A Foreign Investor's Comprehensive Guide to Company Formation in Vietnam

Strategic Market Entry: Choosing Your Corporate Structure

The initial and most critical decision for a foreign investor entering Vietnam is selecting the appropriate legal structure. This choice is foundational, as it dictates the entity's permitted activities, legal liability, tax obligations, and long-term strategic capabilities. The options bifurcate into a non-commercial "test" presence—the Representative Office—and a fully operational, revenue-generating commercial entity, typically a Foreign-Invested Enterprise (FIE).

A. The Non-Commercial Presence: The Representative Office (RO)

A Representative Office (RO) is the most common and lowest-cost structure for investors who wish to establish an initial, exploratory presence without making a large capital commitment.¹

• Legal Status: An RO is not an independent legal entity.² It is a "dependent unit" and a direct extension of its foreign parent company.⁵ It cannot operate independently, and its existence is tied directly to the parent. The RO license is typically valid for five years and is renewable, but the parent company must demonstrate it has been established and operating for at least one year prior to application.³

• Permitted Activities (The "Liaison" Role): The RO's operational scope is strictly and legally limited to non-commercial functions. Permitted activities include:

  • Serving as a liaison office for the parent company.²

  • Conducting market research to assess the Vietnamese market.²

  • Promoting the parent company's brand, products, and services.²

  • Monitoring and supporting the implementation of contracts signed by the foreign parent company with Vietnamese partners.⁸

• Critical Prohibitions: An RO is legally barred from all direct commercial activities. It cannot, under any circumstances, engage in activities that generate revenue in Vietnam.¹ This prohibition includes signing commercial contracts in its own name ², issuing Value-Added Tax (VAT) invoices ¹, or receiving payments from Vietnamese customers.

• Liability and Tax Implications:

  • Liability: As the RO is not a separate legal entity, the foreign parent company bears 100% of the liability for all of its activities, debts, and obligations.³

  • Tax: This is the primary structural benefit of an RO. Because it is prohibited from generating revenue, it is not considered a "permanent establishment" for tax purposes ⁹ and is not subject to Vietnam's Corporate Income Tax (CIT).² Its sole tax obligation is to register, declare, and pay Personal Income Tax (PIT) on behalf of its employees (both Vietnamese and expatriate).³

• Typical Use Case: The RO is the quintessential "toe-in-the-water" strategy.¹ It is the ideal vehicle for companies new to Vietnam that require an on-the-ground presence to explore the market, build relationships, and assess long-term commercial feasibility before committing to a full-scale, capital-intensive FIE.² The "upgrade" from an RO to an FIE (such as an LLC) is a common strategic path, but it represents a fundamental shift from a non-taxable cost center to a fully-taxable, commercially operational entity.¹

B. Commercial Presence: Branch Office (BO) vs. Subsidiary (FIE)

For investors intending to conduct revenue-generating business, a non-commercial RO is insufficient. The choice is then between a Branch Office and a Subsidiary (FIE).

• 1. The Branch Office (BO):

  A Branch Office is a niche option rarely used by most foreign investors. Like an RO, it is a dependent unit of the parent company, not a separate Vietnamese legal entity.4 Its key difference from an RO is that it can conduct commercial activities, sign contracts, and earn revenue in Vietnam.6

  However, this structure has severe limitations. The foreign parent company retains full, unlimited liability for all the branch's activities and debts.⁴ Most importantly, the establishment of branches is highly restricted and only permitted in very specific, regulated sectors such as banking, law, education, and aviation.⁶ It also has a stricter setup requirement: the parent company must have been operating for at least five years, as opposed to one year for an RO.⁷

• 2. The Subsidiary / Foreign-Invested Enterprise (FIE):

  This is the standard, most robust, and most common structure for any foreign investor planning to conduct direct commercial business in Vietnam.1 An FIE is established as a new, independent Vietnamese legal entity 2, typically in the form of a Limited Liability Company (LLC) or a Joint Stock Company (JSC).1

  • Key Advantages:

    • Limited Liability: This is the most significant advantage. The FIE, as a separate legal person, is responsible for its own debts and obligations. The foreign parent company's liability is limited to the amount of capital it has committed to contribute to the FIE.³

    • Full Commercial Rights: An FIE can engage in any business line registered in its licenses ², sign contracts in its own name ², hire employees, issue invoices, and conduct all necessary activities to generate revenue.¹

    • Legal Standing: Upon formation, the FIE is legally defined as a "Vietnamese enterprise" ¹⁵ and possesses the same rights and responsibilities as any domestic Vietnamese company.¹²

The legal frameworks for these entities reveal a core regulatory philosophy. An RO or BO operates on a "permission-of-the-guest" basis, as a dependent unit ² whose activities are explicitly limited by its license. An FIE, in contrast, is a "naturalized corporate citizen." It operates on a "rights-based" framework, enjoying full legal rights to participate in the economy once it is established.

Strategic Market Entry Structures: A Comparative Analysis

Core FIE Structures: A Detailed Comparison of the LLC and JSC

Having chosen to establish a full Foreign-Invested Enterprise (FIE), the investor must select its specific corporate form. The vast majority of investors choose between a Limited Liability Company (LLC) or a Joint Stock Company (JSC). This choice is a critical strategic decision that dictates governance, ownership transfer, and future capital-raising capabilities.

A. The Limited Liability Company (LLC) (Công ty TNHH)

The LLC is the most popular corporate form for foreign investors in Vietnam, prized for its flexibility and simple governance.¹⁹ It is particularly well-suited for wholly foreign-owned subsidiaries.¹ It is classified into two distinct types.

• 1. Single-Member LLC (SM-LLC):

  • Ownership: Comprised of a single owner, who can be either an individual or an organization (e.g., the foreign parent company).¹⁴

  • Governance: This structure features the simplest management. The single owner has ultimate and full decision-making authority.²⁰ The governance structure typically consists of a Company President and a Director or General Director. If the owner is an organization, it may opt to appoint a "Members' Council" to act on its behalf.²¹

  • Capital: The owner is limited in its ability to raise external equity. To add new investors, the SM-LLC must legally convert its form into either a Multi-Member LLC or a JSC.²⁰

  • Use Case: This is the standard structure for a 100% Wholly Foreign-Owned Enterprise (WFOE).¹² It provides the parent company with absolute control and minimal administrative complexity.²⁰

• 2. Multi-Member LLC (MM-LLC):

  • Ownership: Comprised of a minimum of 2 and a maximum of 50 "members".¹⁴ This 50-member cap is a hard limit.⁵

  • Capital Structure: An LLC's capital is not divided into shares. Instead, ownership is defined by a "percentage of capital contribution" that each member has committed to the company's charter capital.²⁴

  • Governance: The highest decision-making body is the "Members' Council," which is composed of all members (or their authorized representatives).²⁰ The Members' Council makes major decisions and appoints a Director or General Director to manage daily operations.²⁰ A Supervisory Board is only mandatory if the company has 11 or more members.²⁰

  • Capital Transfer (Key Limitation): This is the LLC's defining feature and its primary control mechanism. If a member wishes to sell their capital contribution, they are legally required to first offer it to the other existing members in proportion to their holdings.²³ Only if the existing members decline to purchase (or do not purchase the full amount) can the contribution be transferred to an external third party. This severely restricts liquidity but ensures that members can control who their partners are, preventing unwanted third parties from entering the company.

  • Capital Raising: An MM-LLC cannot issue shares, and especially cannot issue shares to the public.⁵ It can only raise new equity capital by: (1) The existing members increasing their capital contributions, (2) Admitting new members, up to the 50-member limit ²⁰, or (3) Converting into a JSC. It is, however, permitted to issue bonds to raise debt capital.¹³

B. The Joint Stock Company (JSC) (Công ty Cổ phần)

The JSC is a more complex but scalable corporate structure, designed for larger enterprises or those with ambitions for public investment.

• Ownership: A JSC requires a minimum of 3 shareholders but has no maximum limit on the number of shareholders.²³

• Capital Structure: The charter capital is divided into equal portions called "shares".²⁴ This makes ownership highly granular, divisible, and easy to transfer, facilitating investment from a wide range of sources.

• Capital Transfer (Key Advantage): This is the JSC's primary strength. Shareholders have the right to freely transfer their shares to others (e.g., on the open market, if listed) without needing pre-approval from fellow shareholders.¹³

  • Key Exception: A "founding shareholder" is restricted from freely transferring their common shares to a non-founding shareholder for the first 03 years of the company's operation, unless they receive approval from the General Meeting of Shareholders.¹³

• Capital Raising: The JSC is vastly superior to the LLC in its ability to mobilize capital. It can issue various types of shares (common, preferred), bonds, and other securities to the public.¹³ The JSC is the only corporate form that can be listed on the Vietnamese stock exchange.²³

• Governance (Key Complexity): Reflecting its potentially large and dispersed shareholder base, the JSC's governance structure is more complex and regulated.²⁶

  • The "General Meeting of Shareholders" (GMS) is the highest decision-making authority, comprising all shareholders.²³

  • The GMS elects a "Board of Management" (BOM) (also referred to as the Board of Directors), which serves as the company's main governance body, overseeing strategy and appointing the Director or General Director to run daily operations.²³

  • Mandatory Governance Models: The Law on Enterprises mandates that a JSC must adopt one of the following two governance models:

    • Model 1 (Two-Tier): This is the traditional Vietnamese model, consisting of a GMS, BOM, Director/General Director, and a Supervisory Board (also translated as Inspection Committee).²⁷ The Supervisory Board is a separate body elected by the GMS to oversee the legality and prudence of the BOM and Director's actions. This board is not mandatory if the JSC has fewer than 11 shareholders and organizational shareholders own less than 50% of the total shares.²³

    • Model 2 (One-Tier): This is a more modern, "Anglo-Saxon" model. It consists of a GMS, BOM, and Director/General Director. This model is permitted only if at least 20% of the BOM members are independent members and the BOM establishes an internal Audit Committee that reports directly to it.²⁷

The choice between an LLC and a JSC is a direct reflection of the investor's long-term strategic intent. The LLC is a "closed" system ¹⁴ designed for maximum control and stability, making it ideal for a WFOE or a strategic joint venture with a few, pre-selected partners. The JSC is an "open" system ¹³ designed for maximum liquidity and scalability, making it the necessary choice for any enterprise that plans to raise capital from a wide base of investors, offer employee stock options, or pursue an eventual IPO.

The provision for a Model 2 governance structure in JSCs ²⁷ is particularly noteworthy. By codifying a model that requires independent directors and an Audit Committee—hallmarks of modern international corporate governance—the law is signaling Vietnam's intent to align its corporate standards with global expectations. This makes the JSC structure more transparent and attractive to sophisticated foreign institutional investors and partners.

In-Depth FIE Comparison: Limited Liability Company vs. Joint Stock Company

The Foreign Investor's Licensing Process: A Step-by-Step Guide

The company formation process for a foreign investor is fundamentally different and more complex than for a domestic entrepreneur. A local Vietnamese investor follows a relatively simple, one-step process: applying for and receiving an Enterprise Registration Certificate (ERC).³⁰ In contrast, a foreign investor establishing an FIE must navigate a mandatory, sequential "Two-Certificate" process.³¹

This two-step system is a deliberate policy design. It separates the approval of the investment project (the IRC, governed by the Law on Investment) from the administrative registration of the corporate entity (the ERC, governed by the Law on Enterprises).³⁵ This allows the government to use the IRC as the primary "gate" to screen foreign investors, assessing their financial capacity, and vetting their project against national security and economic development goals.³⁷ The ERC is simply the "door" that opens once the gatekeeper has granted approval.

A. Phase 1: Pre-Application & Document Legalization

This is a critical, time-consuming preparation phase that must be completed before any applications are filed. All official documents originating from the investor's home country (e.g., the parent company's Certificate of Incorporation, passport copies, financial statements) are not legally valid in Vietnam until they have been "consular legalized".¹⁷

This is a multi-step process:

1. Notarization: The document must first be notarized by a local Public Notary in its country of origin.⁴⁰

2. Authentication: The notary's signature and seal must then be authenticated by the relevant government authority in that country (e.g., the state's Secretary of State in the US, the Foreign, Commonwealth & Development Office in the UK).⁴⁰

3. Legalization: Finally, the authenticated document must be presented to the Vietnamese Embassy or Consulate in that country, which will apply its own legalization stamp, certifying the document for use in Vietnam.⁴⁰

After this entire process, the legalized documents must be officially translated into Vietnamese by a competent authority.³² This process can take several weeks and should be initiated immediately.

B. Phase 2: The Investment Registration Certificate (IRC)

This is the first and most substantial hurdle in the FIE setup process.

• Purpose: To obtain official government approval for the investment project itself. The IRC confirms the investor's right to commit capital to a specific project in Vietnam.³⁴

• Issuing Authority: The Department of Planning and Investment (DPI) for the province or city where the FIE will be headquartered.¹⁷ For projects located within an industrial park or economic zone, the application is typically lodged with the Management Board of that zone.³³

• Application Dossier (Key Documents): The investor must prepare a comprehensive dossier, including:

  • An application form for the implementation of the investment project.¹⁷

  • A detailed Investment Project Proposal, outlining the project's objectives, scale, location, business plan, and socio-economic impact.¹⁷

  • Proof of the investor's financial capacity. For an organizational investor (parent company), this requires legalized copies of its last two years of audited financial statements.¹⁷ For an individual investor, a legalized bank balance confirmation is needed.¹⁷

  • Proof of location, such as a notarized office lease agreement or, more commonly at this stage, a Memorandum of Understanding (MOU) to lease a location.¹⁷

  • Legalized copies of the investor's legal documents (passport for an individual; Certificate of Incorporation or equivalent for an organization).¹⁷

• Timeline: The statutory processing time for an IRC is 15 working days from the date the DPI accepts the dossier as complete and valid.¹⁷ However, this "statutory" timeline can be misleading. In practice, especially for complex projects or those in conditional sectors, investors should budget 30 to 45 working days or more.³² The "real" timeline is consumed by the informal back-and-forth with DPI officials, who may request clarifications or amendments to the project proposal before they formally "accept" the dossier and start the 15-day clock.

C. Phase 3: The Enterprise Registration Certificate (ERC)

Once the IRC has been issued, the investor can proceed to the second, much faster, step.

• Purpose: To formally and legally create the Vietnamese company (the LLC or JSC) and establish its legal identity.³⁵ The ERC contains the company's official name, address, charter capital, legal representative, and its unique enterprise code, which also functions as the company's tax identification number.³²

• Issuing Authority: The Business Registration Office, which is a division of the same provincial Department of Planning and Investment (DPI).³³

• Application Dossier (Key Documents):

  • An application form for enterprise registration.¹⁷

  • The Company Charter (Articles of Association), which is the company's internal constitution.¹⁷

  • A list of members (for an MM-LLC) or a list of founding shareholders (for a JSC).¹⁷

  • Legalized/notarized copies of the personal identification documents (e.g., passports) for the company's Legal Representative(s) and all individual members/shareholders.⁴⁶

  • A copy of the issued Investment Registration Certificate (IRC).¹⁷

• Timeline: This step is administrative and significantly faster than the IRC. The statutory timeline is 3 to 5 working days after the complete and valid ERC dossier is submitted.¹⁷

D. Drafting the Company Charter (Articles of Association)

This document, submitted with the ERC application ⁴⁹, is not a mere formality. It is the core legal document that governs the company's internal operations, the relationship between owners, and the powers of its management. It must comply with the Law on Enterprises.²²

Key mandatory contents include ²²:

• Company name, head office address, and any branches/representative offices.

• Registered business lines (VSIC codes).

• Charter capital; for a JSC, this includes the total number of shares and types of shares.

• Rights and obligations of the company owner, members, or shareholders.

• The company's organizational and management structure (e.g., Members' Council, GMS, BOM).

• Full details of the company's Legal Representative(s).

• Regulations for approving company decisions and principles for resolving internal disputes.

• Principles of profit and loss distribution.

• Cases and procedures for company dissolution or liquidation.

The Charter must be signed by the company owner (for SM-LLC), all members (for MM-LLC), or all founding shareholders (for JSC).²²

The Foreign Investor's "Two-Certificate" Process (IRC vs. ERC)

Navigating the Regulatory Landscape: Business Lines, Ownership & Market Access

Before an investor even begins drafting an IRC application, a critical due diligence phase is required. An investor cannot simply choose to invest in any sector. They must first determine if their intended business is open to foreign investment and, if so, under what specific conditions.

A. Understanding Business Lines: Prohibited, Conditional, and Unconditional

Under Vietnam's Law on Investment, all business activities are classified into three categories:

• 1. Prohibited Sectors: These sectors are banned for all investors, both foreign and domestic, primarily for reasons of national security, health, and morals.⁵² This is a narrow list that includes:

  • Trading in narcotic substances, certain hazardous chemicals, and minerals.⁵²

  • Trading in specimens of endangered wild flora and fauna.⁵²

  • Prostitution, human trafficking, and human cloning.⁵²

  • Provision of debt collection services.⁵²

  • As of July 1, 2025, this list is expected to expand to include the trading of national treasures and the export of artifacts and antiques.⁵⁴

• 2. Unconditional Sectors: This category includes the vast majority of business lines. An FIE can register and conduct these activities freely without needing additional licenses (beyond the standard IRC/ERC) or meeting specific conditions. Examples include most types of manufacturing, software development, management consulting, and IT services.

• 3. Conditional Sectors: These sectors are open to investment, but only if the company and/or its investors meet specific "business conditions" mandated by law.³² These conditions are designed to ensure public order, safety, and quality standards. They can include:

  • A minimum "Legal Capital" requirement ⁵⁶ (see Section V).

  • Specific requirements for facilities, equipment, or technology (e.g., fire safety, environmental protection, or minimum storage capacity for LPG).⁵⁷

  • Mandatory practicing certificates or specific qualifications for the company's managers or staff (e.g., for legal, accounting, or healthcare services).⁵⁸

  • Specific conditions or ownership limits that apply only to foreign investors.

B. Market Access for Foreign Investors & Foreign Ownership Limits (FOLs)

For foreign investors, the "conditional sectors" list has an extra layer of complexity: market access and Foreign Ownership Limits (FOLs). Vietnam's market access for foreigners is primarily governed by its international treaty commitments, most notably with the World Trade Organization (WTO).⁶⁰

Vietnam generally follows a "negative list" approach. If a sector is not on a restricted list, it is presumed to be "Committed" or open, and 100% foreign ownership—a Wholly Foreign-Owned Enterprise (WFOE)—is permitted.¹²

The categories of market access are ⁵³:

• Committed: Fully open to foreign investment, with 100% FOL allowed. This includes most manufacturing, consulting, and IT services.⁵³

• Restricted: The sector is open, but subject to specific limitations. This is the most complex category and can include:

  • A Foreign Ownership Limit (FOL) cap, such as 49% or 30%, meaning the FIE cannot be wholly foreign-owned.³⁸

  • A requirement to form a Joint Venture (JV) with a specific type of Vietnamese partner.³⁸

  • Other business-specific conditions, such as limits on scope or geographic location.

• Unspecified / Uncommitted: The sector is not mentioned in Vietnam's WTO commitments or other treaties. This creates significant uncertainty, as market access requires discretionary, case-by-case approval from the relevant ministries, which can be a long and unpredictable process.⁶¹

A critical strategic trap for investors is the "Lowest Cap Rule." If a foreign-invested enterprise registers multiple business lines, and even one of those lines is subject to a foreign ownership limit (e.g., a 49% cap), that lowest FOL cap will be applied to the entire company.⁶² This is a catastrophic error. For example, an investor whose main business is "Software Development" (100% open) but who also registers "Telecommunications Services" (which is restricted) could be forced to give up 51% of their entire company. The strategic implication is clear: an FIE's registered business lines must be narrow, precise, and limited to the immediate business plan. New, more-restricted activities should be established later, potentially through a new, separate subsidiary, to avoid "contaminating" the primary company's ownership structure.

C. How to Verify Business Lines (VSIC) and Conditions

Given the risks, verification before application is essential.

• Step 1: Identify the VSIC Code. All business lines in Vietnam are categorized according to the Vietnam Standard Industrial Classification (VSIC) system, which is a 5-level numerical code structure.⁶⁵

• Step 2: Use the Official Portal. The single, official source for verification is the National Business Registration Portal (NBRP), maintained by the Ministry of Planning and Investment (MPI) at: dangkykinhdoanh.gov.vn.⁵⁸

• Step 3: Search the Portal.

  • To check an existing company's lines: Use the main search bar on the portal's homepage. An investor can search by a company's full name or its tax code (enterprise code).⁶⁸ The public profile will display its legal status, legal representative, and a list of all its registered business lines and their corresponding VSIC codes.⁶⁸

  • To check if a new line is conditional: The portal maintains a "List of conditional business lines".⁶⁹ This database is organized by the managing ministry, such as the Ministry of Industry and Trade ⁵⁷, Ministry of Finance ⁷⁶, Ministry of Construction ⁷⁷, or Ministry of Justice.⁷⁸ Investors must cross-reference their intended VSIC code against this official list.

D. Sector Deep Dives: Examples of Conditions

• Advertising (CPC 871): This is a classic "Restricted" sector. According to Vietnam's WTO commitments, 100% foreign ownership is not permitted.⁷⁹ Foreign investors must enter the market by establishing a Joint Venture or a Business Cooperation Contract (BCC) with a Vietnamese partner that is already licensed to provide advertising services.⁷⁹

• IT & Software Services: This sector is generally "Committed" and 100% open to foreign investment.⁵³ It is a priority sector actively encouraged by the Vietnamese government, which is seeking to attract high-tech FDI in areas like AI, semiconductors, and R&D.³⁸ The main exception is that this openness does not apply to "network infrastructure services" or "non-infrastructure telecommunications services," which remain heavily restricted, may have FOLs, and require specific approvals from the Prime Minister.³⁸

• Banking & Finance: This sector is highly restricted. The total aggregate foreign ownership in a single Vietnamese commercial bank is capped at 30%.⁶³ However, a new regulation effective from May 19, 2025 (Decree 69/2025/ND-CP), creates a strategic exception. To support the restructuring of the financial system, foreign investors may receive Prime Ministerial approval to own up to 49% in a "weak" credit institution that is undergoing a compulsory transfer (i.e., a forced acquisition or bailout).⁶³ This change illustrates a "Two-Track" liberalization strategy: using foreign capital as a tool to solve domestic problems (toxic assets) without ceding control of healthy, profitable banks, which remain capped at 30%.

• Retail Trading: This is a highly complex conditional sector, historically protected by a significant non-tariff barrier: the Economic Needs Test (ENT).

E. Special Case: The Economic Needs Test (ENT) for Retail

The ENT is a discretionary, case-by-case licensing process in addition to the standard IRC/ERC, and it has long been the single greatest obstacle to foreign retail expansion in Vietnam.⁸⁷

• When it Applies: Under the governing Decree 09/2018/ND-CP, the ENT does not apply to an investor's first retail outlet. It is required for the second and all subsequent retail outlets.⁸⁸

• The Exemption: An FIE can avoid the ENT for its subsequent outlets if the new outlet is (1) less than 500 m2, (2) located inside a shopping mall, and (3) is not classified as a convenience store or mini-supermarket.⁸⁷

• The Test: If the ENT is required, the provincial People's Committee assesses the application based on vague, discretionary criteria, including the local market's "scale," the number of existing retail outlets, and the "impact on market stability," traffic, and environment.⁸⁹

• ENT 2025 Reforms (Critical Update): This landscape is now changing dramatically due to Vietnam's new generation of Free Trade Agreements (FTAs).

  • Vietnam has committed to eliminating the ENT for investors from countries that are parties to the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), the EVFTA (EU-Vietnam Free Trade Agreement), and the UKVFTA (UK-Vietnam Free Trade Agreement).⁸⁷

  • A new draft decree, circulated in late 2024 and 2025 to replace Decree 09/2018, formalizes this change by codifying the removal of the ENT for investors from these treaty nations.⁹³ This is a monumental shift that removes the biggest barrier to expansion for retailers from the EU, UK, Japan, Singapore, and other member countries, and is expected to fuel a new wave of investment.⁹⁶

Capital and Banking: Financial Requirements for FIEs

This section details the regulations governing the financial lifeblood of the FIE: its capital. It clarifies the different types of capital, the minimum requirements, the strict contribution timeline, and the mandatory bank accounts required for operation.

A. Charter Capital vs. Legal Capital: Understanding the Difference

These two terms are often confused but have distinct legal meanings.

• Charter Capital: This is the total value of assets that the investors (owners/members/shareholders) commit to contributing to the company upon its establishment.⁵⁶ This amount is recorded in the Company Charter and the Enterprise Registration Certificate (ERC).²⁴

  • Is there a minimum? For the vast majority of "unconditional" business lines (e.g., consulting, IT services, light manufacturing), there is no fixed minimum charter capital required by law.¹⁸

  • The "Adequacy" Rule: While there is no statutory minimum, the Department of Planning and Investment (DPI) will assess the proposed charter capital during the IRC application. The amount must be deemed "adequate" or "reasonable" to cover the projected operational expenses of the investment project.¹⁸ An application for a large-scale manufacturing project with a proposed capital of $1,000 would be rejected.

  • Practical Minimum: For simple, service-based FIEs, a "paid-up capital" of at least USD 10,000 is often recommended as a practical minimum to demonstrate seriousness and ensure acceptance by the DPI.¹⁸ Some service businesses, like IT services or management consulting, may even be approved with as little as $3,000 if they do not require a large physical presence.¹⁸

• Legal Capital: This is a fixed minimum amount of capital mandated by specialized laws for specific conditional business lines.⁵⁶

  • The Rule: If an FIE intends to operate in a business line that requires legal capital, its registered charter capital must be at least equal to that required legal capital amount.⁵⁶

  • Key Examples of Legal Capital:

    • Real Estate Business: Must have equity capital (which functions as legal capital) of not less than 20% of the total investment for projects with a land scale of less than 20 hectares, or 15% for projects 20 hectares or more.¹⁸

    • Banking (Commercial): Requires legal capital of VND 3 trillion (approx. US$120 million).⁹⁹

    • Insurance: Varies by license, e.g., non-life insurance requires VND 400 billion (approx. US$16 million), while composite life/health insurance can require up to VND 1.3 trillion (approx. US$52 million).⁹⁸

    • Education: A foreign-invested university requires an investment of VND 1 trillion (approx. US$40 million).⁹⁹

    • Securities: Varies by activity, e.g., securities brokerage requires VND 25 billion.⁹⁸

B. The Capital Contribution Process & The 90-Day Rule

This is one of the most critical and strictly enforced compliance rules for a new FIE.

• The Deadline: All members (for an LLC) and shareholders (for a JSC) must contribute their fully-committed charter capital within 90 days from the date the Enterprise Registration Certificate (ERC) is issued.³⁹

• Consequences of Failure: This is not a flexible deadline.

  • If a member/shareholder fails to contribute in full by the deadline, they may lose their rights as a shareholder.¹⁰³ The company is legally required to register a formal decrease in its charter capital to reflect the amount that was actually contributed within a specified period.

  • For an FIE, the consequences are more severe. If the 90-day period is missed, the authorized bank managing the company's capital account will refuse to accept the inward capital remittance, as it would be a violation of the investment license.¹⁰⁴ The FIE must then undergo a complex and costly administrative procedure to apply to the DPI for an adjustment of its IRC to extend the capital contribution timeline. This process is not guaranteed and may involve administrative fines for the late contribution.¹⁰⁴

C. The Direct Investment Capital Account (DICA)

To facilitate and monitor the 90-day rule and all other capital flows, the State Bank of Vietnam (SBV) mandates that all FIEs use a special bank account.

• What it is: A Direct Investment Capital Account (DICA) is a special bank account that all FIEs (and foreign investors in BCCs) must open at an authorized, licensed bank in Vietnam.⁹⁷

• Purpose: The DICA is the SBV's primary tool for monitoring and controlling all capital flows related to foreign direct investment.¹⁰⁵ It ensures that all capital inflows (investments) and outflows (profit repatriation, loan repayments) are transparent and properly documented.

• Key Regulations (Circular 06/2019/TT-NHNN):

  • "Single Bank Rule": An FIE must open all of its DICAs at only one authorized bank in Vietnam.¹⁰⁵

  • "Single Account Rule": An FIE may only open one DICA per currency in which it receives capital (e.g., one DICA in USD, one DICA in VND).¹⁰⁵

  • This DICA is separate from regular "payment accounts." An FIE can open multiple VND or foreign currency payment accounts for its normal, daily domestic business transactions.¹⁰⁷

• Permitted DICA Transactions: The DICA functions as a "closed-loop" system.

  • Permitted Inflows: Receiving charter capital contributions from the foreign investor; receiving medium and long-term foreign loans; receiving capital from the sale of shares to other non-residents.¹⁰⁸

  • Permitted Outflows: Repatriating profits (dividends) to the foreign investor; repaying principal and interest on foreign loans; transferring capital back to the investor upon sale of the company or dissolution; payments for share transfers to other residents.¹⁰⁸

The DICA and the 90-day rule work in tandem as the enforcement arm of the IRC. The IRC approves the investment, while the DICA/90-day rule enforces it, ensuring the exact capital amount specified in the license ⁹⁷ flows through a single, monitored channel ¹⁰⁶ within a strict timeframe.

D. The Profit Repatriation Process

Foreign investors are permitted to repatriate their legally-earned profits, but only by following a strict, legally-mandated process.

• When: An FIE can repatriate profits annually at the end of its fiscal year, or upon the termination or dissolution of the investment project.¹¹⁴ Mid-year or quarterly repatriation is generally not permitted.

• Critical Conditions: An FIE cannot legally transfer profits abroad until it has:

  1. Fulfilled all financial obligations to the State of Vietnam, primarily by paying all corporate income taxes due.¹¹⁴

  2. Completed and submitted its audited annual financial statements and its corporate income tax (CIT) finalization declarations for that fiscal year to the local managing tax authority.¹¹⁴

• The Process: To execute the transfer (which must be done via the DICA ¹¹⁰), the FIE must submit a formal notice of profit repatriation to the tax authority.¹¹⁴ It must then provide its bank with a dossier including the audited financial statements, the tax finalization declaration, and the company's legal resolution (e.g., a Members' Council decision) approving the distribution of profits.¹¹⁴

This process creates a significant and often unexpected "legally-mandated cash-flow lag." Profits earned in January 2025 cannot be repatriated in February. The investor must wait until after the fiscal year closes on December 31, 2025, and complete the annual audit (which may take until March or April 2026), before that profit can be legally transferred. This 12-15 month (or longer) lag on repatriating profits must be factored into the parent company's global treasury and cash flow projections.

Post-Incorporation Compliance: A Checklist for Legal Operation

Receiving the Enterprise Registration Certificate (ERC) means the company legally exists.⁴⁷ It does not mean the company is ready to legally operate. A series of immediate and critical post-licensing steps are mandatory to avoid penalties and become fully operational. These tasks represent a "compliance sprint" where many steps are co-dependent.

A. Immediate Actions (To be completed within ~30 days of ERC issuance)

• 1. Make the Company Seal ("Chop"): The traditional, formal red-ink seal is still a required mark of authority for many official documents and contracts.³³ The company must create a seal and register its specimen with the business registration authority.¹⁰²

• 2. Affix Company Signboard: The company is legally required to affix a sign with its official name, registered address, and tax code at its registered head office.¹¹⁷ Failure to do so can result in fines and, in some cases, a "tax code lock" by the authorities, which freezes the company's ability to issue invoices or file taxes.

• 3. Open Bank Accounts: This is a top priority.

  • Open the mandatory Direct Investment Capital Account (DICA) to receive the capital contribution.⁴⁹

  • Open a VND Payment Account (current account) for all domestic transactions, tax payments, and employee salaries.⁴⁹

• 4. Initial Tax Registrations:

  • Purchase a Digital Signature (USB Token): This is a mandatory electronic signature required for all online tax filing and customs declarations.¹¹⁵

  • Register for e-Tax: The token must be registered with the General Department of Taxation (GDT) online portal.¹¹⁷

  • Submit Business License Tax Declaration: A declaration for this annual flat-rate tax must be submitted.¹⁰² (Note: Newly established companies are exempt from paying this fee for their first year of operation ¹¹⁷).

  • Register for e-Invoices: The company must register with and get approval from the local tax authority to use electronic invoices before it can issue any invoices to customers.¹⁰²

  • Declare VAT Method: The company must register its intended VAT calculation method (e.g., deduction method) with the tax authority.¹⁰²

• 5. Public Announcement: The company must make a public announcement of its establishment on the National Business Registration Portal.³⁹

These steps are highly inter-dependent. For example, an FIE cannot legally invoice a customer until it has its ERC (to get a tax code), its digital token, and has received approval from the tax office to use e-invoices.¹¹⁷ A delay in one simple step, like opening the bank account, can create a domino effect that jeopardizes the 90-day capital deadline.

B. The Critical 90-Day Deadline

• 6. Contribute Full Charter Capital: As detailed in Section V, the single most important post-licensing task is to ensure the full committed charter capital is transferred from the foreign investor into the company's DICA within 90 days of the ERC issuance date.³⁹

C. HR & Labor Compliance (To be done upon hiring the first employees)

• 7. Labor Registration: The company must register its use of labor (i.e., its employment) with the local Department of Labour, Invalids and Social Affairs (DoLISA).¹⁷

• 8. Social Insurance Registration: The company must register itself as an employer and all of its Vietnamese employees (with contracts of 3 months or more) for the compulsory Social, Health, and Unemployment Insurance (SHUI) funds.¹⁷ This must be done within 30 days of signing an official labor contract.¹¹⁷

• 9. Appoint a Chief Accountant: All FIEs must either hire a qualified Chief Accountant or, more commonly, engage a licensed accounting service firm to manage its books in accordance with Vietnamese Accounting Standards (VAS).

D. Conditional & Ongoing Compliance

• 10. Obtain Sub-Licenses: The ERC and IRC do not grant the right to operate in a conditional sector. After the FIE is legally formed, it must now apply to the relevant government ministry for any specific "sub-licenses" or "permits" required for its business line (e.g., a food safety permit for a restaurant, an education license for a school, or a construction permit).³²

• 11. Establish Reporting Procedures: The company must immediately prepare for all required periodic reports, including regular tax filings (VAT, PIT), annual CIT finalization, labor reports, and statistical reports for the investment and planning authorities.

Post-Incorporation Compliance Checklist & Timeline

Key Government Portals and Concluding Recommendations

Navigating Vietnam's regulatory environment requires knowing where to find official information. Investors should familiarize themselves with these key government resources.

A. Key Government Resources for Investors

• National Business Registration Portal (NBRP): dangkykinhdoanh.gov.vn

  This is the single most important portal, managed by the Ministry of Planning and Investment (MPI).58 Its functions include online business registration 58, a public database to search and verify the legal status of any company in Vietnam 68, the official list of conditional business lines 69, and the platform for publishing official corporate announcements.69

• Foreign Investment Agency (FIA): fia.mpi.gov.vn

  The FIA is the official investment promotion agency of Vietnam, operating under the MPI.126 Its website is the best official source for FDI statistics 126, news on investment-related policies, and serves as a primary contact point for major strategic investors.

• Ministry of Planning and Investment (MPI): mpi.gov.vn

  This is the parent ministry for both the NBRP and the FIA. It is the primary government body responsible for drafting and implementing investment policy and law.126

• General Department of Taxation (GDT) Portal: gdt.gov.vn

  This is the main portal for all tax matters. Its sub-portal (tracuunnt.gdt.gov.vn) can be used to independently verify a company's tax status.70 The main portal is used for all electronic tax filings.

B. Concluding Expert Recommendations

Based on the comprehensive legal and procedural analysis, three key recommendations are essential for any foreign investor planning to establish a company in Vietnam.

• 1. Engage Local Counsel Immediately: The entire process—from the consular legalization of documents ⁴⁰ and drafting a legally-compliant Company Charter ²² to navigating the "unwritten rules" of the IRC application and managing the post-ERC compliance sprint ¹⁰²—is a complex legal procedure, not a simple administrative one. Engaging experienced, local legal and tax advisors from the very beginning is not an optional cost; it is an essential risk mitigation strategy to ensure a smooth market entry.⁶

• 2. Strategy Precedes Application: The most common and costly mistake is to begin the application process without a finalized and vetted strategy. Before any documents are filed, the investor must have precise answers to:

  • What is my precise business line (VSIC code)? This will determine if the sector is conditional, restricted, or requires a Joint Venture, and will avoid the "Lowest Cap Rule" trap.⁵⁵

  • What is my long-term capital and ownership plan? This dictates the LLC vs. JSC choice, which has permanent implications for governance and liquidity.¹

  • Where will I be located? The DPI in that specific province will handle the application, and some jurisdictions are faster or more experienced with FDI than others.¹⁷

• 3. Prepare for the "90-Day Sprint": The 90-day capital contribution deadline ¹⁰⁰ is the single greatest point of compliance failure for new FIEs. The clock starts immediately upon ERC issuance. An investor's capital should be liquid and ready for international transfer before the ERC is even approved, as the process of opening the DICA ¹¹⁷ and executing the wire transfer takes time. Failure to meet this deadline ¹⁰⁴ creates a significant legal and administrative headache on day one, forcing the new company into a position of non-compliance before it has even begun operations.

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