"Business first - invest later" mechanism: More flexible but not simple

The Law on Investment 2025 opens up a notable change for foreign investors: in some cases, investors can establish businesses before completing the procedures for issuing an Investment Registration Certificate (IRC). However, this flexibility also poses a new requirement: investors must design industries, capital structures, investment plans and compliance obligations right from the time the enterprise has not officially had a licensed investment project.

Economic organizations must complete the procedures for granting IRCs for investment projects in accordance with their business lines

In other words, the Enterprise Registration Certificate (ERC) in this mechanism is only the step of creating a legal entity. The right to implement an investment project still depends on the enterprise completing the procedures for granting an IRC, meeting the market access conditions and related specialized conditions. This is a legal boundary that foreign investors need to pay special attention to.

The project applying for the IRC must be suitable for the registered business line

When choosing the mechanism for establishing an enterprise first, the investor needs to ensure that the investment project is expected to be implemented in accordance with the business lines registered at the time of establishment of the enterprise. Economic organizations must complete the procedures for granting IRCs for investment projects in accordance with their business lines[1].

This means that the registration of business lines right from the stage of issuance of the ERC should not be carried out in a formal or too general way. If the registered industry or trade does not properly reflect the objectives, scope and operation of the expected investment project, the enterprise may encounter problems when submitting the investment dossier or have to adjust the enterprise registration dossier before continuing the investment registration procedure.

Therefore, investors need to review and design appropriate business lines from the beginning, ensuring the consistency between the IRC, the application for the IRC and the actual project implementation plan. This is an important condition to avoid the fact that the enterprise has been established but is not approved by the licensing agency to issue an IRC in accordance with the investor's expected project.

Review market access conditions right from the stage of business establishment

In case a foreign investor applies for an ERC before carrying out the procedures for issuance of an IRC, the law requires that the enterprise registration dossier must include a commitment to meet the market access conditions for the business line to be done. Therefore, right from the stage of establishing an enterprise, investors need to carefully review market access conditions, including the percentage of foreign capital ownership, form of investment, scope of operation, conditions on investor capacity, requirements for Vietnamese partners (if any) and conditions under specialized laws or international treaties that Vietnam as a member.

This regulation aims to ensure that the "Enterprise First – Invest Later" mechanism is not taken advantage of to "circumvent" investment procedures or evade market access conditions for conditional investment industries and trades. If the review is not fully carried out from the beginning, enterprises may encounter problems when applying for an IRC, or even be unable to implement the project according to the expected investment objectives.

In fact, the mechanism of allowing the establishment of an enterprise in advance does not mean that the business registration authority will "ignore" the foreign investment factor at the stage of issuance of an ERC. Official Letter No. 5427/BTC-DNTN dated 29/04/2026 of the Ministry of Finance[2] has affirmed that the enterprise registration dossier of foreign investors must be accompanied by a commitment to meet market access conditions. This shows that the business registration agency is currently not only performing the role of technical registration,  but in fact have begun to preliminarily consider the suitability of the expected investment activities.

For industries with conditions or limited market access, enterprises may in fact be required to provide additional explanations on the legal basis for market access, capital ownership ratio, scope of operation or applicable international treaties. In some cases, the business registration authority may also discuss with the investment registration authority or request the investor to clarify the operational objectives in order to limit the situation that the enterprise is established but is not eligible to implement the investment project later.

Ensure to meet the deadline for completing the procedures for issuance of IRC

The "Business First – Invest Later" mechanism only creates more preparation time for investors. But it does not mean that businesses are allowed to delay investment procedures indefinitely. Therefore, investors should pay special attention that within 12 months from the date of establishment of the economic organization, the enterprise must complete the procedures to be granted an IRC for the investment project in accordance with the registered business lines[3]. In case the enterprise has not yet registered the investment after the 12-month period, the enterprise may be administratively sanctioned from VND 100,000,000 to VND 200,000,000[4] for the case of implementing the project subject to the issuance of an IRC without being granted an IRC and forced to carry out the procedures for issuance of an IRC.

In addition, if the project is in a business line or area eligible for investment incentives, the determination and application of incentives must be based on the project's legal documents, actual conditions and tax law. The IRC is an important basis for recording project information such as objectives, location, scale, capital and progress, thereby supporting the determination of conditions for enjoying incentives. Therefore, the delay in completing the IRC may affect the investor's ability to prove and enjoy investment incentives in actual operation.

Source: National Political Publishing House – Truth

The charter capital is not necessarily equal to the investment capital of the project but...

In principle, the charter capital of the enterprise is not necessarily equal to the total investment capital of the project. Charter capital is the capital that members/shareholders commit to contribute to the enterprise, while the investment capital of the project can include the investor's contributed capital, loans and other legally mobilized capital sources. This regulation creates flexibility for investors in designing capital structures.

However, that flexibility does not mean that investors can register charter capital at a level that is too low compared to the size of the project. When reviewing the application for issuance of an IRC, the competent authority can still assess the financial capacity, capital source for project implementation, capital contribution progress and feasibility of the investment plan. Therefore, charter capital needs to be determined on the basis of being suitable to the scale, nature and initial operational needs of the project, and at the same time have a clear explanation plan for the loan or additional mobilized capital.

Tax obligations after being granted  an ERC

As soon as the IRC is granted, the enterprise has become a legal entity under Vietnamese law and incurs tax, accounting, and reporting obligations, even if it has not been granted an IRC or has not yet operated or has no revenue.

In principle, enterprises need to perform initial obligations such as tax registration, tax declaration, payment of license fees if they are subject to payment, implementation of the accounting regime and submission of periodic tax reports. In case business activities have not yet arisen, enterprises still need to declare on time to avoid the risk of being sanctioned for late submission of declarations or failure to fulfill tax reporting obligations as prescribed.

Conclusion

For foreign investors, the "business first – investment later" mechanism should not be understood as a procedural shortcut, but as a conditional investment preparation mechanism. Before choosing this mechanism, investors need to review the industry, market access conditions, capital structure, progress of applying for an IRC and tax obligations after establishment. If well prepared, this mechanism can shorten the time to enter the market; On the contrary, if implemented in a hurry, enterprises may fall into the situation that they already have legal entities but are not eligible to implement the project.

Lawyer Nguyen Van Phuc – Nguyen Thi Kieu Khanh

HM&P Law Firm