What do foreign contractors need before entering Vietnam? Many general contractors and specialized contractors from China, Korea and Japan win project bids in Vietnam and then “miss the schedule” right at the legal stage: no construction operation license, no foreign contractor tax registration, foreign personnel without work permits. This article lists all legal conditions foreign contractors must meet before setting foot on the construction site.
Construction Operation License for Foreign Contractors
The Construction Law 2025 (No. 135/2025/QH15, effective from 01/7/2026) continues to require foreign contractors to hold a construction operation license issued by the competent Vietnamese state authority before performing contracts. Licensing conditions include: having won the bid or been selected; having a consortium contract with a Vietnamese contractor or committing to use Vietnamese subcontractors as prescribed; management personnel and engineers meeting competency conditions. The dossier should be prepared as soon as the bid-winning notice arrives — license processing time can directly affect the commencement date.
Foreign Contractor Tax
Foreign contractors without a permanent establishment in Vietnam pay tax under the method applicable to foreign contractors: VAT and CIT calculated at rates on revenue, withheld, declared and paid on their behalf by the Vietnamese party. Tax rates depend on the industry (construction and installation have their own rates). Contracts should clearly state whether prices include foreign contractor tax — disputes over “who bears the tax” are among the most common disputes, and carefully reviewing tax clauses in construction contracts helps avoid millions of USD in losses.
Foreign Personnel: Work Permits and Residence
Engineers, experts and site managers who are foreigners must have work permits (or exemption confirmations) and appropriate visas and temporary residence cards. For projects with dozens of experts arriving in waves, companies should plan personnel — permits per mobilization wave — to avoid situations where experts have arrived but permits are not ready and they must “sit and wait”. This content is closely related to labor law compliance for foreigners working in Vietnam.
Contracts with Investors: Points to Finalize
Beyond tax, contracts should clearly provide: contract language (Vietnamese mandatory; bilingual for foreign elements under the Construction Law 2025 and Decree 210/2026/ND-CP); payment currency and exchange rate adjustment mechanisms; governing law and dispute resolution mechanisms (VIAC arbitration or international arbitration — enforceability needs consideration); advance payment conditions (not exceeding 30% of contract value at signing); and responsibilities for construction permits and fire protection between the parties.
Compliance during Construction
During construction, foreign contractors bear full obligations on labor safety, environmental protection and quality management under Decree 207/2026/ND-CP and post-handover warranty obligations. Administrative violations in construction (unlicensed, wrongly licensed, unsafe) are heavily penalized and can lead to operation license revocation — legal risks should be managed as an independent work item, not left to the site team.
Frequently Asked Questions
Must foreign contractors form consortia with Vietnamese contractors?
The law requires foreign contractors to cooperate with Vietnamese contractors (consortium or using Vietnamese subcontractors) as prescribed — this is a condition for construction operation license issuance.
How is foreign contractor tax calculated?
VAT and CIT are calculated at percentage rates on taxable revenue, withheld and paid on behalf by the Vietnamese party; specific rates by industry are prescribed in tax legal documents.
May construction start without a construction operation license?
No. Constructing without sufficient legal conditions is a serious administrative violation, subject to suspension and affecting the entire project.
FLAT LAW FIRM supports foreign contractors entering Vietnam: construction operation license applications, foreign contractor tax structuring, work permits — residence for experts and contract review and negotiation. If you are preparing to join a project in Vietnam, please contact FLAT LAW FIRM.
