Amid significant volatility in the global economy, the number of foreign companies seeking to expand their investment in Vietnam has been steadily increasing, driven by the pursuit of new markets and sustainable growth opportunities. However, investment expansion is not merely a matter of business strategy; it is also subject to strict legal regulation. Failure to fully understand regulations on investment, taxation, and licensing may expose enterprises to substantial legal risks. Therefore, a proper and comprehensive understanding of relevant legal issues is a decisive factor in ensuring that the investment expansion process is carried out effectively and in compliance with the law.
I. Current situation of foreign companies seeking to expand investment
At present, an increasing number of foreign companies are expanding their investment in Vietnam thanks to the country’s stable political environment and long-term growth potential. Many enterprises opt to expand the scale of existing projects, increase investment capital, or diversify their business lines. However, this process still encounters numerous difficulties due to differences in legal systems, administrative procedures, and compliance requirements relating to taxation and land use.
In practice, insufficient understanding of applicable legal regulations may delay project implementation or give rise to legal risks during investment activities.
II. What does foreign companies seeking to expand investment mean?
To clearly understand the legal basis and scope of application, it is necessary to clarify the concept of foreign companies seeking to expand investment, as well as the forms and characteristics of investment expansion activities under current law.
1. Which sectors may foreign companies expand their investment into?
According to the List of conditional market access sectors and trades promulgated together with Decree No. 31/2021/ND-CP, foreign companies may expand investment into certain sectors, provided that specific legal conditions are satisfied.
For example, in the culture and media sector, foreign investors may participate in the production and distribution of cultural products, television programs, cinematographic works, or the provision of broadcasting and television services, subject to permitted scope and foreign ownership ratios.
In the finance and services sector, industries such as insurance, banking, securities, and advertising are classified as conditional market access sectors and require specialized licenses. In addition, education, real estate, renewable energy, transportation, and logistics are also sectors frequently chosen by foreign companies for investment expansion, but these activities must strictly comply with investment conditions and sector-specific regulatory requirements.
2. Are there any investment incentives available to foreign companies expanding investment?
Pursuant to Clause 1 Article 15 of the Law on Investment 2020, foreign companies expanding investment may be entitled to various investment incentives if their projects meet statutory conditions. The main forms of incentives include corporate income tax (CIT) incentives, import duty exemption for goods forming fixed assets, exemption or reduction of land use fees and land rental, as well as accelerated depreciation mechanisms and increased deductible expenses for the determination of taxable income.
In addition to general incentives under the Law on Investment 2020, foreign companies expanding investment may also enjoy CIT incentives for expanded investment projects pursuant to Point a Clause 6 Article 18 of Circular No. 78/2014/TT-BTC, as amended by Clause 4 Article 10 of Circular No. 96/2015/TT-BTC.
Accordingly, enterprises that expand production scale, increase capacity, or renovate technology of an existing project, if operating in sectors or locations eligible for CIT incentives under Decree No. 218/2013/ND-CP and meeting one of the statutory criteria, may choose an appropriate incentive regime.
Specifically, enterprises may either continue to enjoy the remaining CIT incentives of the existing project, or enjoy tax exemption and reduction for the additional income generated from the expanded investment for a period equivalent to that applicable to a new investment project in the same sector or location.
Where an enterprise opts to apply incentives under the existing project, the expanded investment project must fall within the same incentive-eligible sector or location as the existing project in accordance with law.
III. Legal regulations relating to foreign companies expanding investment
To ensure lawful implementation and minimize potential risks, foreign companies expanding investment must take into account relevant legal regulations, including investment conditions, incentives, obligations, and legal liabilities arising during operation.
1. Main regulations applicable to foreign companies expanding investment
A particularly important regulation to note is the condition for enjoying tax incentives applicable to expanded investment projects under Point a Clause 6 Article 18 of Circular No. 78/2014/TT-BTC, as amended and supplemented by Clause 4 Article 10 of Circular No. 96/2015/TT-BTC. Under these provisions, an expanded investment project refers to the development of an existing project through expansion of production scale, increase in capacity, or renovation of production technology.
To qualify for incentives, the expanded investment project must fall within a sector or location eligible for CIT incentives under Decree No. 218/2013/ND-CP and satisfy one of the following criteria:
- The increase in the original value of fixed assets is at least 20 billion VND, or 10 billion VND for projects implemented in areas with difficult or extremely difficult socio-economic conditions;
- The increase in the original value of fixed assets accounts for at least 20% compared to the value prior to investment; or
- The increase in designed capacity is at least 20% compared to the original designed capacity.
With respect to investment incentive locations, Clause 2 Article 16 of the Law on Investment 2020 (as amended by Point d Clause 1 Article 6 of the Law amending the Law on Bidding 2025, the Law on Investment in the Form of Public–Private Partnership, the Law on Customs, the Law on Value Added Tax, the Law on Export and Import Duties, the Law on Investment, the Law on Public Investment, and the Law on Management and Use of Public Assets) provides that incentive locations include areas with difficult or extremely difficult socio-economic conditions, as well as industrial parks, export processing zones, high-tech zones, and economic zones.
Accordingly, production and business projects implemented within industrial parks are deemed to be located in incentive-eligible areas and may enjoy corresponding investment incentives. For projects implemented outside industrial parks, eligibility for incentives depends on whether the implementation location is listed in Appendix III promulgated together with Decree No. 31/2021/ND-CP. Procedures for applying investment incentives are carried out in accordance with Article 23 of Decree No. 31/2021/ND-CP.
In addition to the above regulations, foreign companies expanding investment must comply with various other legal requirements depending on the business sector, investment scale, and specific conditions of each project. Investors are therefore advised to proactively seek specialized legal advice to ensure compliance and optimize their lawful interests.
2. Violations relating to foreign companies expanding investment
During the process of expanding operations in Vietnam, foreign companies may commit legal violations if they fail to comply with applicable regulations. Common violations include breaches relating to conditional investment sectors, investment beyond the permitted scope, or failure to obtain approval from competent authorities for project adjustment.
Enterprises may also violate regulations on investment registration, capital contribution, capital increase, project transfer, as well as obligations relating to taxation, land, environment, and labor. Such violations may result in administrative sanctions, tax arrears and penalties, suspension of operations, or forced termination of investment projects in accordance with law.
IV. Questions regarding foreign companies expanding investment
In order to clarify legal issues commonly arising in practice, below are responses to frequently asked questions concerning foreign companies seeking to expand their investment activities, thereby assisting investors in correctly understanding the applicable regulations and proactively implementing their projects.
1. What tax regulations apply to foreign companies expanding investment?
Vietnamese law provides various preferential tax policies applicable to FDI enterprises implementing new investment projects or expanded investment projects in incentive-eligible sectors or locations.
Pursuant to Article 19 of Decree No. 320/2025/ND-CP, FDI enterprises may be entitled to preferential CIT rates, such as 10% for the entire duration of operation for certain special projects; 17% for 10 years for projects implemented in areas with difficult socio-economic conditions; or 15% for cultivation, livestock farming, and processing activities in the agricultural and fisheries sectors in difficult or extremely difficult areas.
Under Clause 3 Article 20 of Circular No. 78/2014/TT-BTC, as amended by Article 6 of Circular No. 151/2014/TT-BTC, income derived from eligible new investment projects may be exempt from CIT for the first two years and entitled to a 50% reduction of payable CIT for the subsequent four years.
These incentives apply to income generated from new investment projects specified in Clause 4 Article 19 of Circular No. 78/2014/TT-BTC, as well as income of enterprises from new investment projects implemented in industrial parks, except for industrial parks located in areas with favorable socio-economic conditions.
In addition, foreign companies expanding investment may enjoy import duty exemption for goods imported to form fixed assets, as well as raw materials, supplies, and components used for production, in accordance with laws on export and import duties.
Enterprises operating in the agricultural sector or eligible for investment incentives may also enjoy exemption or reduction of land use fees, land rental, and land use tax, thereby reducing investment costs and enhancing long-term operational efficiency.
2. What is the licensing procedure for foreign companies expanding investment?
As investment expansion may result in significant changes such as project objectives, land use scale, total investment capital, implementation schedule, or applied technology, foreign companies are required, in certain cases, to obtain approval for adjustment of investment policy pursuant to Clause 3 Article 41 of the Law on Investment 2020.
In such cases, procedures for adjustment of investment policy are carried out in accordance with Article 35 of Decree No. 31/2021/ND-CP, rather than merely adjusting the Investment Registration Certificate (IRC).
Under Article 35 of Decree No. 31/2021/ND-CP, the procedure includes the following steps:
Step 1: Obtain a Decision on approval or approval for adjustment of investment policy
- The investor carries out procedures to obtain approval or adjustment of investment policy in accordance with the Law on Investment 2020. This decision serves as the mandatory legal basis for subsequent steps.
Step 2: Issuance or adjustment of the Investment Registration Certificate
- Based on the Decision on approval or adjustment of investment policy, the investment registration authority issues or adjusts the IRC within five (05) working days from the date of receipt of a valid decision.
Step 3: Determination of the competent authority to issue the IRC
- Where the project falls under the investment policy approval authority of two or more provincial People’s Committees, the Prime Minister assigns the Department of Planning and Investment of the province or city where the investor implements or plans to locate the executive office to issue the IRC.
- Where the project is approved by the Management Board of an economic zone, such Management Board concurrently approves the investor and issues the IRC.
Step 4: Submission of application for issuance of the IRC (where required)
- For projects that have been approved for investment policy and where the investor has won an auction, bid, or falls under cases of investor approval pursuant to Clause 3 Article 29 of the Law on Investment 2020, the investor submits a written request for issuance of the IRC, which will be issued within five (05) working days from the date the authority receives a complete dossier.
Step 5: Issuance of the IRC upon the investor’s request
- For projects not subject to mandatory issuance of an IRC but where the investor so requests, the enterprise submits a written request together with the Decision on approval of investment policy (and investor approval, if any) to obtain the IRC within five (05) working days.
Thus, for foreign companies expanding investment that fall under cases requiring adjustment of investment policy, the procedure is closely tied to the investment policy approval decision, followed by the issuance or adjustment of the IRC in accordance with the proper authority.
3. What forms of investment may foreign companies expanding investment apply?
Pursuant to Article 23 of the Law on Investment 2020, foreign companies expanding investment may choose various forms of investment depending on their capital ownership structure and expansion strategy.
Specifically, enterprises may establish a new economic organization, contribute capital to, purchase shares in, or acquire capital contributions of another economic organization, or invest under a business cooperation contract (BCC).
Where an economic organization with foreign investment capital is held by foreign investors at more than 50% of charter capital or falls under cases specified in Clause 1 Article 23, investment conditions and procedures applicable to foreign investors must be applied.
Conversely, if the economic organization with foreign investment capital does not fall within such cases, it may carry out investment activities under conditions and procedures applicable to domestic investors when establishing other economic organizations, contributing capital, purchasing shares, acquiring capital contributions, or entering into BCCs.
In addition, for foreign companies already established in Vietnam, where a new investment project arises, the enterprise is only required to carry out investment procedures for that project without the need to establish a new economic organization, thereby providing flexibility for investment expansion.
4. What legal risks may foreign companies face during investment expansion?
During the process of expanding investment in Vietnam, foreign companies may face several typical legal risks, including:
- Expanding a project without carrying out procedures for project adjustment
- Where investors expand scale, increase capital, change objectives, location, or project schedule without adjusting the IRC or obtaining approval for adjustment of investment policy as required under Clause 3 Article 41 of the Law on Investment 2020.
Legal consequences: Such acts are subject to administrative penalties under Point b Clause 2 Article 17 of Decree No. 122/2021/ND-CP, with fines ranging from 70,000,000 VND to 100,000,000 VND, together with remedial measures requiring completion of project adjustment procedures, and potentially suspension of project operation until compliance is achieved.
- Violations relating to investment incentives due to untruthful declarations
- If a foreign company makes inaccurate or untruthful declarations to enjoy investment incentives, it may be fined from 50,000,000 VND to 70,000,000 VND under Clause 1 Article 18 of Decree No. 122/2021/ND-CP. Where violations are aimed at enjoying tax incentives or other state budget-related benefits, the enterprise may also be sanctioned under tax laws. Additionally, pursuant to Clause 2 Article 18 of Decree No. 122/2021/ND-CP, the investor is required to return the entire unlawful benefit obtained.
Failure to thoroughly review investment forms, market access conditions, and project adjustment procedures may expose foreign investors to risks of sanctions, suspension, or forced termination of operations. Therefore, foreign investors should ensure full legal compliance from the project planning stage.
5. What happens if a foreign company expanding investment violates the law?
In addition to administrative sanctions for specific violations, foreign companies may face more severe legal consequences depending on the nature, severity, and impact of the violation.
Beyond fines, restitution of unlawful gains, or suspension or termination of investment projects, enterprises may also be subject to tax arrears, tax penalties, and sanctions in the fields of taxation and accounting.
Where violations involve fraudulent conduct, tax evasion, falsification of documents, or large-scale asset misappropriation, related individuals and organizations may face criminal liability under Article 174 of the Penal Code 2015 (as amended in 2017), resulting in long-term legal consequences for investment activities in Vietnam.
V. Are you seeking legal experts to support foreign companies expanding investment?
If you are concerned about legal conditions, investment procedures, tax incentives, or potential risks when expanding investment in Vietnam, NPLaw is ready to provide in-depth support. With extensive experience advising FDI enterprises, NPLaw offers comprehensive legal solutions that ensure compliance, optimize benefits, and mitigate risks from investment project adjustment and investment policy approval to tax advisory and legal risk prevention.
The above information is for reference purposes only. For detailed advice on specific cases, please contact NPLaw Law Firm for prompt consultation.
