What Areas Foreign Investors Could Invest in Vietnam?
In recent years, it has become an attractive investment destination to set up company in Vietnam in the eyes of foreign investors thanks to the socio-economic innovation policy since the early 80s of the 20th century.
Vietnam encourages investors to set up company in Vietnam
With the government’s efforts in improving the investment and business environment, which is favorable for not only domestic investors but also foreign investors, Vietnam’s economic, political and social situation has always remained stable and achieved great progress, throughout the time including the post-Covid era, while establishing bilateral trade relations with many countries in the world. The government continues to change the policies on improving the business environment, supporting business development through resolutions and legal documents, to open up the economy. In particular, the government commits to encourage foreign investors doing business in Vietnam: to set up company in Vietnam, set up factory, or acquire shares, capital contribution in business to invest in Vietnam in various areas that positively impact the economy.
In general, foreign investors are welcome to invest and set up company in Vietnam. The Foreign Direct Investment (FDI) capital registered up to end of the year 2022 is USD 439 billion and the FDI attracted in the year 2022 alone is USD 27,7 billion. In practice, a large number of them have set up business in Vietnam and heavily invested in manufacturing and production, real estate, energy, technical areas, and wholesales trading, retail trading of all kinds of products.
Areas prohibited to set up company in Vietnam
It should be noted that the law in Vietnam prohibits business in the areas of: i) trading in narcotic substances; ii) trading chemicals and minerals; iii) trading in specimens of plants and wild animals; iv) business of prostitution; v) purchasing and selling human beings, tissues, organs, human fetuses; vi) business activities related to human cloning; vii) trading in firecrackers; viii) business of debt collection services, among which debt collections services have just recently been added to the banned list in early 2021 because of the negative social impact created by the debt collection companies in Vietnam.
The general condition applicable to domestic and foreign investors is that the investor is entitled to conduct business investment activities in industries and trades not prohibited by law. Beside trades banned from business investment mentioned above, the remaining industries and trades are divided into conditional business lines and ordinary business lines. In ordinary business lines, investors can freely enter without barriers. In contrast, conditional business lines set conditions that must be met if the investors wish to join. Understanding the legal condition to operate in a specific industry and business line is the first step for investors to enter the market to set up company in Vietnam.
Areas investors need to meet conditions to set up company in Vietnam
For conditional investment areas, there are conditions of i) investors being domestic or foreign investors; ii) type of conditions; iii) detailed description of conditions; iv) documents required for application; v) competent authorities that handle the application; vi) licenses and duration of license to operate in such conditional investment areas.
In some areas, foreign investors are restricted in investment in foreign ownership ratios, forms investment, area of investment in Vietnam, Vietnamese partner requirement in the joint venture, and other conditions as the bilateral trade agreements involved. Particular areas of restricted investment for foreign investors include banking, insurance, securities, telecommunications, tourism… In some areas, foreign investors are not allowed to invest in Vietnam for the reason of state monopoly or national securities i.e. fishery, investigation, notary, marine services, intellectual property agent services…
For foreign investors, when investing to set up company in Vietnam, they must determine area of business and to check whether that industry has any special conditions for investment. The business lines allowed to join are considered based on Vietnam’s commitments to WTO assessment in the field of trade in services and agreements signed between Vietnam and other countries based on bilateral trade agreements. For foreign companies entering Vietnam investing and establishing business, hiring professional or law firm in Vietnam with expertise in market entry in the legal area could be proven cost and time effective solution.
Why investors need get help from professional to set up company in Vietnam?
Not only that the lawyer in Vietnam could help advising the conditions, procedures for foreign investors to make investment and set up company in Vietnam, it is important to understand the government policies from a broader perspective in the aspect of preferential policies to attract foreign investment, corporate income tax exemption and reduction, import tax exemption for a number of goods, land rental and land usage exemption. Further, it is important to get updated when the Vietnam government also commits to continue to reform administrative procedures in order to simplify procedures and create the best conditions for foreign investors to invest and set up companies, factories in Vietnam.
Let ANT Lawyers, a law firm in Vietnam help your business in Vietnam.