When you decide to engage in the Vietnamese market as a foreigner, you must first research the viability of the industry you are interested in. Start by checking whether the business field is allowed by Vietnamese law or is subject to limitations, such as Vietnamese business regulations affecting international investors. Because Vietnam is still a developing country, not all business entity kinds are permitted, and of those that are, not all are accessible to international direct investors.
Investing in Vietnam? Explore InCorp’s Company Incorporation Services
To encourage business in Vietnam, business Investment Law No 61/2020/QH14 was enacted in 2020. One of the major modifications to this legislation was the elimination of conditional investment lines and the addition of numerous forms and reward lines. In addition, the Vietnamese government has removed the prohibitions on foreign ownership of listed and state-owned businesses to maintain its rapid economic development. We will examine the limitations of international business activity in Vietnam in this article.
Local vs Foreign Companies in Vietnam
Because it will affect the success of your future company, selecting a legal entity in Vietnam is almost as crucial as deciding which industry to engage in.
A Limited Liability Company is the most typical form of corporate organization in Vietnam. Either residents or outsiders may own it entirely. Local LLCs must submit a bank proof of deposit of shared capital and a registered location in Vietnam to the officials to organize.
For foreign-owned LLCs, opening a capital account with a regional bank is required to be approved for a foreign investment license (FIC). Although there is no mandatory minimum capital requirement in Vietnam, generally a sum of US$25,000 (2023 update) is required to effectively incorporate a business. Don’t hesitate to contact a consultant to get a detailed estimation for your specific industry.
Continue reading Know How to Start a Limited Liability Company in Vietnam.
Sectors Prohibited for Foreign Investments
According to Decree 31/2021/ND-CP (Appendix I), there are 25 business sectors in Vietnam with restricted entry to the market:
1. Trade in products and services on the list of monopolized products and services
2. News-gathering efforts by the press in all forms
3. Taking or using aquatic life for food
4. Security and investigation services
5. Court and administrative services, including court evaluation, bailiff, property sale, notary, and official receiver services.
6. Services for guest workers
7. Investing in the building of cemeteries to pass the facilities and land use rights thereon
8. Household trash direct collection
9. Services for public surveys
10. Services for blasting
11. Producing and selling firearms, explosives, and protective clothing
12. The import and deconstruction of used seagoing ships
13. The use of public post offices
14. Trading in products as a merchant
15. Temporary purchase of merchandise for re-export.
16. Importing, exporting, and selling products that are listed as being prohibited by foreign owners and foreign-invested business groups
17. Collection, purchase, and handling of public property at armed force units.
18. Manufacturing of military goods or materials, dealing in military goods, weapons, specialty vehicles used only by the military and the police, specialist equipment and its components, and manufacturing of related technology
19. Services for representing industrial property and evaluating intellectual property
20. Marine-related foundation, administration, maintenance, support, survey, and publishing services
21. Electronic marine information services; maritime safety services in water zones, water regions, and publicly accessible channels
22. Services involving car examination, testing, and license issuing
23. Survey, evaluation, and gathering of natural resources services
24. Studying or utilizing novel household animal genetic resources
25. Travel services, except international travel services for inbound tourists
We made the most detailed step-by-step guide to setting up a business in Vietnam for investors, now available as an interactive checklist:
Business Restrictions under the WTO Agreement
Vietnam may impose restrictions on or shut down particular industries to foreign investment by its WTO commitments. The following industries are affected by the barriers:
- Courier services
- Advertising services
- Equipment maintenance and repair (except for ships)
- Film production, distribution and screening
- Travel agents and tour operators
- Services related to manufacturing and mining
- Telecommunication services
- Electronic games
- Road and rail transport
- Maritime transport, and container handling
- Aircraft repair and maintenance
In addition to the aforementioned limitations, Vietnam’s Investment Law specifies the number of industries that are permissible for foreign investment, subject to clearance under certain circumstances.
- Air transportation
- Air and seaports construction and operation
- Exploration, extraction, and refinery of petroleum
- Gambling industry
- Production of cigarette
- Infrastructure development in economic zones
- Golf courses construction
- Other industries include shipping, telecommunications, media, publishing, and the
- Creation of science and technology businesses.
Besides, there are further regulations such as:
- When a project requires over 10,000 people in the highlands or 20,000 people in other areas to relocate (needs clearance from the Prime Minister)
- Projects with investments of more than VND 5 trillion (needs clearance from the Prime Minister)
How to Start a Business in a Fully-Closed Sector?
Even in the restricted sector, there is a secure option to follow the local law when starting a company in Vietnam as a foreigner.
Establish a nominee business in Vietnam by locating a local designer. This kind of business is frequently used by overseas investors because they can still execute all of their rights in a nominee company. A set of agreements that have been notarized and are signed through a reputable consultant can ensure clear division of tasks and obligations.
Restrictions on Property and Land Ownership
As with other Vietnamese residents, the law in Vietnam permits outsiders with formal organizations to purchase property and real estate, including apartments, villas, and houses. Foreigners are not allowed to own more than 250 properties in a single area or more than 30% of a structure, however.
Interested in purchasing property? Continue reading Buy Property in Vietnam as a Foreigner: Why and How
To gain an in-depth understanding of business restrictions for foreigners in Vietnam, contact InCorp. Our advisors are fully at your service in Ho Chi Minh City or online.
InCorp Vietnam is a leading provider of global market entry services. We are part of InCorp group, a regional leader in corporate solutions, that encompasses 8 countries in Asia-Pacific, headquartered in Singapore. With over 1,100 legal experts serving over 15,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business perfectly fit into the market with healthy growth.
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