Foreign investors often enter the dynamic Vietnamese market by establishing a subsidiary company in Vietnam, known as a foreign-invested enterprise (FIE), to enhance their business operations. 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.
What are the Types of Subsidiaries in Vietnam?
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
Enterprise Registration (ERC)
Foreign investors may obtain the Enterprise Registration Certificate (ERC) first by submitting required documentation to the local Department of Finance (DOF). Once approved, the enterprise obtains its legal existence.
Investment Registration Certificate (IRC)
After receiving the ERC, the investor must complete the IRC procedures as required by the Investment Law 2025 if the project is in a regulated or conditional sector or if foreign capital contributions exceed specific thresholds. The DOF generally issues the IRC within statutory timelines stipulated in subordinate regulations.
Sectoral Licences and Certificates
If the business is in a regulated field (e.g., financial services, healthcare, or education), the investor must obtain additional licences from the relevant authorities before commencing operations.
Post-Establishment Compliance
After establishment, FIEs must comply with various ongoing obligations:
- Tax and Social Registration: Once corporate registration is complete, the FIE must also register for tax codes, obtain seals and tax records, and if hiring staff, register for social insurance and employment reporting.
- Reporting Requirements: FIEs must submit periodic investment and business performance reports to authorities.
- Reporting and Regulatory Compliance: Tax declarations, corporate changes, capital adjustments, and shareholder changes must be reported in accordance with Vietnamese regulations.
- Adjustments and Notifications: Any change in charter capital, ownership structure, or investment project scope must be registered and updated with authorities under prescribed processes.
