Why do many foreign-invested enterprises (FDIs) in Vietnam face legal risks, penalties, or project delays despite having strong business potential? In most cases, the problems stem from avoidable legal mistakes—made during market entry or daily operations. This article highlights the most common legal errors committed by FDI enterprises in Vietnam and explains how investors can prevent costly consequences.
Vietnam continues to attract strong foreign direct investment thanks to its open economy, competitive costs, and expanding market access through major free trade agreements. However, Vietnam’s investment environment is highly regulated and compliance-driven. Many FDI enterprises underestimate the importance of local legal requirements, assuming that international practices will automatically apply.
In reality, Vietnam’s legal system combines civil law principles, administrative discretion, and sector-specific regulations. A small oversight—especially in a conditional sector—can lead to licensing suspension, fines, or forced restructuring.
Legal mistakes often result in:
Delays in project implementation
Administrative penalties and fines
Revocation or suspension of licenses
Inability to repatriate profits
Rejection of future investment expansions
Damage to corporate reputation
Understanding common pitfalls is the first step toward long-term compliance and sustainable operations.
One of the most frequent legal mistakes occurs before the company is even established.
FDI enterprises often assume that:
All sectors allow 100% foreign ownership
WTO commitments apply uniformly across industries
Local partners are optional in every case
In reality, sectors such as advertising, logistics, education, media, and certain trading activities are subject to foreign ownership caps or mandatory joint-venture requirements. Establishing an incorrect ownership structure may result in license rejection or forced restructuring.
Some investors choose capital contribution or share acquisition structures to “save time” without checking whether prior approval is required. This often leads to:
Invalid ownership registration
Inability to amend the Enterprise Registration Certificate
Regulatory investigations
Proper structuring from the outset is critical.
Another common issue is registering business lines incorrectly.
FDI enterprises sometimes register business lines that:
Are conditional but lack required licenses
Are not permitted for foreign investors
Are unrelated to actual operations
Authorities may approve the company initially, but compliance problems arise during inspections, tax audits, or license amendments.
Vietnam uses a strict business classification system. Incorrect or vague codes may:
Restrict contract execution
Prevent issuance of sub-licenses
Delay future expansion
Accurate registration is essential for operational flexibility.
Capital contribution compliance is one of the most strictly enforced areas for FDI enterprises.
FDI companies must contribute capital:
Within the timeline stated in the IRC and ERC
Through a Direct Investment Capital Account (DICA)
Delays or improper transfers may result in penalties or forced capital reduction.
Many FDI enterprises mistakenly transfer capital through regular operating accounts instead of DICA accounts. This violates foreign exchange regulations and complicates profit repatriation later.
FDI enterprises often rely heavily on foreign experts, especially during early stages.
Common errors include:
Allowing foreign staff to work before permits are issued
Misclassifying positions that do not qualify for work permits
Missing renewal deadlines
These violations can lead to fines, deportation orders, and operational disruptions.
FDI enterprises sometimes apply foreign HR practices without adapting to Vietnamese law, leading to:
Invalid labor contracts
Incorrect termination procedures
Social insurance non-compliance
Labor disputes are costly and time-consuming in Vietnam.
Tax compliance is another major risk area for FDI enterprises.
FDI enterprises engaging in transactions with parent or affiliated companies must comply with transfer pricing regulations. Common mistakes include:
Lack of transfer pricing documentation
Improper pricing policies
Late submission of declarations
Tax authorities actively audit FDI enterprises in this area.
Incorrect tax treatment of cross-border services often results in:
Tax reassessments
Penalties and interest
Disputes with tax authorities
Early tax structuring is essential to minimize risk.
Vietnam has significantly tightened its data protection and cybersecurity framework.
FDI enterprises operating digital platforms or handling customer data often fail to:
Obtain proper user consent
Implement adequate data protection measures
Appoint responsible data officers
Violations may lead to severe penalties and operational restrictions.
Certain data may be required to be stored locally in Vietnam. Non-compliance can result in forced system changes or suspension of services.
Intellectual property is often overlooked by FDI enterprises during initial setup.
Vietnam follows a first-to-file principle. Many FDIs lose trademark or software rights simply because they register too late.
Without proper IP assignment clauses, ownership of software, designs, or inventions may be disputed—especially when key employees leave.
Some FDI enterprises attempt to start operations prematurely.
Operating before completing licensing procedures may trigger:
Administrative inspections
Suspension of activities
Fines or forced closure
Compliance must come before commercialization.
Changes in ownership, capital, address, or business scope must be reported. Failure to update licenses may invalidate existing approvals.
Most legal problems faced by FDI enterprises in Vietnam are avoidable with proper planning and legal guidance. From incorrect investment structures and capital compliance failures to labor, tax, and data protection risks, understanding common legal mistakes is essential for sustainable success.
Are you operating or planning an FDI project in Vietnam?
Contact DEDICA Law to assess your legal risks and build a compliant, resilient business.
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