By Lawyer Luu Thi Hue – UniLaw LLC

SUSTAINABLE INVESTMENT IN VIETNAM – UNILAW PERSPECTIVE

The Foundation of Trust: Lessons from the Unitex Fashion Liability Dispute

The journey of foreign direct investment in Vietnam often begins with high hopes but can encounter complex legal quagmires if the structure is not soundly established. Consider the case of an investment group from Hong Kong that acted as the primary investor for a fashion enterprise in Hung Yen Province. In 2009, this investor entered into a strategic agreement with a South Korean entity, allowing the latter to “rent” the entire legal persona, including the corporate seal, facilities, and documentation, for a period of five years. To formalize this risky arrangement, a representative of the Korean entity was appointed as Deputy Director, while the General Director issued a comprehensive power of attorney granting the Korean operator full authority to execute commercial contracts. Under this facade, the Korean operator imported machinery valued at 2.5 million USD under the name of the Vietnamese subsidiary. However, by 2011, the enterprise had accumulated losses exceeding 1 million USD, leaving the original Hong Kong investor facing severe liability for debts they did not directly manage.

Unilaw was engaged to find a strategic exit from this precarious situation. Our legal analysis focused on the validity of the “legal entity rental” and the potentially fraudulent nature of the power of attorney. We explored remedies under the Civil Code, specifically analyzing Article 128 regarding contracts that violate legal prohibitions and Article 129 concerning sham transactions. By proposing solutions such as the assignment of obligations and the implementation of specific guarantee mechanisms under Decree 163/2006/ND-CP, Unilaw helped the client mitigate liability and restructure their debt profile. This case serves as a stark reminder that sustainable investment requires more than just capital; it demands a robust legal structure that anticipates operational risks and adheres strictly to the principles of corporate governance.

Defining the Legal Landscape: Key Terms under the Law on Investment

To navigate foreign direct investment in Vietnam (FDI Vietnam), one must first grasp the foundational terminology established by the primary legislation. The Law on Investment No. 61/2020/QH14, along with its subsequent amendments in 2024 and 2025, provides the dictionary for all business activities. Article 3 of this Law offers critical definitions that every international investor should know:

“8. Investment project means a collection of proposals for medium or long-term capital investment to carry out business investment activities in a specific area and within a determined period of time.”

In simpler terms, an investment project is your detailed business plan that says how much money you will spend, where you will do it, and for how long.

“18. Business investment means the investor’s spending of investment capital to carry out business activities.”

This simply means putting your money or assets into a venture to make a profit.

“19. Investor means an organization or individual that carries out business investment activities, including domestic investors, foreign investors and foreign-invested economic organizations.”

An investor is the person or company putting up the money, whether they are from Vietnam or abroad.

Understanding these definitions is the first step toward investing Việt Nam effectively. The law distinguishes between “new investment projects”—those carried out for the first time—and “expanded investment projects,” which increase the scale or capacity of an existing venture. This distinction is vital because it often determines the level of incentives and the specific administrative procedures required.

Gateway to Growth: Understanding Market Access and Foreign Ownership Limits

One of the most frequent questions regarding fdi to vietnam concerns the extent to which foreign entities can own and operate businesses. Vietnam has moved toward a “negative list” approach, meaning that unless a sector is specifically restricted, foreign investors enjoy the same market access as domestic ones. Article 9 of the Law on Investment 2020 clarifies this principle:

“1. Foreign investors shall be applied with market access conditions as prescribed for domestic investors, except for the case specified in Clause 2 of this Article.”

Essentially, the door is open for foreigners just like it is for locals, unless there is a specific rule saying otherwise for your type of business.

Clause 2 of Article 9 mandates the government to publish a “List of sectors and trades with restricted market access for foreign investors.” This list is divided into two categories: sectors not yet open to foreign investment and sectors open with specific conditions. These conditions may include:

“(a) Ownership ratio of charter capital of foreign investors in an economic organization; (b) Form of investment; (c) Scope of investment activities; (d) Capacity of the investor; partners participating in investment activities; (dd) Other conditions…”

This means that in certain sensitive areas, the government might limit how much of the company you can own or require you to partner with a local firm.

For instance, in the logistics sector, Unilaw recently advised a client on establishing a joint venture for freight forwarding. While the foreign direct investment in Vietnam in this field is generally encouraged, specific ownership limits often apply depending on the sub-sector—such as a 51% cap for certain transport services as per WTO commitments. Furthermore, if a foreign-invested enterprise (FIE) in Vietnam wishes to invest in another local company, it may be treated as a “foreign investor” if more than 50% of its charter capital is held by foreign entities.

Sustainable Development through Special Investment Procedures

The latest legislative shift in 2024 and 2025 emphasizes “special investment procedures” aimed at attracting high-quality, sustainable capital. Under Article 36a of the amended Law on Investment, certain priority sectors can benefit from a streamlined registration process. This is a cornerstone of the invest to vietnam strategy for the next decade.

“1. Except for the investment projects specified in Article 30 of this Law, investors have the right to choose to register investment… for projects in industrial parks, export processing zones, high-tech zones… in the following fields: (a) Investment in construction of innovation centers, research and development (R&D) centers; investment in the field of semiconductor integrated circuit industry, design technology, component manufacturing… (b) Investment in the high-tech field…”

If you are building something very advanced, like a chip factory or an R&D center, you can use a “fast track” process that is much quicker than the standard one.

This special procedure replaces many traditional “pre-approvals” with a “commitment-based” system. Investors must provide specific evaluations regarding construction, environmental protection, and fire safety. Article 3 of Decree 19/2025/NĐ-CP details the requirements:

“2. Commitments of the investor in the investment project execution proposal include: (a) Relevant conditions, standards, and technical regulations as prescribed by the law on construction, environmental protection, and fire prevention and fighting; (b) Preliminary assessment of the suitability of the project…”

Instead of waiting for every single permit first, you officially promise to follow all the safety and environmental rules, and you are held legally responsible if you don’t.

This approach significantly reduces the time from “idea” to “operation,” fostering a more investing việt nam environment. However, the responsibility is high. Clause 8 of the investor’s commitment states that if the project fails to meet its promises or schedule, the authorities may suspend or terminate operations.

The New Land Law 2024: Expanding Rights for Foreign-Invested Enterprises

Land is often the most valuable asset for a manufacturing project, and the legal framework for land use has seen major updates. The Land Law 2024 (Law No. 31/2024/QH15) clarified the rights of FIEs, particularly those operating in industrial and high-tech zones. Article 41 of this Law details the rights of organizations that lease land from the state:

“2. …foreign-invested economic organizations leased land by the State with annual land rent payment have the following rights and obligations: … (b) Mortgages of assets owned by them and attached to the land at credit institutions permitted to operate in Vietnam; (c) Capital contribution by assets owned by them and attached to the land…”

If you rent land and pay every year, you can’t mortgage the land itself, but you can use the factory or buildings you built on it as collateral to get a bank loan.

For investors who choose to pay the entire rent upfront (one-time payment), the rights are even broader. According to Article 41, Clause 3:

“(b) Transfer of land use rights and assets owned by them and attached to the land during the land use term; (c) Lease or sub-lease of land use rights and assets owned by them and attached to the land…”

If you pay all your rent at once for the whole 50 years, you have almost the same rights as a local owner, including the right to sell or sub-lease your land rights to someone else.

Unilaw frequently assists clients in negotiating these land lease agreements. For example, for a major project in VSIP Hai Phong, we advised on the nuances of annual versus one-time payments and the legal implications for future asset transfers. The 2024 Law also includes transition provisions that protect investors currently in the middle of a transfer process, ensuring their rights are inherited by the new land user.

Strategic Incentives: Maximizing Benefits in Priority Sectors

Vietnam actively uses incentives to guide fdi vietnam toward sustainable and high-value sectors. Article 15 of the Law on Investment lists several forms of incentives:

“(a) Corporate income tax incentives, including the application of corporate income tax rates lower than the normal tax rate for a determined period of time or the whole duration of the investment project execution; tax exemption, reduction and other incentives… (b) Exemption from import tax on goods imported to create fixed assets; raw materials, supplies and components…”

The government offers “discounts” on your taxes and lets you bring in your factory equipment from abroad without paying import duties.

These incentives are not distributed randomly. They are targeted at specific sectors (like high-tech, social housing, or education) and specific geographic areas (those with difficult socio-economic conditions). Article 20 introduces “special investment incentives” for very large projects:

“2. … (b) Investment projects… with a capital scale of 30,000 billion VND or more, disbursing at least 10,000 billion VND within 03 years from the date of being granted the Investment Registration Certificate…”

If you are investing a massive amount of money (around 1.2 billion USD) and spending it quickly, the government can give you even better tax breaks and support than usual.

Furthermore, to maintain a competitive edge while complying with the Global Minimum Tax (GMT), Vietnam has established an “Investment Support Fund.” This fund, mentioned in Article 18a, uses revenue from the supplementary corporate income tax to support strategic investors in areas like high-tech and innovation.

Safeguarding Assets: Government Guarantees and Legal Stability

A primary concern for any foreign direct investment in Vietnam is the security of their assets. The Law on Investment provides strong guarantees against nationalization.

“Article 10. Protection of property ownership. 1. Lawful assets of investors shall not be nationalized or confiscated by administrative measures.”

Your business and your money are safe; the government cannot just take them away from you by force or through a simple administrative order.

In the rare event that assets must be requisitioned for national security or emergency reasons, the law guarantees compensation. Furthermore, Article 13 provides protection in the case of legal changes:

“2. In case a new legal document is issued providing new investment incentives or higher investment incentives… the investor shall be entitled to enjoy the investment incentives… for the remaining incentive period of the project.”

If the rules change and the taxes get even lower, you automatically get the better deal for your existing project.

“3. In case a new legal document is issued providing investment incentives lower than the investment incentives the investor enjoyed before… the investor shall be entitled to continue applying the investment incentives as previously prescribed…”

If the government decides to raise taxes or reduce benefits later, they usually can’t take away the “deal” they already gave you for your current project.

This principle of non-retroactivity is crucial for long-term financial planning. At Unilaw, we help investors document their existing incentives carefully so they can invoke these protections if the regulatory environment shifts.

Resolving Commercial Conflicts: Arbitration and International Recognition

No investment is entirely without the risk of dispute. Whether it’s a conflict between joint venture partners or a disagreement with a supplier, the Law on Investment encourages amicable resolution.

“Article 14. Settlement of disputes in business investment activities. 1. Disputes… shall be settled through negotiation and mediation. In case they cannot be negotiated or mediated, the dispute shall be settled by Arbitration or Court…”

First, try to talk it out. If that fails, you can go to a private arbitrator or a public court to decide who is right.

For international investors, the choice of forum is vital. Article 14, Clause 3 allows disputes involving a foreign party to be settled via:

“(a) Vietnamese Court; (b) Vietnamese Arbitration; (c) Foreign Arbitration; (d) International Arbitration; (dd) Arbitration established by the disputing parties.”

Foreign investors have the freedom to choose to have their case heard by international experts instead of just local judges, which often gives them more confidence.

Vietnam’s commitment to international standards is reflected in its recognition of foreign awards. For example, in 2023, the People’s Court of Ho Chi Minh City officially recognized and permitted the enforcement of an arbitration award from the International Centre for Settlement of Investment Disputes (ICSID) regarding a dispute between an individual investor and the state of Vietnam. This demonstrates that the investing việt nam framework is backed by an increasingly mature and internationally-integrated judicial system.

Operational Compliance: Managing Reporting and Post-Licensing Obligations

Success in fdi to vietnam requires diligent attention to compliance after the project is licensed. Many investors underestimate the complexity of ongoing reporting requirements. Article 72 of the Law on Investment and various circulars mandate regular updates:

“Investors have the responsibility to implement the reporting regime on investment activities… monthly, quarterly and annually.”

You must tell the government every month, quarter, and year how your project is doing, how much you have spent, and how many people you have hired.

Failure to comply can lead to significant administrative penalties. Under Decree 122/2021/ND-CP, fines can range from 30 million to 50 million VND for failing to report or providing dishonest information. Post-licensing tasks also include:

• Registering corporate seals and tax codes.
• Opening direct investment capital accounts (DICA).
• Obtaining work permits and temporary residence cards for foreign personnel.
• Complying with environmental impact assessments and fire safety certifications.

Unilaw provides comprehensive “legal health checks” to ensure our clients are always in good standing. For example, we assisted a multinational testing company, a global testing and certification client, in managing their branch registration and supplemental business activities across multiple provinces, ensuring that each new office was fully compliant with the evolving Law on Investment.

Conclusion: Crafting a Sustainable Future in Vietnam

Investing in Vietnam is a marathon, not a sprint. The nation offers unparalleled opportunities through its young labor force, strategic location, and extensive network of trade agreements. However, the path to profitability is paved with legal requirements that demand local expertise and proactive management.

Sustainable investment means more than just complying with the law today; it means building a business structure that can adapt to the “green” and “high-tech” standards of tomorrow. Whether you are considering your first fdi vietnam project or looking to expand an existing venture, Unilaw stands ready to provide the strategic counsel and administrative support necessary to turn your vision into a lasting success. From navigating the new Land Law to utilizing the high-tech fast-track procedures, our goal is to ensure that your investment is not only profitable but also legally resilient and truly sustainable.