documents of the lessor to serve as the company headquarters and project implementation location.
• For the location of the production project, there must be a real estate leasing function on the land use rights certificate and enterprise registration certificate of the lessor and must be located in an industrial cluster or zone.
• The company’s headquarters implementing the project cannot use an apartment building. The company’s establishment documents must be accompanied by a lease contract for the headquarters, project location, and legal documents (notarized copies) of the lessor.

Conditions on capacity and experience and specific conditions according to investment fields

• Meet specific conditions for conditional business lines for foreign investors.
• For some fields such as trade, wholesale, and retail of goods, investors need to prove their capacity and experience in the investment field.

Form of foreign invested enterprise in Vietnam

• Establish a foreign invested enterprise company from the beginning, the capital contribution ratio of foreign investors accounts for from 1% to 100% of the company’s capital;
• Foreign investors contribute capital and buy shares in Vietnamese companies that have an Enterprise Registration Certificate.
• Foreign invested enterprises continue to contribute capital to establish new companies in Vietnam.
• Investment in the form of a business cooperation contract (BCC)
• Investment in the form of a PPP contract.

Procedures to establish foreign invested enterprise in Vietnam

Establishing a foreign invested enterprise is carried out through detailed steps with specific documents and procedures as follows:

Step 1: Prepare a dossier to establish a foreign invested enterprise 

In addition to the legal documents of the individual/organization and related representative, the investor needs to prepare the following capacity documents:

Financial capacity profile:

• A copy of one of the following documents: financial statements of the last 2 years of the investor; financial support commitment of the parent company; financial support commitment of a financial institution; guarantee of the investor’s financial capacity; Confirmation of the investor’s bank account balance corresponding to the expected investment capital in Vietnam;
• Confirm the investor’s bank account balance corresponding to the expected investment capital in Vietnam;

Head office profile:

• Head office lease contract, Documents proving the lessor’s right to lease (Land use right certificate, Construction permit, Enterprise registration certificate with real estate business function of the lessor or equivalent documents).
• Propose land use needs; request the State to allocate land, lease land, and allow change of land use purpose;

Technology profile:

If the project uses technology, it is necessary to attach an explanation of the use of technology for the project as prescribed, including the following contents: technology name, technology origin, technology process diagram; main technical parameters, usage status of machinery, equipment, and main technology lines.

Note: Foreign language documents must be translated into Vietnamese and the translation must be notarized, and copies must be notarized and consularized at a Vietnamese diplomatic representative agency abroad.

Step 2: Apply for an Investment Registration Certificate

Based on the documents provided, Viet An Law will draft a complete request dossier based on legal regulations including:

• Document requesting to implement investment project;
• Investment project proposal;
• Power of attorney.

The place to apply for an Investment Registration Certificate

The Department of Planning and Investment receives and issues Investment Registration Certificates for the following investment projects:

• Investment projects outside industrial parks, export processing zones, high-tech zones, economic zones;
• Investment projects to develop infrastructure of industrial parks, export processing zones, high-tech zones, and investment projects in industrial parks, export processing zones, high-tech zones in localities where Management Boards of industrial parks, export processing zones, and high-tech zones have not been established.

The Management Board of industrial parks, export processing zones, high-tech zones, and economic zones receives, issues, adjusts, and revokes Investment Registration Certificates for investment projects in industrial parks, export processing zones, high-tech zones, and economic zones, including:

• Investment projects to develop infrastructure of industrial parks, export processing zones, and high-tech zones;
• Investment projects implemented in industrial parks, export processing zones, high-tech zones, and economic zones.
• The Department of Planning and Investment where the investor has or plans to have its head office or executive office implement the investment project shall receive, issue, adjust, and revoke the Investment Registration Certificate for the following investment projects:
• Investment projects implemented in many provinces and centrally-run cities;
• Investment projects are implemented simultaneously inside and outside industrial parks, export processing zones, high-tech zones and economic zones.

Granting Investment Registration Certificate: within 15 days from the date of receipt of complete documents.

Step 3: Apply for Enterprise Registration Certificate

Foreign invested enterprises, including those with projects in industrial parks or projects outside industrial parks, after being granted an Investment Registration Certificate, will carry out procedures for granting an Enterprise Registration Certificate at the Business Registration Office – Department of Planning and Investment where the company has its head office to implement the project stated in the IRC. The registration documents and procedures are similar to those of domestic enterprises, however, it is important to choose an enterprise with an Investment Registration Certificate and submit the certificate in the registration dossier.

Submit company establishment documents and pay business information disclosure fees.

• After fully preparing the application for the Enterprise Registration Certificate, Viet An Law submits the application for the Enterprise Registration Certificate via the National Business Registration Information Portal.
• Unlike before, the procedure for paying the fee for publishing enterprise registration information will be carried out in parallel with the procedure for submitting documents for company establishment.
• Therefore, as soon as a company is granted a Enterprise Registration Certificate, it will simultaneously publish its business information on the National Business Registration Information Portal.

Granting Enterprise Registration Certificate:

Within 03 – 05 working days from the date of receiving complete documents, the business registration authority will issue the Enterprise Registration Certificate.

Step 4: Engrave the company seal

• As soon as the Enterprise Registration Certificate and tax code are available, the company will proceed to engrave a round legal seal.
• Implementation time: 01 day.
• Similar to Vietnamese-invested companies, foreign invested enterprises engrave their seals and are responsible for the use of their company’s legal seals. Therefore, companies do not have to publish notices about their seal samples as before. This is also a very new point of the Enterprise Law 2020, but it is also a concern of many businesses regarding the issue of self-management and the use of corporate seals without supervision from state management agencies related to seals.
• In addition, the company can engrave additional title stamps for key personnel positions of the company for convenience in the operation process.

Step 5: Open a foreign direct investment capital account

After being granted an Investment Registration Certificate and an Enterprise Registration Certificate, a foreign invested enterprise must open a foreign currency direct investment capital account at 01 (one) licensed bank to conduct legal receipt and payment transactions in foreign currency related to foreign direct investment activities in Vietnam.

Step 6: Make capital contribution according to the capital contribution commitment schedule in the Investment Registration Certificate

• Foreign investors and Vietnamese investors in foreign invested enterprises are allowed to contribute investment capital in foreign currency and VND according to the investor’s capital contribution level stated in the Investment Registration Certificate into a foreign direct investment account.
• The capital contribution in cash of foreign investors and Vietnamese investors in foreign invested enterprises must be made through transfer to direct investment capital accounts.
• The foreign direct investment capital account is also the account that investors use to transfer profits to investors abroad when the company’s business operations make a profit.
• Maximum term: 90 days from the date of ERC issuance.

Step 7: Apply for a Business License and sub-license for certain conditional business lines

For conditional business lines, in addition to the procedures for granting an Investment Registration Certificate, investors must prove and submit the conditions for being granted an Investment Registration Certificate. After completing the procedures for granting an Investment Registration Certificate and an Enterprise Registration Certificate, foreign invested enterprises must apply for a license to operate. For example:

• For companies that retail goods or establish retail establishments: need to apply for a business license, a license to establish a retail establishment,…
• In case the company conducts international travel business (inbound): Foreign investors are only allowed to conduct international travel business within the scope of bringing foreign guests into Vietnam (inbound).
• In case the company conducts foreign language training business: The investor shall request approval from the Department of Education and Training during the process of granting the Investment Registration Certificate. Before starting operations, the enterprise shall apply for a Foreign Language Training Center Operating License at the Department of Education and Training.

Step 8: Report on investment project implementation status

After being granted the Investment Registration Certificate, during the operation process, foreign-invested companies must periodically report monthly, quarterly, 6-monthly, and annually on the implementation of investment projects. Currently, the submission of reports by foreign-invested companies to the Department of Planning and Investment will be through the national electronic information website: https://fdi.gov.vn.

Notes when establishing a foreign invested enterprise

Note on investment field

• Depending on the investment sector, investors can determine their capital contribution ratio in the company established in Vietnam. For each specific sector, investors need to meet specific conditions and determine the corresponding investment capital to demonstrate financial capacity in the appropriate investment sector so that the project can be granted an investment license while ensuring that capital contribution is correct and sufficient according to the committed schedule.
• For investment sectors not included in the WTO commitments, investors must seek approval and opinions from the Ministry of Industry and Trade when they want to invest. Therefore, the possibility of successfully registering for these sectors is not high and depends largely on the investor’s ability to explain, experience, and financial capacity.

Notes on investment capital contribution value and investment capital contribution progress

Investment capital not only proves the financial capacity of the investor when investing in Vietnam but also determines whether the investor must obtain a work permit or not. Investors who contribute less than 3 billion VND in investment capital in Vietnam, are not exempt from work permits. Investors must still apply for a work permit and when they have a work permit, they will only be granted a temporary residence card for a maximum of 02 years. The investment capital ratio of the investor is also related to the duration of the temporary residence card issued to the investor and the representative of the foreign organization investing in Vietnam, specifically:

• For investors with contributed capital worth from 3 billion VND to less than 50 billion VND, the temporary residence card issued is valid for no more than 3 years;
• For investors with contributed capital worth from 50 billion VND to less than 100 billion VND, the temporary residence card issued is valid for no more than 05 years;
• For investors with capital contributions worth 100 billion VND or more, temporary residence cards are issued for no more than 10 years.

In addition, investors must pay attention to contributing investment capital on time according to the progress recorded in the Investment Registration Certificate. In case the investor does not contribute enough capital within the committed time, the investment capital contribution must be extended (if there is a legitimate reason). In case of late extension, a penalty will be imposed for late capital contribution.

Note on investment contribution account

In fact, many foreign invested enterprises come to Viet An Law in a ” caught in a dilemma” situation because, during the establishment process, they were not advised on the need to contribute capital through a foreign direct investment capital account. This leads to the situation of capital contribution not being in accordance with regulations, and that capital is sometimes used up, so correcting the wrong capital contribution is extremely difficult, not only that, but also being fined for not contributing capital correctly. When the company wants to make changes or adjust the investment registration certificate, it must prove that it has fulfilled its capital contribution obligations, encountering many difficulties, and in many cases, it is impossible to carry out the procedure even if it wants to dissolve. Therefore, foreign invested enterprises need to pay special attention to opening a foreign direct investment capital account and making timely capital contributions to this account.

Notes on choosing the form of establishing a foreign invested enterprise in Vietnam

Investors establishing a foreign invested enterprise, in addition to choosing the investment form as in this article (ie investors contributing capital from the beginning), investors who want simpler procedures, especially if foreign investors combine with Vietnamese investors to do business together, should choose to invest in the form of buying capital contributions and shares of Vietnamese companies. With this form, the company establishment procedure is simpler, proving the company’s headquarters is not required, especially since investors reduce the procedure for granting Investment Registration Certificates. Accordingly, during the operation process, many legal procedures and costs will be saved when changes and additions arise.

Types of taxes that foreign invested enterprises must pay after establishing the company

Similar to Vietnamese companies, foreign invested enterprises must pay the following basic taxes:

• License tax (according to the level of registered charter capital);
• Value added tax (according to the company’s input and output balance);
• Corporate income tax (only payable when the company is profitable, 20% of company profits);
• Export/ Import tax (if there are import and export activities);
• Natural resources tax (if there is resource usage);
• Special consumption tax (if doing business in a special restricted industry).

Note on foreign investor ownership ratio in companies in Vietnam

Depending on the industry that foreign investors choose to do business in, the investor’s ownership ratio can range from 0-100% in the enterprise. For example:

• Company providing management consulting services: maximum foreign investor ownership ratio is 100%;
• Advertising service provider: Foreign investors must enter into a joint venture with a domestic company that has registered for this industry and the foreign investor’s ownership ratio is not limited in the joint venture;
• Road freight transport service provider: foreign investor ownership ratio is a maximum of 51%;
• Companies providing services to send Vietnamese people to work abroad: are not allowed to have capital contributions from foreign investors.

Preferential investment policies for foreign invested enterprises

Tax incentives for foreign invested enterprises

Corporate Income Tax Incentives

FDI enterprises enjoy preferential foreign corporate income tax rates when implementing investment projects in industries or areas with investment incentives according to the law.

Preferential tax rate

Under Article 19, Circular 96/2015/TT-BTC, FDI enterprises enjoy preferential tax rates as follows:

• Newly established enterprises enjoy a tax incentive of 10% during their entire period of operation.
• Income from implementing new investment projects in areas with difficult socio-economic conditions is subject to a tax rate of 17% for 10 years.
• Income of enterprises growing, raising, and processing in the agricultural and aquatic sectors in areas with difficult or especially difficult socio-economic conditions will be subject to a tax rate of 15%.
• Enterprises that are People’s Credit Funds, Cooperative Banks, and Microfinance Institutions: Apply a tax rate of 17%.

Corporate income tax exemption

Pursuant to Article 20, Circular 78/2014/TT-BTC, some FDI enterprises will be subject to corporate income tax exemption, specifically:

1. Tax exemption for 04 years, 50% reduction of tax payable for the next 09 years for:

• Corporate income arising from new project investment enjoys a preferential tax rate of 10% for 15 years.
• Enterprise income arising from investment in new projects in the socialized sector and implemented in areas with difficult or especially difficult socio-economic conditions.

2. Tax exemption for 04 years, 50% reduction of tax payable within the next 05 years for enterprise income arising from investment in new projects in the socialized sector not located in areas with difficult or especially difficult socio-economic conditions.
3. Tax exemption for 02 years, 50% reduction of tax payable within the next 04 years for:

• Income from implementing new investment projects: Tax rate of 17% applied for 10 years.
• Corporate income arising from investment in new projects in industrial parks.

Incentives on land rent exemption and reduction for FDI companies

The Government issued Resolution 65/NQ-CP on May 7, 2024 at the regular Government meeting in April 2024, notably, there will be a Decree on reducing land and water surface rents under the direction of the Government. It is likely to be applied similarly to the Decision on reducing land rents in 2023 according to Decision 25/2023/QD-TTg (regulation on reducing 30% of land rent payable in 2023)

Incentives on export and import taxes for foreign-invested enterprises

Specifically, the conditions for FDI enterprises to be exempted from import tax when importing goods include:

• Imported goods of foreign organizations enjoying privileges and immunities in Vietnam within the limits in accordance with international treaties to which the Socialist Republic of Vietnam is a member; imported goods for sale at duty-free shops.
• Goods are exempt from import tax according to international treaties of which the Socialist Republic of Vietnam is a member.
• Goods with a value or tax amount below the minimum level.
• Imported raw materials, supplies, and components for processing export products; imported finished products for attachment to processed products; processed export products.
• Raw materials, supplies, and components imported to produce export goods.
• Goods manufactured, processed, recycled, and assembled in duty-free zones do not use imported raw materials or components from abroad when imported into the domestic market.
• Goods temporarily imported, re-exported, temporarily exported, or re-imported within a certain period.
• Goods not for commercial purposes in the following cases: samples; photos, films, models replacing samples; small quantity advertising publications.
• Imported goods to create fixed assets of subjects entitled to investment incentives under the law on investment.
• Plant varieties; animal breeds; fertilizers and pesticides that cannot be produced domestically and must be imported according to regulations of competent state management agencies.
• Raw materials, supplies, and components that are not yet produced domestically and are imported for production of investment projects in the list of industries and trades with special investment incentives or areas with particularly difficult socio-economic conditions according to the provisions of the law on investment, high-tech enterprises, science and technology enterprises, and science and technology organizations are exempted from import tax for 05 years from the start of production (not applicable to mineral exploitation investment projects; projects to produce products with a total value of resources, minerals plus energy costs accounting for 51% or more of the product cost; projects to produce and trade goods and services subject to special consumption tax).
• Imported raw materials, supplies, and components that cannot be produced domestically for investment projects to produce and assemble medical equipment that is prioritized for research and manufacturing are exempt from import tax for 05 years from the start of production.
• Imported goods for oil and gas activities.
• Shipbuilding projects and facilities are included in the list of preferential industries and occupations under the law on investment.
• Imported machinery, equipment, raw materials, supplies, components, parts, and spare parts for printing and minting activities.
• Imported goods are raw materials, supplies, and components that cannot be produced domestically and directly serve the production of information technology products, digital content, and software.
• Imported goods for environmental protection, including Machinery, equipment, vehicles, tools, and specialized materials that cannot be produced domestically.
• Imported goods specifically for domestic use that cannot be produced directly for education.
• Imported goods are machinery, equipment, spare parts, specialized materials that cannot be produced domestically, specialized scientific documents and books used directly for scientific research, technology development, development of technology incubation activities, incubation of science and technology enterprises, and technological innovation.
• Imported goods specifically serving security and national defense, in which specialized means of transport must be of a type that cannot be produced domestically.
• Imported goods to serve social security, and overcome consequences of natural disasters, catastrophes, epidemics and other special cases.

Preferential investment locations for foreign investors

• Areas with difficult socio-economic conditions, areas with especially difficult socio-economic conditions;
• Industrial parks, export processing zones, high-tech zones, and economic zones.
• Thus, a production and business project implemented in an industrial park or industrial zone is a production and business project operating in an investment incentive area. As explained above, investment incentives are applied depending on the industry, investment sector, location of the investment project, and the industrial park in the investment incentive area. Projects implemented in an industrial park are entitled to investment incentives according to the investment incentive area.
• For investment projects implemented outside industrial zones, depending on whether the project implementation area is in a province or city designated by the Government as an area with difficult socio-economic conditions or an area with particularly difficult socio-economic conditions, the project’s operating area will be eligible for investment incentives or not.
• The list of provinces and cities in the investment incentive areas is specified in Appendix III issued with Decree 31/2021/ND-CP guiding the Investment Law.

Special investment incentives for foreign invested enterprises

On October 6, 2021, the Prime Minister issued Decision 29/2021/QD-TTg regulating special investment incentives to selectively attract FDI. According to this Decision, there are 3 levels of special investment incentives on corporate income tax.

• In particular, investors implementing investment projects in industries and professions with special investment incentives and capital scale of over 30,000 billion VND will enjoy special incentives, with a corporate income tax rate of 9% for 30 years.
• Investors will enjoy a preferential corporate income tax rate of 7% for 33 years if they fall into one of the following cases: projects to establish new or expand research and development (R&D) centers with investment capital of 3,000 billion VND or more, disbursing at least 1,000 billion VND within 3 years from the date of being granted an investment certificate; projects in industries and professions with special investment incentives that meet the requirements on investment capital scale, have level 1 high technology, Vietnamese enterprises participate in the chain at level 1, and meet level 1 technology transfer.
• Investors enjoy a preferential corporate income tax rate of 5% for 37 years. This incentive applies to national innovation center projects established under the Prime Minister’s decision. Investment projects in industries and occupations with special investment incentives, meeting the requirements on investment capital scale, being level 2 high-tech projects, having a proportion of Vietnamese enterprises participating in the level 2 chain, the added value in Vietnam accounting for over 40% of the cost, meeting the criteria for level 2 technology transfer.
• In addition to this regulation, investors eligible for special investment incentives will be exempted from corporate income tax for the first 5-6 years and will have their corporate income tax payable reduced by 50% for the next 10-13 years, from the date of investment license issuance.
• Regarding land and water surface rent, investors eligible for special incentives are exempted from land and water surface rent for 18-20 years and have a 55%-75% reduction in land and water surface rent throughout the project life cycle.
• Also according to Decision 29/2021/QD-TTg regulating special investment incentives, in addition to the conditions on the registered capital scale, to enjoy special incentives on tax, land rent, and water surface rent from the Government, investors must meet the criteria on project investment capital scale, disbursement level, high-tech project investment, technology transfer, having Vietnamese enterprises participating in the chain, and domestic production value.

Establish foreign invested enterprise in Vietnam service of Viet An Law

• Consulting on conditions for establishing a foreign invested enterprise: capital contribution ratio of foreign investors in Vietnam; business conditions of each industry; project implementation location; note the procedures before and after establishing a foreign invested enterprise;
• Consulting on choosing the appropriate type of company for investors: LLC or Joint Stock Company;
• Consulting on opening capital transfer accounts and capital contribution deadlines;
• Consulting and guiding investors to prepare necessary documents to establish a foreign invested enterprise;
• Consulting and drafting company establishment documents for investors;
• Representing investors in working with competent state agencies of Vietnam in the process of carrying out procedures for establishing a company for investors (Applying for Investment Registration Certificate, Enterprise Registration Certificate, Business License, License according to specialized requirements, making a legal seal, procedures after establishing a company, procedures for opening a direct investment capital account, reporting on the implementation status of investment projects, etc.;
• Comprehensive, regular consulting, accounting services, and tax law package for activities arising during the process of doing business in Vietnam for investors.