Foreign investors have been eyeing Vietnam for years, as it offers a favorable climate for investment due to its political stability, strategic location, and growing economy. Vietnam has become one of the fastest-growing economies in Southeast Asia, and foreign investments have fueled its growth.
There are several forms of investment that foreign investors can use to invest in Vietnam, each with its own advantages and disadvantages. Below, we list some common forms and compare them in the following table.
Investment forms for foreign investors
Foreign investors wishing to invest in Vietnam must comply with the regulations and requirements outlined in Clause 2, Article 24 of the 2020 Investment Law, which stipulates that Article 9 outlines the market access requirements for foreign investors. These provisions are in place to safeguard national defense and security.
Furthermore, the Land Law in Vietnam specifies the conditions for receiving land use rights, as well as land use regulations in islands, communes, wards, border towns, and coastal townships.
Vietnam has 5 different forms of investment as per the 2020 Investment Law.
– The establishment of economic organizations is one form of investment in Vietnam.
– Capital contribution, share purchase, and capital purchase are other forms of investment in the country.
– Investment projects’ implementation is also recognized as a form of investment in Vietnam.
– BCC contract-based investment is yet another form of investment in the country.
– The Government regulates any new forms of investment and types of economic organizations in Vietnam.
Common investment options in Vietnam available to foreign investors
According to the 2020 Investment Law in Vietnam, foreign investors can select from various investment forms provided they meet the market access criteria outlined by the law. These forms include the establishment of economic organizations, capital contribution, share purchase, capital purchase, BCC contracts, and representative office establishment. These are commonly chosen investment options by foreign investors in Vietnam.
Investment in establishing an economic organization
Establishing an economic organization such as Limited Liability Company (LLC) or Joint Stock Company (JSC) is a popular form of investment for many foreign investors in Vietnam, particularly for those who are individuals or legally recognized foreign companies. This form allows foreign investors to enter the Vietnam market. However, investors must first obtain an Investment Registration Certificate and an Enterprise Registration Certificate. It is recommended that investors seek advice from experts in the sector and market conditions to make informed investment decisions that align with legal requirements. Moreover, they must register the business sector and investment objectives and adhere to the conditions and restrictions placed on certain investment sectors in Vietnam. Foreign investors can take advantage of the opening of many common operating sectors such as technical consultancy, management consultancy, market research, a list which the Vietnamese government has committed to making available for foreign investment.
The investment can be in the form of capital contribution, share purchase, or capital contribution purchase.
The forms of capital contribution, share purchase, and capital contribution purchase are investment alternatives that foreign investors should consider if they intend to invest in an existing Vietnamese economic organization. As per investment regulations, foreign investors are entitled to contribute capital, purchase shares, or acquire capital contribution portions of legally recognized economic organizations in Vietnam. However, for some industries regulated by law, there may be restrictions on the ownership ratio for foreign investors.
Investors must locate a legally recognized economic organization in Vietnam that is appropriate for the intended field of operation to pursue this type of investment. The forms for foreign investors to purchase shares or buy capital contributions of economic organizations are as follows:
– Buying shares from either the shareholders or the company in a joint-stock company.
– Acquiring the capital contribution share of a member in a limited liability company to become one of its members.
– Purchasing the capital contribution share of a capital contributing member in a partnership to become a member of that partnership.
– Purchasing the capital contribution share of members of other economic organizations in addition to the above options.
The form of investment in a BCC contract
The Business Cooperation Contract (BCC) is a type of agreement that enables investors to collaborate in business, share profits, and distribute products in compliance with legal regulations. This form does not necessitate the entities signing the contract to be legal entities, allowing investors to enter into a contract with a legal entity to partake in business activities. This approach saves costs and time as there is no need to establish a new economic organization. In summary, the BCC contract is an investment opportunity founded on a contractual agreement between investors, without the establishment of a fresh legal entity. However, because no economic organization is formed, the parties do not have a common seal, which can be disadvantageous in certain cases where specific documents require a seal under Vietnamese law.
Representative office
Foreign traders who have legally established their business in Vietnam are eligible to establish a representative office, according to Vietnam’s laws pertaining to the foreign trade sector. A representative office may carry out functions like research and business promotion for foreign traders within the country. Investing in a representative office comes with advantageous benefits for investors such as easy management, cost savings, and exemption from certain taxes such as the gambling and enterprise income taxes. This option is especially favorable for foreign companies seeking to penetrate the Vietnamese market and expand their trade opportunities.
Compare of investment forms of foreign investors
We will list the requirements, terms, and conditions related to investments in Vietnam into a table to help customers refer to them easily and gain a better understanding.
| Establishing an economic organization | Capital contribution, share purchase, capital contribution purchase | BCC contract | Representative office | |
| Time | 25-30 working days | For capital contribution to establish a company: the time limit for full capital contribution is 90 days from the date of issuance of the Certificate of Business Registration. For capital contribution or share purchase: Parties must sign documents to serve the completion of enterprise accounting books. | Agreement of parties | 6-8 weeks |
| The minimum of investment capital | The investment capital required can vary depending on the specific industry in question. | Agreement of parties | Agreement of parties | None |
| Tax | Business license tax, VAT, Personal Income Tax (PIT), Profit tax | VAT, PIT | VAT, PIT | PIT |
| Legal responsibility | Take legal responsibilty in accordance with the law | Parties take legal responsibility in accordance with the law | Take legal responsibilty in accordance with the law and agreements of contract | Foreign traders are responsible for the operation of representative offices established in Vietnam |
| Granted a required documents | Visa, Work Permit, Temporary Residence Card (TRC) | Visa, Work Permit, Temporary Residence Card (TRC) | Visa, Work Permit, Temporary Residence Card (TRC) | Work Permit, Temporary Residence Card (TRC) |
Conclusion
In conclusion, foreign investors in Vietnam have a wide range of options available to them. From setting up wholly foreign-owned enterprises and joint ventures to acquiring stakes in existing Vietnamese companies or investing in government-led projects, investors can tailor their investment strategy to their specific needs and goals. Each investment option comes with its own set of benefits and challenges. The Vietnamese government has implemented various policies and incentives to attract foreign investment and protect the rights of foreign investors. Vietnam continues to be an attractive destination for foreign investors. The country’s positive economic outlook, strategic location, and young and skilled workforce allow investors to tap into its vast potential. Foreign investors seeking to realize significant returns on their investments can take advantage of these opportunities.
Through the above information sharing, HMLF aims to provide foreign investors with insight into the investment form in Vietnam. For more detailed consultation and answers, please contact the HMLF team.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 93 72 15585
Email: miller@hmlf.vn | website: hmlf.vn
