Business Restrictions for Foreign Investors in Vietnam

Learn about restrictions and avoid business sectors that foreign investors are prohibited from in Vietnam. This is your guide.

When you have decided to enter the market in Vietnam as a foreign investor, you must first study the feasibility of the sector you are interested in. Start by ensuring that the business sector you plan to invest and operate in is permitted by the Vietnamese Law, or is restricted by other conditions such as business restrictions for foreign investors in Vietnam. As Vietnam is still a developing nation, not all types of business entities are allowed and of those that are allowed, not all are open to foreign direct investors.

Investing in Vietnam? Explore Cekindo’s Company Incorporation Services

In December 2014, Investment Law No 67/2014/QH13 was passed to boost investment in Vietnam. One of the big changes in this law was the replacement of the “positive list” with “negative list”, allowing foreign companies to invest in almost all sectors except for six prohibited industries.

In order to sustain rapid economic growth, the government of Vietnam further announced that they plan to lift the restrictions on foreign ownership of listed and state-owned companies by the end of 2019, which was done.

In this article, we will take a closer look at what business restrictions for foreigners are in place in Vietnam.

Local vs Foreign Companies in Vietnam

Selecting a legal entity in Vietnam is almost as important as choosing a business sector to invest in the country – because it will determine the success of your future business.

The most common type of legal entity in Vietnam is a Limited Liability Company (LLC). It can be wholly owned by foreigners or by locals. For local LLCs to incorporate, they will need to provide the authorities with a registered address in Vietnam and a bank certificate of deposit of shared capital.

As for foreign-owned LLCs, they will need to open a capital account with a local bank, and so acquire approval for a foreign investment certificate (FIC). Even though there is no set minimum capital in Vietnam, an investment of US$40,000 (2021 update) is commonly considered as the minimum capital to successfully complete company incorporation.

Continue reading Know How to Start a Limited Liability Company in Vietnam.

Sectors Prohibited for Foreign Investments

As mentioned earlier, the prohibited industries under the new national Law on Investment have been reducedfrom 51 sectors to 6 industries:

  1. Drugs and narcotics
  2. Hazardous chemicals and minerals
  3. Range of specimens of endangered flora and fauna
  4. Prostitution
  5. Human trafficking, sale of human body parts and tissue
  6. Human cloning or asexual reproduction

Business Restrictions under the WTO Agreement

According to Vietnam’s WTO Commitments, Vietnam can restrict or close certain sectors to foreign investments. The barriers apply to the following sectors:

  1. Courier services
  2. Advertising services
  3. Equipment maintenance and repair (except for ships)
  4. Film production, distribution and screening
  5. Travel agents and tour operators
  6. Services related to manufacturing and mining
  7. Distribution
  8. Telecommunication services
  9. Education
  10. Electronic games
  11. Road and rail transport
  12. Maritime transport, and container handling
  13. Aircraft repair and maintenance

Conditional Industries

In addition to the restrictions above, Vietnam’s Investment Law lists out sectors that are open to foreign investments, but they are subject to approval when they meet certain conditions.

These conditions include the ownership percentage, capital amount, etc. Some conditions and the industries under this category include the following:

  • When a project requires over 10,000 people in the highlands or 20,000 people in other areas to relocate
  • Projects with investments of more than VND 5 trillion
  • 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 sectors such as sea transportation, telecommunication services, journalism, publication and the establishment of science and technology companies

How to Start a Business in a Fully-Closed Sector?

You need to follow the local law, but there is a safe alternative to start a business in Vietnam as a foreigner – even in the closed sector.

Find a local nominee and set up a nominee company in Vietnam. Many foreign investors commonly use this type of company as they are still able to exercise all their rights in a nominee company. To ensure the clear division of responsibilities and duties, a notarised set of agreements through a reliable consultant must be signed.

Restrictions on Property and Land Ownership

The law in Vietnam allows foreigners with legal entities to buy land and properties such as an apartment, villa, and house, just like other Vietnamese citizens. However, foreigners are prohibited from owning more than 250 properties in the same district or from possessing more than 30% share of a building.

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 Cekindo. Our advisors are fully at your service in Ho Chi Minh City or online.

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