Legal due diligence before committing capital to Vietnam is not a formality — it is the shield that protects foreign investors from deal-breaking risks: prohibited sectors, disputed land, missing licences, hidden tax exposures. This article provides a 10-area legal checklist, updated for the Law on Investment 2025 (No. 143/2025/QH15, effective 1 March 2026) and Decree 96/2026/ND-CP.
1. Why conduct due diligence before investing in Vietnam?
Vietnam applies the principle that investors may conduct business in any sector not prohibited by law — yet many sectors are conditional or subject to market-access restrictions for foreign investors. A project launched without careful screening may face termination and revocation of its Investment Registration Certificate (IRC) under Article 36 of the Law on Investment 2025 — for example where the project land is recovered, the escrow obligation is ignored, or the investment rests on a sham civil transaction.
Legal due diligence answers three core questions: (1) is the project legally permitted; (2) what is the real compliance cost; (3) which risks remain and who bears them.
2. The 10-area legal due diligence checklist
Area 1 — Sector: prohibited, restricted or conditional?
- Cross-check the planned sector against Article 6 of the Law on Investment 2025 (prohibited: narcotics, chemicals/minerals in Appendices I-II, wild specimens, prostitution, human trafficking, firecrackers, debt collection services, e-cigarettes/heated tobacco…).
- Check Article 8 and Section A, Appendix I of Decree 96/2026/ND-CP: 23 sectors not yet open to market access for foreign investors (press, marine fishing, investigation-security services, judicial administration services, public postal services, goods transshipment/temporary import for re-export…).
- Check conditional business sectors (Article 7, Appendix IV — effective 1 July 2026) and sectoral laws: which sub-licences are mandatory before operations begin?
Area 2 — Choosing the right investment form
Article 18 of the Law on Investment 2025 provides five forms: establishing an economic organisation; capital contribution/share purchase; implementing an investment project; BCC contracts; and new forms prescribed by the Government. Choosing the wrong form means redoing the entire procedure. Note: a foreign investor may establish an economic organisation before carrying out IRC issuance/adjustment procedures (Article 19), but must satisfy market-access conditions at establishment.
Area 3 — Land and project location
- Foreign investors cannot own land in Vietnam — they may only lease land or obtain land-use rights within statutory limits.
- Verify: the lessor/transferor’s land-use right certificate remains valid; the land-use purpose matches the project; the land-use term (Article 172 of the Land Law 2024: investment projects up to 50 years, 70 years maximum); absence of mortgages, disputes or enforcement distraints.
- Assess clean land bank availability, site-clearance progress, and transparency of local land-use planning.
Area 4 — Investor’s financial capacity
The IRC application dossier (Articles 32 and 39 of Decree 96/2026/ND-CP) requires proof of financial capacity: audited financial statements for the last two years, a parent-company or financial-institution support commitment, or a financial-capacity guarantee. Figures must be consistent between the project proposal and supporting documents — the most common reason FDI dossiers are returned for clarification.
Area 5 — Escrow to secure project implementation
Projects requesting State land allocation, land lease or land-use-purpose conversion must place an escrow deposit or obtain a bank guarantee (Article 30 of the Law on Investment 2025), except in seven exempt cases (winning a land-use-right auction, winning a bid for a land-using project, acquiring a project that already placed escrow…). Failure to place escrow is itself a ground for project termination (Article 36.2(e)).
Area 6 — Environment, construction and fire safety
- Determine whether the project requires an environmental impact assessment (EIA) or environmental registration under the Law on Environmental Protection 2020.
- Review construction-permit requirements (Construction Law 135/2025/QH15, effective 1 July 2026) and fire-prevention design approval and acceptance before commissioning.
Area 7 — Labour
Assess demand for foreign workers and work-permit exemption/issuance conditions (Decree 219/2025/ND-CP: work-permit exemption for investor-owners/members contributing capital of VND 3 billion or more). Review labour contracts and social-insurance obligations for Vietnamese employees.
Area 8 — Tax and customs
- Identify corporate income tax incentives (if the project is in an incentivised sector/location — Articles 14-15 of the Law on Investment 2025) and the conditions to obtain and maintain them.
- Review foreign contractor tax exposures (if any), transfer-pricing policy (associated enterprises), and customs procedures for imported machinery forming fixed assets.
Area 9 — Contracts and partners
Review material contracts: change-of-control clauses, early-termination rights, exclusivity; verify the Vietnamese partner’s legal standing (enterprise registration certificate, legal representative, actual ownership structure).
Area 10 — Disputes, IP and compliance
- Check litigation/enforcement history of the partner and the project site.
- Verify intellectual-property ownership (trademarks, patents) where the project uses existing technology or brands.
- Run sanctions screening and identify ultimate beneficial owners (UBO) for bank AML compliance.
3. Legal dossier for investment procedures
Under Article 26 of the Law on Investment 2025 and Decree 96/2026/ND-CP, the IRC application comprises: the written project proposal request; documents proving the investor’s legal status; documents proving financial capacity; the investment project proposal (objectives, scale, capital, location, schedule…); location documents; technology explanation (if subject to technology appraisal); and the BCC contract (if applicable). Foreign-issued documents must be consular-legalised and translated into Vietnamese with notarised translation before use.
4. Common mistakes to avoid
- Citing repealed article numbers: many online sources still cite the Law on Investment 2020 (Articles 21, 44, 48). From 1 March 2026, the Law on Investment 2025 applies with new numbering (investment forms: Article 18; project term: Article 31; project termination: Article 36).
- Assuming the investment licence is the finish line: the IRC/ERC is only the start — sectoral sub-licences, fire safety, environment and land procedures must all be completed before operations.
- Ignoring ongoing conditions: market-access conditions and incentive conditions must be maintained throughout operations, not only at licensing.
- Omitting compliance costs from the financial model: escrow, land rental, taxes, diligence costs — mid-course capital shortfalls are a common cause of project termination.
5. When to hire independent counsel for due diligence?
For land-using projects, M&A transactions (acquiring a Vietnamese enterprise), or projects in conditional/restricted sectors, investors should engage independent counsel to produce a legal due-diligence report before signing binding documents. Diligence fees are always cheaper than unwinding a legally distressed project.
For assistance with legal reviews of investment projects in Vietnam, investors may contact us to discuss an appropriate diligence scope. See more in our Foreign Investment section.
Prepared and reviewed by the FLAW AI Legal Council — now submitted to the owner for approval prior to publication. This content is for reference only and does not constitute legal advice for any specific case.
