Yes, foreigners can own a business in Vietnam, as the country encourages international investment through supportive legislation. However, understanding the regulations and requirements is crucial for successfully establishing a business in Vietnam.
Legal Framework for Foreign Business Ownership
Vietnam’s investment landscape is governed primarily by two key laws:
- Investment Law 2020
- Enterprise Law 2020
These laws, which took effect on January 1, 2021, have modernized and relaxed previous restrictions, creating a more accessible environment for foreign investors. They outline the conditions under which foreign entities can operate and set the standards for business practices within the country.
Forms of Business Ownership Available to Foreigners
Foreign investors can establish their presence in Vietnam through several business structures. The most common forms include:
- 100% Foreign-Owned Enterprise (FOE): Foreign investors can set-up a company wholly owned by them. This structure provides complete control over business operations.
- Joint Venture Enterprise (JV): This involves a partnership between foreign investors and Vietnamese individuals or companies. Joint ventures can be advantageous in sectors where local knowledge and networks are beneficial.
- Business Cooperation Contract (BCC): A contractual agreement between foreign and Vietnamese partners to cooperate on specific business activities without creating a separate legal entity. This model allows for collaboration while maintaining separate legal statuses.
- Public-Private Partnerships (PPP): Commonly used for large infrastructure projects, PPPs involve collaboration between foreign investors and the Vietnamese government. These arrangements are typically governed by specific regulations tailored to the project’s nature.
Restrictions on Foreign Ownership
While many sectors are open to foreign investment, there are restrictions in certain areas. According to Article 6 of the Investment Law, foreigners are prohibited from engaging in specific business activities, including:
- Trading narcotic substances
- Prostitution and human trafficking
- Debt collection
- Businesses involving toxic chemicals and endangered species.
Additionally, foreign ownership limits apply in certain sectors. For example, in the banking sector, foreign ownership is capped at 30% for total foreign investment in a Vietnamese bank. In the aviation sector, the limit is set at 34%, etc.
Industry-Specific Restrictions and Opportunities
While Vietnam has opened most sectors to foreign investment, some industries maintain restrictions or special requirements.
Under Decree 31/2021/ND-CP, certain business activities require:
- Joint venture arrangements with local partners
- Maximum foreign ownership caps
- Special licenses or approvals from relevant ministries
For example, in the retail sector, foreign companies must undergo an Economic Needs Test (ENT) for each retail outlet beyond the first one, except in certain cases specified under Vietnam’s WTO commitments.
Registration Process and Documentation
To establish a business in Vietnam, foreign investors must obtain:
1. Investment Registration Certificate (IRC)
Obtained from the Department of Planning and Investment, this document approves the investment project and takes approximately 15 working days to process under normal circumstances.
2. Enterprise Registration Certificate (ERC)
This establishes the legal entity and typically requires an additional 3-5 working days after obtaining the IRC.
The documentation required includes:
- Business plan and feasibility study
- Legal documents of the foreign investor
- Proof of financial capacity
- Lease agreement or land use rights (if applicable)
- Environmental impact assessment (for certain projects)
3. Charter Capital Requirements
Certain business lines may require a minimum capital investment. For instance, real estate businesses often have specific capital requirements to ensure financial stability and project feasibility.
Recent Developments
As of January 1, 2025, new laws have been introduced that impact foreign investment in Vietnam:
- Law on Real Estate Business No. 29/2023/QH15: This law updates the regulations governing foreign-invested enterprises in the real estate sector. It outlines the activities foreign investors can engage in and specifies their rights and obligations in real estate transactions.
- Law on Housing No. 27/2023/QH15: This legislation clarifies the rights of foreign individuals and organizations regarding property ownership in Vietnam. It details the criteria, limitations, and approved methods for acquiring housing, providing clearer guidelines for foreign investors interested in the real estate market.
How Russin & Vecchi Can Help You Start
Starting a business in Vietnam can be complex, but the right guidance makes it easier. Russin & Vecchi is a top law firm in Vietnam that helps international entrepreneurs through every step of the process.
We have extensive experience in Vietnamese business law and ensure your investment complies with legal requirements and is set up for growth.
For more information and personalized assistance, contact Russin & Vecchi today.
