Company Formation Ahead of IRC: Vietnam Law on Investment

The Ministry of Finance has recently submitted to the Government a proposal to amend the Law on Investment No. 61/2020/QH14. The aim is to address existing limitations and procedural obstacles in the investment process. One proposed amendment has drawn particular attention from foreign investors: the allowance for foreign investors to establish an economic organization (foreign invested enterprise – FIE) without the need to have an investment project in advance.

This change is expected to create a more open and attractive investment environment for foreign investors, while ensuring equal treatment between domestic and foreign investors. However, without clearer guidance and corresponding adjustments to related regulations in other areas, removing this barrier could give rise to new challenges in practice.

This article reviews:

1. The current legal framework for foreign investors incorporating an FIE in Vietnam
2. The proposed amendments under the draft of new Law on Investment
3. The outstanding issues that remain to be clarified

1. Foreign investment in Vietnam

Vietnam has been on a nearly 40-year journey of opening its doors to foreign investment. Since then, foreign investment capital has remained a vital source of funding, contributing significantly to the country’s economic growth.

According to the Socio-Economic Report for Quarter III and nine months of 2025 released by the General Statistics Office under the Ministry of Finance:

• Total registered foreign investment: As of September 30, 2025, this reached USD 28.54 billion, up 15.2% compared to the same period last year. The figure includes newly registered capital, adjusted capital, and capital contributions and share purchases by foreign investors.
• Realized foreign direct investment capital: This was estimated at USD 18.80 billion for the first nine months of 2025, an 8.5% increase year-on-year. It is the highest level of realized capital for a nine-month period in the past five years.
• 2025 target: Attracting approximately USD 38-40 billion from foreign investors in 2025 remains a considerable challenge. This highlights the need for the Vietnamese Government to further strengthen efforts in enhancing the investment climate and refining policies to attract foreign investment capital.

2. Current legal framework for foreign investors incorporating FIE in Vietnam

Investment by establishing an economic organization is one of the investment forms provided under the Law on Investment 2020. Foreign investors investing in Vietnam through this form must meet two requirements:

• Market access conditions: They must satisfy the market access conditions, such as those relating to business lines, capacity and foreign ownership ratio, among others.
• Investment project and IRC: Before establishing an FIE, they must have an investment project and complete procedures for obtaining or amending an Investment Registration Certificate (IRC).

Exceptions

Certain exceptions apply, including the establishment of small and medium-sized start-up enterprises or venture capital funds for start-ups, as provided under the law on support for small and medium-sized enterprises. As of June 2025, the scope of exceptions has been expanded to include:

• Investment projects involving the establishment of new innovation centers or research and development centers.
• Projects for the development of infrastructure for large-scale data centers, cloud computing, mobile networks from 5G onwards, and other digital infrastructure in strategic technology sectors as determined by the Prime Minister.
• Investment projects in strategic technology sectors or the production of strategic technology products, as approved by the Prime Minister.

For other projects, depending on their objectives and scale, investors may be required to obtain an investment policy approval or IRC before setting up the FIE.

IRC processing time in practice

Currently, the statutory processing time for obtaining an IRC is 15 days from the date on which the competent authority receives a complete and valid application dossier. However, the process often takes longer in practice because:

• Other requirements: In addition to meeting the market access conditions, foreign investors must also satisfy other requirements relating to the business lines, project location, investment capital, and more.
• Legalization of documents: Before submitting the IRC application, investors must prepare a number of documents, some of which must be legalized. The legalization process can be time-consuming, and its requirements and procedures may vary from time to time depending on the regulations of each country.

As a result, in practice, the process of obtaining an IRC and subsequently establishing an FIE in Vietnam often takes several months to complete.

Subsidiaries established by FIEs

In certain cases, such as where foreign ownership in an FIE exceeds 50%, the FIE is required to comply with the market access conditions and investment procedures applicable to foreign investors when establishing its subsidiaries. This includes the requirement to obtain the IRC. This regulation makes the investment procedures for FIEs more complex and time-consuming, thereby reducing flexibility and diminishing the overall attractiveness of the investment environment.

3. Proposed amendments under the draft of new Law on Investment

• Formation before the IRC in any permitted sector: According to the latest draft of the Law on Investment as of September 2025, foreign investors investing in any permitted sectors (not limited to technology and innovation as previously) are allowed to establish an economic organization to implement an investment project before carrying out procedures for obtaining or amending the IRC. The condition is that they meet the market access conditions applicable to foreign investors.
• Establishment of other economic organizations by FIEs: To ensure consistency with this new regulation, the draft law also removes the provision requiring an FIE to comply with market access conditions and investment procedures applicable to foreign investors when establishing other economic organizations.

4. Outstanding issues remain to be clarified

4.1. Enterprise operations in the period between establishment and the issuance of the IRC

This amendment raises several key questions:

• Whether obtaining an IRC will remain a prerequisite for a newly established FIE to commence operations.
• If so, how soon after incorporation the foreign investor (or the FIE itself) must apply for the IRC.
• What the legal status of the enterprise’s activities is in the interim, before the IRC is issued.
• Whether the FIE must comply with the charter capital contribution timeline before knowing if the IRC will eventually be granted.
• Whether the FIE would be obliged to terminate its operations if the IRC is not issued for any reason.

4.2. Procedures and timeframe for the enterprise establishment

• Current ERC timeline: At present, the processing time for issuing an Enterprise Registration Certificate (ERC) is relatively quick: approximately 05 working days in practice once the foreign investor has obtained the IRC.
• Shift of responsibility: Allowing enterprise formation prior to the IRC issuance effectively shifts the responsibility for assessing whether foreign investors meet investment conditions to the business registration authority.

In such cases, questions arise as to whether the current regulations on application dossiers, procedures and processing time for issuing the ERC would remain appropriate.

4.3. Direct Investment Capital Account (DICA)

• Current rule: This comes from the current regulations on foreign exchange management applicable to foreign direct investment activities in Vietnam (Circular No. 06/2019/TT-NHNN). Newly established FIEs are permitted to open and use a DICA if they are required to obtain an IRC under the Law on Investment. This excludes FIEs formed through capital contribution, share or capital purchase by foreign investors, or as a result of separation, merger or consolidation.
• Banking practice: In practice, commercial banks always require the IRC to be presented when processing the opening of a DICA.
• Capital contribution risk: The current regulations on DICA and enterprises have yet to be revised accordingly. Without an IRC, a newly established FIE may therefore be unable to contribute its charter capital within the statutory timeline prescribed by the Law on Enterprises, which is typically 90 days from the date of issuance of the ERC.

5. Conclusion

The removal of the requirement for foreign investors to have an investment project and obtain an IRC before establishing an enterprise represents a notable step forward. It supports Vietnam’s ongoing efforts to improve its investment climate and attract foreign capital. However, should the new Law on Investment be enacted, the Government will need to promptly issue detailed guidance to address potential implementation issues and ensure consistency across related regulations.

This is essential to avoid a situation where removing one barrier inadvertently creates new ones in practice.

How can we help?

Contact our Legal team to discuss how company formation ahead of the IRC applies to your investment plans and FIE set-up in Vietnam.