Struggling to decide where to expand your operations in Asia? If you’re looking for a market that blends cost efficiency with strategic regional access, Vietnam warrants serious consideration. It’s a dynamic destination, but success requires understanding the nuances beyond the headlines – from evolving legal frameworks to the practicalities of setting up shop.

A crucial aspect of establishing a company's headquarters in Vietnam is securing a location lease contract. This contract serves as essential documentation for the company's headquarters and is particularly important for project implementation in the manufacturing sector.

Key Takeaways for Investors Eyeing Vietnam:

• Vietnam actively refines policies to attract Foreign Direct Investment (FDI), particularly in high-tech and sustainable sectors, but navigating bureaucracy remains key.
• Choosing the right legal structure (WFOE, JV, RO) critically impacts operational scope, control, and profit repatriation feasibility.
• The legal setup involves distinct IRC and ERC stages, plus sector-specific licenses, with potential delays requiring proactive management.
• Attractive tax incentives target specific industries and locations, but rigorous documentation and compliance are vital to secure and retain these benefits.
• Location within specialized zones (IZs, EZs, HTPs) significantly impacts incentives, infrastructure quality, and administrative support.

Why Vietnam Is a Top Destination for FDI Companies

Vietnam’s appeal for FDI stems from a potent mix of sustained economic growth and deepening trade integration. The country isn’t just passively receiving investment; it’s actively courting it through ongoing legal reforms. As noted by Tap Chi Cong Thuong in 2024, Vietnam continues to refine its legal policies specifically to attract foreign investment, signaling a clear governmental commitment. The World Bank’s analyses consistently point to market-oriented reforms as a driver of Vietnam’s notable development. Testament to this is how real GDP per capita shot up from less than US$700 in 1986 to nearly US$4,500 in 2023; or how Vietnam's Ease of Doing Business ranking climbed from 99th in 2013 to 70th out of 190 economies in 2020.

This proactive stance enhances Vietnam’s strategic positioning within global supply chains in Southeast Asia. As companies diversify manufacturing bases, Vietnam’s location, improving infrastructure, and increasingly skilled workforce make it a compelling node in international production networks. The government is particularly keen on attracting high-quality capital, focusing on high-tech industries and, increasingly, sustainable development projects.

Who This Guide Is For

This guide translates these macro trends into actionable insights for:

• Foreign companies mapping out their incorporation strategy in Vietnam.
• High-net-worth individuals and VCs evaluating specific investment deals.
• Expansion-minded SMEs targeting Southeast Asia’s growth potential.
• Foreign individuals looking to invest in Vietnam.

With over twenty years on the ground facilitating FDI across Asia—especially in Vietnam, China, and Malaysia—we at Viettonkin Consulting understand the strategic imperatives. From traditional manufacturing shifts to pioneering sustainable ventures, we’ve guided businesses through the intricacies of market entry and long-term growth.

Read More: How Foreign Investors Can Set Up a Business in Vietnam – Viettonkin

Key Insights Foreign Investors Must Know

Transformative Insight #1: Vietnam offers more than cost savings—it’s a compliance-focused market where deep local understanding and navigating bureaucracy are crucial.

While competitive costs are an initial draw, long-term success depends on mastering the operational environment. Substantial foreign capital plays a pivotal role in driving foreign direct investment (FDI) in Vietnam's rapidly growing economy, making it an attractive destination for investors. In fact, the total registered FDI capital in 2024 reached 38.23 billion USD and disbursed FBI capital reached an all-time high of 25.35 billion USD, a significant increase of 9.4% compared to the previous year (MPI, 2025).

The Reality Behind Vietnam’s Business Freedom

Global rankings may show progress, but the practical experience of ease of doing business involves navigating a complex regulatory landscape. As highlighted in the U.S. Department of State’s 2021 Investment Climate Statement, while Vietnam has made strides, investors can still face challenges related to regulatory transparency and bureaucratic procedures. Sector-specific requirements add another layer; setting up in finance involves different hurdles than in manufacturing or retail. What’s often missed in generic guides is how local interpretations and undocumented requirements can impact timelines – making local expertise in understanding local laws invaluable.

Hidden Costs and Delays Investors Often Miss

Factor potential local licensing delays into your timeline. Beyond explicit fees, infrastructure readiness can vary, potentially impacting logistics, especially outside major industrial zones. Furthermore, Vietnam’s labor laws, covering contracts, social insurance, and termination procedures, are specific and require careful adherence to avoid disputes and unexpected costs – a point often underscored in guidance for foreign firms.

It is also crucial to have a valid lease contract for the company's headquarters and project implementation location, as this is a key requirement for satisfying investment registration requirements.

Business Structures Available for FDI in Vietnam

Transformative Insight #2: Your chosen legal structure dictates operational scope, control, potential partnerships, and ultimately, your ability to scale and repatriate profits effectively.

This isn’t just a legal formality; it’s a cornerstone of your Vietnam strategy. Wholly foreign owned enterprises (WFOE) are a critical factor for successful foreign investment in Vietnam, allowing foreign investors to fully own and manage their business without any local partnerships.

Wholly Foreign-Owned Enterprise (WFOE)

• Legal Definition: A Vietnamese entity with 100% foreign-contributed capital, also known as a foreign invested enterprise. This structure is governed by the legal framework surrounding foreign direct investment (FDI) in Vietnam, detailing the requirements and procedures necessary for establishment, including documentation for investment and business registration, and compliance with local laws and regulations.
• Strategic Fit: Best for maximum operational control, IP protection, and brand consistency. Favored in manufacturing, IT, and many services.
• Limitations: Some sectors remain restricted or require conditional approval for 100% foreign ownership, as outlined in Vietnam’s investment laws and commitments referenced in resources like the U.S. Trade Administration’s 2023 Country Guide.

Joint Venture Company (JV)

• Ownership: Involves partnering with a Vietnamese entity. Minimum local ownership might be mandated in certain regulated fields (e.g., advertising, logistics). Contributing capital is a crucial step for foreign investors when establishing joint ventures, as it outlines the procedures and legal requirements for investment.
• Benefits: Necessary for entry into conditional sectors; local partner can offer market insights and network access.
• Risks: Potential for partnership disputes over strategy or management. Thorough due diligence on the partner is non-negotiable.

Representative Office (RO)

• Purpose: Limited scope – cannot engage in direct profit-making activities. Acts as a liaison for the foreign parent company.
• Suitable For: Market research, liaison, quality control, building initial presence.
• Transitioning: A common stepping stone before committing to a WFOE or JV, requiring a separate registration process.

The Legal Setup Process from A to Z

The path to operational readiness involves several distinct phases.

• Investment Registration Certificate (IRC): Foreign investors must obtain an Investment Registration Certificate (IRC) from the Department of Planning and Investment. This requires having a well-defined investment project that complies with the Investment Law 2020, including meeting market access standards and other legal requirements.

Pre-Approval & Licensing

1. Investment Registration Certificate (IRC): Approves the investment project. Requires detailing scope, investment capital, location, and objectives, along with demonstrating financial capacity.
2. Enterprise Registration Certificate (ERC): Establishes the company legally after the IRC is issued. Confirms name, address, legal representative, etc.
3. Sector-Specific Licenses: Many industries (finance, education, retail, health) require additional “sub-licenses” from relevant ministries. This stage can sometimes be complex and time-consuming. Management boards of industrial zones can sometimes assist in streamlining these processes for companies located within their zones.

Post-License Operational Setup

1. Tax Code & Bank Account: Immediate steps post-ERC issuance include registering for a tax identification number and opening necessary corporate bank accounts (capital and current). Additionally, foreign investors holding over 51% of the capital in a Vietnamese business must open a direct investment capital account to facilitate the transfer of investment capital.
2. Labor Declarations: Formal registration of the company and its employees with labor and social insurance authorities.
3. Capital Contribution: Injecting the registered charter capital into the capital account within the mandated timeframe (usually 90 days post-ERC).

Ongoing Compliance Needs

Establishment is just the beginning. Continuous compliance includes:

Investment Adjustments: Changes to the project’s core details often necessitate amending the IRC and/or ERC.

Annual Audits & Tax Filings: Mandatory audited financials and regular submission of CIT, VAT, and PIT returns.

Understanding value added tax regulations is crucial for FDI enterprises to ensure proper compliance and successful operation within Vietnam.

Foreign Loan Registration: Medium and long-term loans from foreign entities typically require registration with the State Bank of Vietnam.

Taxation, Incentives, and Profit Repatriation

Transformative Insight #3: Vietnam leverages tax incentives strategically to attract desired investment, but accessing and maintaining these benefits requires meticulous compliance and documentation.

The 2008 Corporate Income Tax Law (Articles 15–17) stipulates:

• Tax exemption for 2–4 years for projects in disadvantaged areas (Zone C)
• Tax exemption for 4–9 years + 50% reduction for the next 5 years for high-tech projects, environmental protection projects

Corporate Tax Essentials

• Rates: Standard Corporate Income Tax (CIT) is generally 20%. However, preferential rates (10%, 15%, 17%) and tax holidays (exemptions + 50% reductions) are key tools.
• Incentives: Often linked to specific sectors (e.g., high-tech, R&D, supporting industries, environmental protection), locations (disadvantaged areas, IZs/EZs/HTPs), or project scale. The U.S. Trade Administration’s 2023 guide notes these targeted incentives. Various sectors within Vietnam's economy have recently attracted significant FDI, emphasizing the diversity of investment opportunities available for foreign investors.
• Eligibility: Strict criteria apply, and maintaining the necessary conditions throughout the incentive period is crucial to avoid clawbacks.

Import/Export Duties and VAT

• Exemptions: Import duty exemptions for goods creating fixed assets are common. Materials imported for export production often benefit from exemptions or refunds. The management of foreign investment capital under the Investment Law is crucial for defining various types of enterprises and their eligibility for these exemptions.
• Special Zones: EPZs and similar zones have distinct customs/tax regimes.
• VAT: Standard rate 10%. Exports are typically 0%-rated, allowing for VAT refunds, though the process requires careful documentation.

Repatriating Profits Legally

Moving profits home requires following specific procedures.

• Conditions: Generally possible annually after fulfilling tax obligations and having audited financials. Accumulated losses must be cleared first. International investors play a crucial role in Vietnam's FDI landscape, benefiting from the country's favorable policies and strategies.
• Currency Control: Remittances are subject to foreign exchange controls and must be processed via authorized banks with supporting documents.
• DTAs: Vietnam’s extensive network of Double Taxation Avoidance agreements helps mitigate being taxed in both jurisdictions - where 80 of such agreements were signed with notably Singapore, Japan, Korea, Switzerland and UK.

Choosing the Right Location in Vietnam

Where you establish your presence significantly impacts costs, incentives, and operational efficiency. Vietnam's strategic location offers a key advantage for foreign investors looking to establish a presence in Asia.

Industrial Zones (IZs), Economic Zones (EZs), and High-Tech Parks (HTPs)

• Infrastructure & Services: These zones typically offer superior infrastructure readiness and often feature streamlined administrative support, sometimes described as a “one-stop shop” for handling procedures, as detailed by LuatVietnam in 2024.
• Incentives: Often provide the most attractive tax and land rental incentives, with specific benefits varying by zone type and location.
• Sustainability Focus: There’s a growing emphasis on developing Eco-Industrial Parks (EIPs), integrating principles of resource efficiency and environmental protection, sometimes supported by initiatives like green finance mechanisms explored in recent academic work (e.g., Nguyen et al., 2024). Additionally, there is significant potential for investment in renewable energy within these zones, particularly in solar, wind, and hydropower projects.

Major Cities for FDI

• Hanoi vs HCMC: The capital vs the southern commercial engine. Ho Chi Minh City is a key location for business setup, especially for foreign-invested (FDI) companies. Choice depends on target market, industry focus, and need for proximity to government vs. commercial partners.
• Tier-2 Cities: Da Nang (IT, tourism), Binh Duong & Dong Nai (manufacturing), Hai Phong (logistics, manufacturing) offer competitive advantages.
• Labor: Assess availability of required skilled labor pools.

Sector-Specific Hotspots

• Manufacturing: Bac Ninh, Hai Phong, Binh Duong, Dong Nai remain dominant in the manufacturing sector.
• Tech/IT: HCMC, Da Nang, Hanoi are key clusters, often concentrated in HTPs.
• Logistics: Areas near major ports and transport corridors like Long An, Dong Nai, Hai Phong.

Risk Management and Common Pitfalls

Proactive risk mitigation is essential for sustainable operations.

Proper business registration is crucial to avoid legal issues and ensure compliance with local regulations.

Cultural and Communication Barriers

• Negotiation: Understand the preference for indirect communication and consensus-building.
• Local Expertise: Employing experienced local managers or advisors is crucial for navigating cultural nuances. Additionally, understanding the Vietnamese business landscape is essential for successful operations, as it involves comprehending local laws and government incentives that shape the business environment.

Contract Enforcement and Dispute Resolution

• Contract Clarity: Avoid ambiguity, especially in JV agreements. Define obligations and dispute mechanisms clearly, and ensure compliance with specific regulations related to capital contributions, market access, and the nationality of investors as outlined in the Investment Law and the Enterprise Law.
• Arbitration: While Vietnamese courts are an option, arbitration is often preferred by foreign investors for commercial disputes. Vietnam is a signatory to the New York Convention, making foreign arbitral awards generally enforceable, a point highlighted by legal analysis platforms like Lexology. The Vietnam International Arbitration Centre (VIAC) is a common forum.

Currency, HR, and Regulatory Risks

• FX Management: Manage currency fluctuation risks impacting costs and repatriation value.
• Labor Compliance: Strict adherence to Vietnam’s labor code and labor regulations is essential to prevent disputes. The U.S. Trade Administration’s 2023 report touches upon ongoing labor issues relevant to investors.
• Bureaucracy & Transparency: Despite reforms, navigating bureaucracy and ensuring consistent application of regulations remain areas requiring attention, as sometimes noted in assessments like the State Department’s 2021 report.

Make Your Vietnam Entry a Strategic Win

Vietnam offers significant rewards for investors who approach the market with diligence and strategic foresight. Success hinges on meticulous planning around structure, location, compliance, and proactive risk management. Understanding both the stated policies and the practical realities is key. Compliance with the 2020 Investment Law is crucial for establishing foreign direct investment (FDI) companies and ensuring successful market entry.

Ready to transform the challenges of entering Vietnam into strategic advantages? Partnering with seasoned local experts can provide the critical insights needed to navigate the landscape effectively. At Viettonkin Consulting, we specialize in providing that strategic insight. Let’s partner for a sustainable and prosperous future in Vietnam. Invest in tomorrow’s breakthrough, today.

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