Foreign investors often enter the dynamic Vietnamese market by establishing a subsidiary company in Vietnam, known as a foreign-invested enterprise (FIE). The choice of investment vehicles, which depends on factors like the number of investors, industry sector limitations, and the project size, is critical. The process is governed primarily by the Investment Law and Enterprise Law and typically necessitates professional guidance due to the complexity of the Vietnamese legal system.
Many choose to establish a subsidiary company in Vietnam to leverage the growing economy.
Forms of Foreign Investment and Corporate Structures
The Investment Law outlines several permissible forms of investment:
- Establishing a new legal entity (FIE): This is the most common route.
- Limited Liability Company (LLC): This structure can be a single-member LLC (SLLC) or a multiple-member LLC (MLLC, restricted to a maximum of 50 members). Members are liable only to the extent of their charter capital contribution. An LLC cannot issue shares but can issue bonds to raise capital.
- Joint Stock Company (JSC): Requires at least three shareholders, with no maximum limit. JSCs may issue shares and can potentially be listed publicly. Shareholders’ liability is limited to their capital contributions.
- Acquisition of Existing Enterprise (M&A): Investors can acquire all or part of an existing entity. Approval for M&A is compulsory if the transaction increases foreign ownership in a business line subject to market access conditions, or if foreign ownership exceeds 50% of the charter capital.
- Public and Private Partnership Contract (PPP): Used primarily for regulated infrastructure works and public services (e.g., transportation, power plants, healthcare). PPP contracts include: Build–Operate–Transfer; Build–Own–Operate, Build–Lease–Transfer; Build–Transfer–Operate; Build–Transfer – Lease; Operate – Manager.
- Business Cooperation Contract (BCC): Allows foreign investors to collaborate with Vietnamese or other foreign investors without creating a separate legal entity, although a coordinating board must be established.
The Licensing Process
Establishing a new FIE requires securing two sequential certificates:
Investment Registration Certificate (IRC)
This is the first mandatory step for 100% foreign-owned projects. The statutory timeframe is 15 working days. The application must demonstrate financial capability, legal investment location, and sectoral compliance. The IRC establishes the foreign enterprise’s right to invest in Vietnam.
Enterprise Registration Certificate (ERC)
Issued after the IRC is obtained. The ERC confirms the establishment of the legal entity, and the certificate number serves as the entity’s tax registration number. The statutory processing time is 3 to 5 working days from the submission of a valid dossier.
In certain complex cases, particularly those involving large-scale projects, specific sectors (e.g., nuclear power, gambling, major seaports), or land use, an “in-principle” approval may be required from the Provincial People’s Committee, the Prime Minister, or even the National Assembly before the IRC application.
Investment Capital and Requirements
Foreign investors must register their planned Investment Capital, which consists of Charter Capital (registered equity) and Loan Capital. While minimum capital is not required for most business lines, the quantum of committed capital is reviewed by authorities regarding project viability and influences the duration of the investor’s visa (e.g., VND 100 billion or more grants a visa up to 5 years).
Once obtained, the ERC facilitates the operation of your subsidiary company in Vietnam.
The full Charter Capital must be contributed within 90 days from the ERC issuance date. Capital transfers must flow through a Direct Investment Capital Account (DICA) opened at a licensed bank in Vietnam, allowing the government to supervise inflows and outflows
Post-Licensing and Compliance Obligations
In Vietnam, certain sectors require enterprises to obtain sub-licenses or conditional business licenses before commencing operations. This applies to areas such as e-commerce platforms, logistics services, education and training, retail distribution for investors from non-WTO countries, and professional services like legal consultancy.
After obtaining the licenses, post-licensing procedures must be completed, including seal carving, tax filing, labor registration, and charter capital contribution.
- Governance and Legal Representative: All companies must have a Charter outlining management rules. At least one Legal Representative is required, who is authorized to represent the company and sign documents. This person must generally reside in Vietnam.
- Tax and Incentives: The standard Corporate Income Tax (CIT) rate is 20%. Vietnam offers substantial incentives, including preferential tax rates (10% or 17%) and tax holidays (up to 4 years exemption plus subsequent 50% reduction for years) for projects in encouraged sectors (e.g., high-tech, environmental protection, infrastructure) and favorable locations (e.g., Economic Zones, high-tech zones).
- Profit Repatriation: Foreign investors are permitted to remit profits and invested capital abroad annually or upon project termination, provided they have finalized tax obligations, submitted audited financial statements, and confirmed there are no accumulated losses.
A well-structured governance framework is necessary for a subsidiary company in Vietnam.
Investment Limitations: Foreign investors are prohibited from engaging in certain business activities (e.g., debt collection, drug trade) when operating a subsidiary company in Vietnam. Market access is conditional in 227 business lines, often involving foreign ownership caps.
Profit repatriation is an aspect that affects your subsidiary company in Vietnam.
Understanding these limitations is essential when establishing a subsidiary company in Vietnam.
