Vietnam’s Foreign Investment Restrictions are provided in (i) international treaties to which Vietnam is a party, such as Vietnam’s WTO Commitments, (ii) domestic investment laws such as the Law on Investment 2020 and its guiding regulations, and (iii) specialized laws and regulations in certain sectors.

Foreign Investment Restrictions include (a) foreign ownership limits, (b) form of investment, (c) scope of investment activity, (d) qualifications of the investors (including local partner requirement), and (e) other conditions as provided in laws and treaties.

Vietnam’s regime focuses on both economic protectionalism and national security.

Pursuant to the Law on Investment 2020, a “foreign investor” means an individual with foreign nationality or an organization established in accordance with foreign law conducting business investment activities in Vietnam. This definition covers investments from all foreign countries.

Additionally, Vietnam-based companies having capital contribution (i.e., equity) or shares owned by a foreign investor, called foreign-invested enterprises (“FIEs”), are also treated as foreign investors when establishing or acquiring interest in another company if they have over 50% shareholding owned by foreign investors or by other FIEs that also have over 50% shareholding owned by foreign investors.

There are 25 business lines on the List of Restricted Business Lines (where foreign investment is not allowed) and 59 business lines on the List of Conditional Business Lines (where foreign investment restrictions will apply), which will be subject to Foreign Investment Restrictions screening.  Some of the main sectors under those lists are:

List of Restricted Business Lines

• Press activities and news gathering in any form;
• Fishing or exploiting seafood;
• Security and investigation services;
• Manufacture and trade in weapons, explosives and supporting tools;
• Public postal services; and
• Intellectual property representation services and industrial property assessment services.

List of Conditional Business Lines

• Advertising services;
• Hydropower, offshore wind power and nuclear energy;
• Educational services;
• Real estate business;
• Legal services;
• Travel services; and
• Health and social services.

The relevant thresholds will be subject to a specific sector.  In particular, different sectors may be subject to different foreign ownership caps, such as 49%, 51%, 65% or 75%. 

In addition, the threshold of over 50% foreign ownership is a relevant threshold to determine which FIEs are treated as foreign investors when establishing, or acquiring interest in, another company. FIEs treated as foreign investors are subject to the same foreign ownership caps as noted above.

Yes. Regulatory Approvals are required for investment in any business subject to the List of Conditional Business Lines.  

1. Acquisitions: Foreign investors need to apply for approval for a foreign investor to acquire interest in a Vietnam-incorporated company in certain circumstances. These circumstances may include the target company engaging in business lines in the List of Conditional Business Lines; acquisition of shares by a foreign investor in a company causing an increase of foreign ownership from under 50% to over 50% or an increase of foreign ownership from over 50% onwards; or acquisition of shares by a foreign investor in a company with a land use right certificate for land on an island or in a border or coastal commune, or in another area that affects national defense and security.
2. New investment projects: Foreign investors need to apply for approvals for setting up investment projects, which may include an Investment Registration Certificate (“IRC”) and in some cases an in-principle approval (“IPA”) as well. There are no specific and additional regulatory approvals in respect of foreign investment restrictions when setting up new investment projects; however, during the licensing procedure for issuance of an IRC and an IPA, the licensing authorities may seek ad hoc opinions from higher or relevant authorities in respect of foreign investment restriction and market access conditions for foreign investors.

Yes. Where the foreign investor is subject to a licensing or permission requirement, approval from the relevant authority is required prior to closing. For example, in a majority acquisition by a foreign investor, the Department of Planning and Investment’s approval for the foreign investor to acquire shares is needed for the target company to open a direct investment capital account to effect payment of the purchase price to the sellers.

There has been no impact of COVID-19 on the foreign investment regime in Vietnam.

In Vietnam, the authorities are active in management of foreign investment. Foreign investment is generally reviewed and approved at the local-level, e.g., local Department of Planning and Investment or People’s Committees, during the process of granting the IRC and IPA for new investment projects and approvals for acquisitions by foreign investors. Only large and important investment projects or investment in specialized sectors are reviewed at the national level, e.g., Prime Minister, National Assembly, or by specialized regulators, e.g., State Bank of Vietnam, Ministry of Finance. Where the local authorities do not have clear regulations on whether to approve or reject applications for foreign investment, they will seek guidelines from the national level or specialized regulators. 

The authorities can block a foreign investment by refusing to grant the required approvals for various reasons, including the business line being prohibited, the planned project failing to satisfy conditions for foreign investment or not being open to foreign investment, or the planned project not aligning  with zoning or national security concerns. Please also refer to the answers to Questions 6 and 9 regarding the authorities’ scope of review.

The authorities are active in management of foreign investment, but there have not been any significant trends of blocking foreign investments in the past 6 months.

Vietnamese laws are continually changing, but we do not expect that there will be any major regulatory developments with respect to investment laws over the next 6 months.