When deciding to enter the Vietnamese market, the first strategic question for any investor is not "What to business?" but "How to structure the legal entity?". Choosing the wrong investment form from the start can lead to heavy administrative burdens or a loss of corporate control.
1. Analysis of Popular Investment Forms
A. Wholly Foreign-Owned Enterprise (WFOE)
This is the preferred choice for businesses that want absolute control over technology, processes, and corporate culture.
- Advantages: Complete independence in business decisions; protection of technological trade secrets.
- Challenges: A "double" licensing procedure (must obtain an Investment Registration Certificate - IRC first, followed by an Enterprise Registration Certificate - ERC).
B. Capital Contribution and Share Purchase (M&A - Mergers and Acquisitions)
Foreign investors buy part or all of the charter capital of an existing Vietnamese company.
- Advantages: Quick "market entry"; leverages existing infrastructure, personnel, and especially "sub-licenses" already held by the local enterprise.
- Challenges: Legal risks from undisclosed liabilities, taxes, or prior disputes of the previous owners.
2. Strategic Comparison Table
3. "Rules of the Game": Market Access Requirements (Law on Investment 2020)
Not all sectors are 100% open to foreign capital. Investors must pay close attention to the Negative List for Market Access under Decree 31/2021/NĐ-CP:
- Prohibited Sectors: Foreign investors are strictly banned (e.g., private investigation services, security services).
- Conditional Sectors: Must meet specific requirements regarding Foreign Ownership Limits (FOL) or investment forms.
Top 3 Sectors Commonly Chosen by Foreign Investors That Require a “Joint Venture”:
- Advertising Services: Must cooperate with a Vietnamese partner who is already licensed for advertising.
- Road Freight Transport: Foreign ownership is generally capped at 51%.
- Tourism (International Travel Services): Limited to "Inbound" travel and must be a joint venture with a domestic enterprise.
4. Important Notes
- Legal Due Diligence: If choosing M&A, never skip the financial health check and litigation history of the target company.
- Location Selection: Take advantage of tax incentives in Industrial Parks or Economic Zones to optimize profits during the first 5 years.
- Long-term Vision: If your business sector is fully open under WTO/EVFTA commitments, prioritize 100% WFOE for maximum flexibility in the future.
