Setting Up an FDI Company in Vietnam

As of 1 March 2026, Vietnam's Investment Law 2025 officially took effect, accompanied by Decree 96/2026/ND-CP dated 31 March 2026 guiding its implementation. Together, these two documents directly affect the sequencing, mechanism, and legal logic governing foreign investors entering the Vietnamese market.

Quick Answer

Under the Investment Law 2025, foreign investors may now obtain the ERC before the IRC, cutting entity setup to around three working days for many cases; the IRC remains mandatory above 50% foreign ownership. In practice, preparation steps — legalisation, translation, sub-licences — still extend real timelines well beyond the 10–13 working days stated on paper.

1. A New Sequence: ERC Before IRC

Under the previous framework, establishing an FDI (Foreign Direct Investment) company in Vietnam followed a fixed order: obtain the IRC (Investment Registration Certificate) first, then apply for the ERC (Enterprise Registration Certificate). This meant foreign businesses had to wait 10 or more working days for the IRC before they could register a legal entity and begin commercial operations.

Under the Investment Law 2025, this has changed: foreign investors may now incorporate via ERC first, then obtain the IRC.

In theory, this is an option, not a mandate. In practice, it is a meaningful shift, investors can establish a legal entity within three working days instead of waiting for the full investment dossier to be processed. This better reflects how international investors actually operate: incorporate first, seek approval in parallel.

Important: The IRC remains mandatory where a foreign investor holds more than 50% of charter capital. ERC-first does not bypass the IRC requirement, it simply offers greater flexibility in sequencing.

Classification by Foreign Ownership Ratio

Vietnamese law classifies foreign-invested enterprises by the degree of foreign capital control, which determines the full scope of legal obligations:

• Foreign ownership above 50%: the company must obtain an IRC, is subject to FDI-restricted sector rules, and faces limitations on real estate ownership.

• Foreign ownership at 50% or below: the company is generally treated as a domestic enterprise, no mandatory IRC, fewer sector restrictions, and fewer land-use limitations.

This tiered classification is not new, but the updated regulations clarify how indirect or accumulated foreign ownership is assessed. When Company A (a foreign entity) holds shares in Company B, Company B may be subject to stricter FDI regulations even if the direct foreign ownership stake appears below 50%.

Special Investment Procedure: Post-Clearance Mechanism for Industrial Zone Projects

One of the most significant practical changes under the new regulations is a streamlined investment procedure for projects located in industrial zones, export processing zones, high-tech zones, and certain other functional areas.

Under the new law, investors submit their application along with a written commitment that the project meets the applicable technical standards. The sole approving authority is the Industrial Zone Management Board, and the deadline for issuing the IRC is 15 working days.

This mechanism shifts the regulatory approach from pre-clearance to post-clearance: the State trusts the investor's commitment upfront but will audit and penalise violations. This aligns with international best practice familiar to investors in other markets.

The Gap Between Legal Timelines and Practical Reality

On paper, core procedures can be completed within 10 to 13 working days. In practice, this timeline is rarely achievable for first-time foreign investors in Vietnam.

The main reason lies in the preparation phase, which is consistently underestimated:

• Consular legalisation and translation of foreign documents: 2 to 8 weeks

• Notarised translation into Vietnamese: 1 to 2 weeks

• Document corrections if the authority requests supplementation: an additional 5 to 15 working days per round

• Sub-licences required post-incorporation (sector-dependent): 1 to 3 months

Beyond ERC and IRC: Post-Establishment Obligations

Once the incorporation documents are in place, FDI companies must complete a series of mandatory post-establishment steps. Overlooking these can expose the company to serious legal consequences:

• Opening a Direct Investment Account (DIA): this is a mandatory account under Circular 06/2019/TT-NHNN. All inbound capital contributions, foreign loans, and outbound profit repatriation must flow through this account. Foreign exchange transactions conducted outside this account may result in penalties and could block profit remittance abroad.

• Performance security deposit: required when the State allocates or leases land to the enterprise. The deposit is calculated at 1% to 3% of total project investment and must be lodged through a licensed commercial bank.

Conclusion

Establishing an FDI company in Vietnam is becoming more flexible and better aligned with international norms, most notably through the ERC-first option and the post-clearance mechanism for industrial zone projects. However, the complexity remains: the capital-ratio classification framework and the layered post-establishment obligations still require careful planning.

CHILLI's team of experienced legal professionals advises foreign investors on the full process of incorporating and operating FDI companies in Vietnam. Contact CHILLI to access the latest regulatory guidance and practical solutions for your business.

Frequently Asked Questions (FAQ)

What is the difference between an IRC and an ERC in Vietnam?

Under the Investment Law 2025, foreign investors may now obtain the ERC (Enterprise Registration Certificate) before the IRC (Investment Registration Certificate). The IRC remains mandatory where foreign ownership exceeds 50% of charter capital — ERC-first only changes the sequencing, not the requirement itself.

How long does it take to get an IRC in Vietnam?

Core procedures can be completed within 10–13 working days on paper. In practice, first-time investors should budget for preparation: consular legalisation and translation (2–8 weeks), notarised Vietnamese translation (1–2 weeks), and post-incorporation sub-licences (1–3 months depending on sector).

How is a company classified by foreign ownership ratio?

Above 50% foreign ownership requires an IRC and triggers FDI-restricted sector rules and real estate limitations. At 50% or below, the company is generally treated as domestic, with no mandatory IRC and fewer sector or land-use restrictions.

What is the Direct Investment Account (DIA) requirement?

All inbound capital contributions, foreign loans, and profit repatriation must flow through a DIA under Circular 06/2019/TT-NHNN. Transactions outside this account may result in penalties and block profit remittance abroad.

What is the post-clearance mechanism for industrial zone projects?

For projects in industrial zones, export processing zones, or high-tech zones, investors submit a written commitment of compliance instead of pre-approval; the Industrial Zone Management Board must issue the IRC within 15 working days.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Regulations may change — please verify with qualified counsel before taking action.