Vietnam has solidified its position as a top destination for Foreign Direct Investment (FDI) in Southeast Asia, thanks to its strategic location, growing consumer market, and favorable trade agreements like the CPTPP and EVFTA. For foreign investors looking to tap into this vibrant economy, establishing a legal entity is the critical first step. However, navigating Vietnam’s legal framework can be daunting without a clear understanding of the available options and requirements. This article explores the key pathways for setting up an FDI business in Vietnam, the regulatory landscape, and practical insights to ensure compliance and success in 2025.
Why Establishing a Legal Entity Matters for FDI Investors
For FDI companies, setting up a legal entity is not just a formality—it’s a prerequisite for conducting business legally in Vietnam. The process is governed by the Law on Investment 2020 (No. 61/2020/QH14) and the Law on Enterprises 2020 (No. 59/2020/QH14), both effective since January 1, 2021, with subsequent amendments reflecting Vietnam’s commitment to streamlining foreign investment. A registered entity allows investors to secure permits, hire employees, sign contracts, and access tax incentives—essential elements for operational stability. With FDI inflows reaching over $22 billion in 2024, as reported by the Ministry of Planning and Investment, understanding these rules has never been more relevant. A legal entity also establishes credibility with local partners and authorities, a key factor in a market where trust drives long-term success.
Legal Entity Options for FDI in Vietnam
Foreign investors in Vietnam can choose from several business structures, each tailored to different needs and scales of operation. Below are the most common options available in 2025.
Limited Liability Company (LLC)
The Limited Liability Company (LLC) remains the preferred choice for FDI investors due to its flexibility and simplicity. An LLC can be established as a single-member entity, wholly owned by one foreign investor or organization, or a multi-member entity with up to 50 members. The key advantage is limited liability—investors are only responsible for debts up to their capital contribution. This structure suits small-to-medium enterprises entering Vietnam, such as tech startups or manufacturing firms. However, it requires a detailed company charter outlining governance and profit distribution, which must comply with Vietnamese law.
Joint Stock Company (JSC)
The Joint Stock Company (JSC) is ideal for larger FDI projects or those seeking to raise capital through share issuance. A JSC requires at least three shareholders and offers the ability to list on Vietnam’s stock exchanges, such as the Ho Chi Minh Stock Exchange (HOSE). This structure is common among multinational corporations in sectors like real estate or energy. While it provides greater scalability, it also demands stricter corporate governance, including a board of directors and mandatory annual audits, making it more complex than an LLC.
Branch Office
For investors hesitant to establish a standalone entity, a Branch Office offers a simpler alternative. Unlike an LLC or JSC, a branch is an extension of the parent company abroad and does not require separate capital registration in Vietnam. However, branches are limited to specific activities—such as trading or representation—and are not permitted in all industries. Decree No. 07/2023/ND-CP, effective March 2023, clarified that branches must align with the parent company’s scope of operations, making this option less flexible but cost-effective for market entry.
Representative Office (RO)
Another option is the Representative Office (RO), which serves as a liaison for the foreign parent company. ROs are restricted from profit-making activities and are best suited for market research or coordination tasks. While easy to set up, their utility has declined as investors increasingly opt for fully operational entities to capitalize on Vietnam’s growth. In 2025, ROs remain a low-risk entry point for cautious investors.
Key Requirements for Establishing an FDI Entity
Regardless of the chosen structure, FDI investors must navigate a two-step process to establish their presence in Vietnam: obtaining an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC).
Investment Registration Certificate (IRC)
The IRC, regulated under the Law on Investment, is required for projects in most sectors. Investors must submit a detailed proposal to the Department of Planning and Investment (DPI) or the Management Board of Industrial Parks for projects in special zones. The proposal must outline the investment amount, business objectives, and location. As of 2025, processing times have been reduced to 15-30 days for non-conditional sectors, reflecting Vietnam’s efforts to enhance its business environment. However, conditional sectors like education or healthcare may require additional ministry approvals.
Enterprise Registration Certificate (ERC)
The ERC, issued under the Law on Enterprises, follows the IRC and formalizes the company’s establishment. This step requires a legal representative residing in Vietnam, a registered address, and a minimum capital contribution. While Vietnam does not impose a universal minimum, certain industries like real estate or banking have specific thresholds (e.g., VND 20 billion for real estate trading). Capital must be transferred into a Vietnamese bank account within 90 days of ERC issuance, a rule tightened in Circular No. 06/2023/TT-NHNN to ensure genuine investment commitments.
Sector-Specific Conditions
Sector-specific conditions also apply. For example, Decree No. 31/2021/ND-CP lists education and healthcare as “conditional” sectors, requiring extra approvals. Meanwhile, the 2024 amendment to the Law on Investment expanded market access in logistics and renewable energy, reducing barriers for FDI in these high-growth areas, aligning with Vietnam’s green development goals.
Practical Steps and Challenges
To establish an entity, investors should engage a local legal or consultancy firm with expertise in Vietnam’s FDI regulations. These professionals can assist with drafting charters, securing a physical address (a legal requirement), and liaising with authorities. The National Business Registration Portal (dangkykinhdoanh.gov.vn) has improved efficiency, but language barriers and bureaucratic nuances often necessitate local support.
Challenges remain, especially for first-time investors. Delays in IRC approval can occur if documentation—such as legalized parent company certificates—is incomplete. Vietnam’s land use restrictions also complicate securing a business location, particularly in urban centers like Hanoi or Ho Chi Minh City, where rental costs surged by 10% in 2024 due to FDI-driven demand. Additionally, tax authority audits have intensified since mid-2023 to curb undercapitalized “shell” companies, requiring investors to maintain robust financial records.
Leveraging Vietnam’s FDI Advantages
Successfully establishing a legal entity unlocks Vietnam’s FDI incentives, such as tax holidays for projects in industrial zones or high-tech sectors (e.g., a four-year tax exemption under Decree No. 57/2021/ND-CP). The government’s 2025 economic plan continues to prioritize FDI in sustainable industries, with new policies expected to streamline renewable energy and digital infrastructure projects. By mastering the legal setup process, investors can position themselves to thrive in one of Asia’s most dynamic markets.
La Défense Law Firm provides expert legal services to assist foreign investors in establishing and managing their legal entities in Vietnam, ensuring compliance and maximizing investment opportunities.
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