As Vietnam continues its rapid economic growth and opens up further to international investment, many enterprises are increasingly viewing Vietnam as a prime investment destination. Particularly in the manufacturing sector, Vietnam offers competitive advantages such as lower labor costs, strategic geographical location, and a stable political environment, making it a favored choice for Chinese companies looking to invest abroad. However, when selecting a factory site and entering into investment partnerships in Vietnam, companies must fully understand the local foreign investment policies to better mitigate risks and seize opportunities. This article provides a clear and comprehensive guide to Vietnam’s foreign investment policies, covering incentives, restricted sectors, compliance requirements, and more.

I. Incentive Policies for Foreign Investment in Vietnam

1. Investment Law and Policy Incentives

• Legal Basis: The Law on Investment (Law No. 61/2020/QH14), enacted by the National Assembly of Vietnam on June 17, 2020, effective from January 1, 2021, provides a legal framework for foreign investment in Vietnam, defining the areas and forms of investment that are encouraged.
• Encouraged Sectors: According to the Law on Investment, the Vietnamese government encourages foreign investment in high-tech industries, renewable energy, infrastructure development, agricultural modernization, education, and training. Investment projects in these sectors may qualify for incentives such as corporate income tax (CIT) exemptions, import duty exemptions, and land use fee reductions.
• Specific Clauses:
  • Article 15 states that the government will provide preferential treatment to qualifying investment projects, including CIT exemptions, land use fee reductions, and exemptions from export and import duties.
• Issuing Authority: Ministry of Planning and Investment (MPI)
• Contact Information:
  • Website: www.mpi.gov.vn
  • Phone: +84 24 08043485

2. Special Economic Zones and Industrial Parks

• Legal Basis: Decree No. 31/2021/ND-CP, which details the specific incentives available to foreign investors in various levels of industrial zones and economic zones in Vietnam.
• Incentive Measures: Foreign-invested enterprises in these zones can benefit from more lenient policy treatments, such as lower CIT rates, land use fee exemptions for up to 15 years, and exemptions from taxes on import and export activities.
• Specific Clauses:
  • Article 26 outlines the tax incentives for enterprises in special economic zones and industrial parks, particularly for high-tech projects.
• Issuing Authority: Vietnam Industrial Zones Authority (VIZA)
• Contact Information:
  • Website: www.hepza.hochiminhcity.gov.vn
  • Phone: +84 28 38290033

II. Restricted Sectors for Foreign Investment in Vietnam

1. Negative List

• Legal Basis: Decree No. 31/2021/ND-CP clarifies the negative list system, which specifies the sectors where foreign investment is restricted or prohibited.
• Restricted Sectors: The list divides restricted sectors into prohibited and conditional market access. Investments in sectors related to national security, defense, media, publishing, and maritime transport are either strictly controlled or outright prohibited.
• Specific Clauses:
  • Article 6 details sectors where foreign investment is prohibited, such as drug production, arms manufacturing, and the development of state secrets technology.
  • Article 7 outlines sectors with conditional market access, such as financial services, real estate, and education, where foreign investors must meet specific conditions to enter.
• Issuing Authority: Ministry of Planning and Investment (MPI)
• Contact Information:
  • Website: www.mpi.gov.vn
  • Phone: +84 24 08043485

2. Foreign Ownership Limits

• Legal Basis: Securities Law (Law No. 54/2019/QH14) and Decree No. 155/2020/ND-CP regarding foreign participation in Vietnam’s capital markets.
• Restrictions: In certain key sectors, such as finance, insurance, media, and telecommunications, Vietnam imposes strict foreign ownership limits. Typically, foreign ownership cannot exceed 49%.
• Specific Clauses:
  • Article 77 states that foreign ownership in specific fields like securities companies and insurance firms must not exceed the specified cap.
• Issuing Authority: State Securities Commission (SSC)
• Contact Information:
  • Website: www.ssc.gov.vn
  • Phone: +84 24 39344283

III. Compliance and Tax Management

1.Company Registration and Licensing

• Legal Basis: The Law on Enterprises (Law No. 59/2020/QH14), passed by the National Assembly of Vietnam in 2020, provides the legal framework for the establishment, registration, and operation of enterprises.
• Compliance Requirements: Foreign enterprises must comply with a series of requirements when registering in Vietnam, including obtaining an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC). Depending on the industry, additional operating licenses may be required.
• Specific Clauses:
  • Article 30 outlines the registration procedures for foreign enterprises, including document submission, review processes, and timelines.
• Issuing Authority: Ministry of Planning and Investment (MPI)
• Contact Information:
  • Website: www.mpi.gov.vn
  • Phone: +84 24 08043485

2.Tax Incentives and Regulation

• Legal Basis: Law on Tax Administration (Law No. 38/2019/QH14) and Law on Corporate Income Tax (Law No. 14/2008/QH12).
• Incentive Policies: Vietnam offers several tax incentives for foreign enterprises, including CIT reductions, VAT deductions, and exemptions for export enterprises. Enterprises should ensure timely registration and regular tax declarations to avoid penalties.
• Specific Clauses:
  • Article 5 details the tax declaration procedures and required documentation for foreign enterprises, with a particular emphasis on compliance with Transfer Pricing (TP) regulations for multinational companies.
• Issuing Authority: General Department of Taxation (GDT)
• Contact Information:
  • Website: www.gdt.gov.vn
  • Phone: +84 24 39741161

IV. Risk Management and Policy Response

1.Strategies for Managing Policy Changes

• Legal Basis: Vietnam’s investment laws and policy environment may evolve with economic development and changes in international relations, requiring enterprises to stay vigilant and responsive.
• Response Measures: It is recommended that enterprises maintain strong communication with relevant Vietnamese government departments and industry associations to stay informed about policy changes. Additionally, hiring local legal consultants ensures compliance with current regulations.
• Specific Clauses:
  • Article 50 provides measures for enterprises to respond to policy changes, such as compliance checks, policy interpretation, and legal support.
• Issuing Authority: Ministry of Planning and Investment (MPI)
• Contact Information:
  • Website: www.mpi.gov.vn
  • Phone: +84 24 08043485

2.Managing Relations with Local Governments

• Collaboration Suggestions: Building strong relationships with local governments is crucial for the smooth operation of foreign enterprises in Vietnam. It is suggested that enterprises actively engage in local community activities, understand local culture and regulations, and seek government support and guidance.
• Contact Channels: Investment promotion centers in various provinces and cities in Vietnam are vital channels for enterprises to connect with local governments, offering investment advice and assistance with procedures.
• Contact Information: Example: Hanoi Investment Promotion Center
  • Website: www.investhanoi.vn
  • Phone: +8424 39369299

When selecting a factory site and investing in Vietnam, foreign enterprises must comprehensively understand and comply with local foreign investment policies. This article provides a detailed analysis of Vietnam’s foreign investment policies, covering areas such as incentive policies, restricted sectors, and compliance requirements. Chinese enterprises investing in Vietnam should seize opportunities while cautiously responding to policy changes and compliance risks. With thorough preparation and continuous monitoring of policy dynamics, enterprises can achieve stable development in this emerging market in Vietnam.