Guide to set up an FDI manufacturing company in Vietnam

Vietnam, with its abundant labor force, strategic locations, and attractive incentives, has been continuously attracting foreign investors in the manufacturing sector. Foreign investors wishing to set up a 100% foreign-owned manufacturing company in Vietnam need to understand the legal requirements and conditions to be met in order to establish and operate in accordance with Vietnamese law. Below, Viet An Law Firm will provide a guide to set up an FDI manufacturing company in Vietnam.

Guide to set up an FDI manufacturing company in Vietnam under WTO’s Commitments

According to the WTO’s Commitments, for manufacturing-related industries, foreign investors should pay attention to certain market access conditions, as follows:

• Manufacturing-related services (CPC 884 and 885): No restrictions, except that after 3 years from Vietnam’s accession, joint ventures are required, where the foreign partner’s capital contribution cannot exceed 50%. After an additional 5 years, the establishment of 100% foreign-owned companies is allowed. Therefore, Vietnam currently allows foreign investors to establish a 100% foreign-owned manufacturing business with no market access restrictions.
• Film production services (CPC 96112, excluding video tapes): These services can only be provided through a business cooperation contract or joint venture with a Vietnamese partner who is permitted to offer these services in Vietnam. The foreign partner’s capital contribution cannot exceed 51% of the legal capital of the joint venture. According to Decree No. 54/2010/ND-CP (amended by Decree 142/2018/ND-CP), the legal capital for the business of film distribution and screening services is VND 200,000,000.

Guide to set up an FDI manufacturing company in Vietnam under domestic Law

In addition to the conditions for establishing a business according to the 2020 Enterprise Law, such as the founding entity, company name, address, office, etc., when setting up an FDI manufacturing company in Vietnam, the following conditions under the Investment Law 2020 must be taken into account:

Conditions for business lines

According to the Investment Law 2020, industries and business sectors that are restricted or conditionally open to foreign investment in manufacturing include:

Restricted business lines, such as:

• Manufacturing of industrial explosives;
• Manufacturing of gold bars;
• Fireworks production;
• Manufacturing, and trading of weapons, explosives, and support tools;
• Production of military materials or equipment.

Conditionally open business lines, such as:

• Production of cultural products, including audiovisual recordings;
• Production of television programs and musical, stage, and film works;
• Manufacturing of paper;
• Manufacturing of transport vehicles with more than 29 seats;
• Aircraft manufacturing;
• Manufacturing of railway engines and carriages;
• Tobacco product manufacturing, including raw tobacco and machinery;
• Production of rare plants and endangered wildlife breeding;
• Construction materials production.

For sectors with conditional market access, foreign investors must ensure they meet these conditions before proceeding with legal procedures to set up a manufacturing company in Vietnam.

Project location

As manufacturing activities have a significant impact on the environment, it is important to comply with fire safety, environmental commitments, and public security regulations. Therefore, the project location must be within an area designated for manufacturing, such as industrial zones, high-tech zones, or export processing zones. Environmental protection regulations must be adhered to, and in many cases, an Environmental Impact Assessment (EIA) and waste discharge permits may be required.

Before leasing the project location, foreign investors should ensure that the property is suitable for the type of manufacturing they plan to undertake and verify that the lease documents comply with legal regulations for production.

Products to be manufactured by the company

Foreign investors need to verify whether the products their company plans to manufacture are permitted in Vietnam. Some products may not be licensed for production under the ASEAN Comprehensive Investment Agreement, including:

• Fireworks production, sky lanterns, fishing nets, explosives materials;
• Publishing and printing (e.g., books, magazines, maps, posters, counterfeit documents);
• Alcoholic beverages, carbonated drinks, tobacco products;
• Certain construction materials steel products, and more.

Investment capital requirements

Vietnamese law does not specify a minimum capital requirement for establishing a 100% FDI manufacturing company. However, investors must allocate sufficient capital to meet the demands of their business project, including the production scope, scale, and nature of the operations.

Compliance with the Investment Registration Certificate

The Investment Registration Certificate (IRC) issued to the investor clearly outlines the production objectives, production scale, and timeline for project implementation. Investors must strictly adhere to the registered contents of the IRC. In case of any changes, they must contact the licensing authority to amend the IRC accordingly.

Meeting sector-specific licensing requirements

Upon obtaining the IRC and the Enterprise Registration Certificate (ERC), investors must secure additional licenses for certain regulated sectors before commencing production. Examples include: Pharmaceutical manufacturing; Cosmetics production; Medical equipment production; Manufacturing, assembling, importing, and providing warranty services for automobiles; Alcohol production; Food production, etc.

Obligation to report Investment Project Implementation

After obtaining the IRC, FDI companies must periodically report the implementation status of their investment projects. Reports are submitted monthly, quarterly, biannually, and annually. Currently, these reports are filed electronically through the National Foreign Investment Information System at https://fdi.gov.vn.

Services of Viet An Law Firm to set up an FDI company in Vietnam

• Advising on the foreign ownership ratio for investors in Vietnam;
• Assisting in choosing the appropriate legal entity type (Limited Liability Company or Joint Stock Company), registered office address, investment capital, business lines, opening a capital contribution account, and deadlines for capital contribution;
• Guiding and advising investors on preparing necessary documents for establishing an FDI company;
• Drafting incorporation documents for investors;
• Representing investors in dealings with Vietnamese government agencies during the incorporation process (obtaining the IRC, ERC, corporate seals, seal announcements, post-establishment procedures, legal advisory services on taxation, accounting, profit repatriation, labor, insurance, intellectual property rights, etc.);
• Providing comprehensive legal advice for business operations in Vietnam.

This is Viet An Law Firm’s guide to set up an FDI manufacturing company in Vietnam. Should you have any questions, please contact Viet An Law Firm for expert consultation and support!