Attorney Vu Manh Quynh is the Managing Partner of ECOVIS Vietnam Law, advising international investors on Foreign Direct Investment (FDI), corporate governance, and regulatory compliance in Vietnam.

Foreign investors expanding into Vietnam usually focus on market access, site selection, capital investment, and speed to operation. In practice, many legal problems arise not because the business model is weak, but because the investment structure, licensing scope, capital contribution, and post-licensing compliance plan were not properly designed from the beginning.

Below are five common legal mistakes seen in foreign-invested projects in Vietnam. They are not theoretical risks. They are recurring issues that can delay licensing, affect tax and customs treatment, complicate profit remittance, and create avoidable exposure during inspections.

1. Treating the ERC as the Only Required Approval

One of the most common mistakes is assuming that the Enterprise Registration Certificate (ERC) is sufficient to legally operate a foreign-invested business in Vietnam.

The ERC confirms the legal existence of the Vietnamese company. It records key corporate information such as the company name, enterprise code, registered address, charter capital, legal representative, and corporate form.

For many new foreign-owned investment projects, however, the Investment Registration Certificate (IRC) is also required. The IRC records the approved investment project, including the investor, project objectives, location, investment capital, implementation schedule, operating term, and investment scope.

In most greenfield foreign investment projects, the IRC is obtained before the ERC. However, acquisition structures, capital contribution into existing Vietnamese companies, and certain investment forms may follow different licensing paths.

The practical mistake is treating company incorporation as the end of the licensing process. In Vietnam, company establishment and investment project approval are related but distinct legal steps.

If the company operates without the required investment approval, or conducts activities outside the approved investment scope, it may face administrative penalties, licensing difficulties, and tax or customs complications.

Practical recommendation: Foreign investors should confirm the correct licensing route before incorporation, signing lease documents, hiring employees, importing equipment, or commencing business activities.

2. Failing to Check Sector Eligibility Before Committing

Vietnam allows foreign investment in many sectors, including manufacturing, trading, services, technology, logistics, education, healthcare, and real estate-related activities. However, not all sectors are fully open.

Some sectors are prohibited. Some are conditional. Some require foreign ownership caps, ministry-level consultation, special licenses, minimum capital, local partner involvement, or additional post-licensing approvals.

The risk often appears when an investor has already selected a location, negotiated a lease, prepared internal budgets, or announced the expansion timeline — only to discover that the proposed activity is subject to conditions that materially affect the investment structure.

This is particularly relevant for businesses involving trading and distribution, logistics, education, healthcare, e-commerce, real estate, financial services, media, data-related services, chemicals, regulated goods, and certain manufacturing processes.

At that stage, the investor may face delay, restructuring costs, renegotiation of contracts, or even the need to abandon the original plan.

Practical recommendation: Sector eligibility should be reviewed at the feasibility stage, before the investor commits to land, factory lease, customer contracts, capital expenditure, or market entry timelines.

3. Missing or Mishandling the Capital Contribution Deadline

Capital contribution is not merely an internal shareholder matter. In Vietnam, it is closely connected to corporate licensing, foreign exchange control, accounting, tax compliance, and profit remittance.

For limited liability companies, the common statutory deadline is 90 days from the date of ERC issuance, subject to the relevant corporate form, licensing documents, and applicable legal requirements. Capital must generally be contributed through the proper banking channel, including the Direct Investment Capital Account (DICA), where required.

Two mistakes are common. The first is missing the contribution deadline because of internal treasury delay, banking document issues, late account opening, or misunderstanding of when the deadline starts. The second is contributing capital incorrectly — for example, transferring funds through the wrong account, treating shareholder loans as equity, contributing machinery without proper valuation and customs documents, or failing to match the remitting entity with the registered investor.

These mistakes may create inconsistency between the licensed charter capital and the actual contributed capital. The issue can later affect financial statements, tax filings, audit reports, foreign loan registration, profit remittance, and licensing amendments.

Practical recommendation: Foreign investors should plan capital contribution before incorporation, including banking setup, remittance route, currency, contribution schedule, supporting documents, and contingency planning if capital cannot be contributed on time.

4. Operating Outside the Approved Investment Scope

The IRC and enterprise registration documents are not merely administrative records. They define the legal scope within which the foreign-invested company may operate.

Problems arise when a company expands its activities without reviewing whether an amendment is required. Common examples include: adding new product lines; increasing production capacity; changing from export-only to domestic sales; adding trading or distribution activities; changing factory location; expanding warehouse or logistics functions; changing investment capital or implementation schedule; introducing new manufacturing processes, materials, or technology.

Even if the new activity is commercially logical, it may still require an IRC amendment, ERC update, environmental review, fire safety approval, trading license, customs adjustment, or other regulatory procedure.

This risk often surfaces during tax inspections, customs reviews, investment reporting, environmental inspections, or when the company later applies for a license amendment. A further issue is tax incentive eligibility: if the company claims incentives based on the approved investment project but the actual activity differs from the licensed scope, the company may face questions from tax or customs authorities.

Practical recommendation: Before changing products, capacity, market channel, location, investment capital, or operational model, the company should conduct a licensing impact review and, where necessary, complete amendments before implementation.

5. Neglecting Post-Licensing Compliance

Many foreign investors focus heavily on obtaining the IRC and ERC, but underestimate the compliance work that begins after incorporation.

Post-licensing compliance may include tax registration, e-invoice setup, digital signature, DICA opening, capital contribution, accounting system setup, social insurance registration, labour reporting, foreign employee work permits, internal labour regulations, investment reporting, environmental obligations, customs registration, fire safety compliance, and recurring statutory filings.

For manufacturing and factory projects, the post-licensing stage is even more important. A factory may have the IRC and ERC but still be unable to legally construct, import machinery, hire foreign experts, issue invoices, claim tax incentives, or commence production until other approvals and compliance steps are completed.

Common post-licensing failures include: failure to monitor investment reporting obligations; delayed capital contribution; missing work permit renewals; weak employment contract and internal labour regulation systems; failure to review trade union fund and labour-related contribution obligations; late social insurance registration; incomplete environmental monitoring; customs documentation gaps; unreviewed related-party transactions; and failure to amend the IRC or ERC after operational changes.

The cost of remediation is usually higher than the cost of proper compliance planning. It may include fines, back-payments, delayed operations, management time, and reputational risk with authorities, banks, auditors, customers, and group headquarters.

Practical recommendation: Foreign-invested companies should prepare a post-licensing compliance calendar immediately after incorporation and assign clear internal responsibility for legal, tax, labour, accounting, customs, and reporting obligations.

Vietnam Expansion Requires More Than Company Formation

Vietnam remains a highly attractive market for foreign investors, manufacturers, trading companies, service providers, and regional headquarters. However, successful expansion requires more than speed of incorporation.

The five legal mistakes above usually arise when investors treat Vietnam market entry as a registration task rather than a structured investment implementation project. A sound Vietnam expansion plan should cover: investment feasibility; foreign ownership and sector conditions; IRC and ERC licensing; capital contribution and DICA compliance; tax and accounting setup; labour and expatriate compliance; industrial land or office lease review; customs and import-export readiness; environmental and fire safety obligations where relevant; post-licensing compliance calendar; and future amendment and expansion planning.

Early legal structuring helps investors avoid delay, reduce regulatory exposure, protect tax and customs positions, and build a stronger foundation for long-term business operations in Vietnam.