Vietnam Trade and Investment Law: A Complete Guide for FDI Enterprises
Sales, distribution and investment contracts in Vietnam are governed simultaneously by several instruments: the 2015 Civil Code, the 2005 Commercial Law, the Investment Law, the 2018 Competition Law, the 2014 Customs Law and the rules on tax and foreign exchange. A single drafting error — a product name that does not match, a vague price clause, a penalty above the statutory cap — can render an entire contract unenforceable or expose the enterprise to unexpected sanctions. This guide consolidates 15 core checkpoints every FDI enterprise should review before signing and performing commercial contracts in Vietnam.
Contents
1. Get the product name and the legal nature of the relationship right
2. Price clauses: fixed, transparent, with an adjustment mechanism
3. Penalties and damages: the 8% cap and the combination rule
4. Customs declaration and origin of goods
5. Import-prohibited list: the Appendix IV transition under the 2025 Investment Law
6. Competition: breach of contract vs. anti-competitive conduct
7. Signatories and transaction approval authority
8. Contractor tax and cross-border payments
9. Record and document retention
10. Frequently asked questions
1. Get the product name and the legal nature of the relationship right
The product name must be identical across the contract, the invoice and the customs declaration. Dispute practice shows many cases arising simply because the goods are described differently in the sale contract, on the customs declaration and on the VAT invoice. When a dispute over quality, quantity or warranty arises, the breaching party may exploit the inconsistency to deny the subject matter of the contract. The working rule: use one single product name across the entire document chain — contract, appendices, purchase orders, delivery minutes, invoices and customs declarations.
Determine the correct legal nature: breach of contract or competition law violation. These two regimes involve different competent authorities, procedures and sanctions. Breach of contract (late delivery, non-conforming goods, non-payment) is handled under the contractual terms and the commercial remedies in Article 300 of the 2005 Commercial Law, within the jurisdiction of the courts or arbitration as agreed. Anti-competitive conduct (agreements in restraint of competition, abuse of a dominant or monopoly position, selling below total cost to eliminate competitors) falls under the competition authority pursuant to the 2018 Competition Law. Confusing the two leads to filing with the wrong authority and losing limitation periods.
Identify precisely which trader is the breaching party. In multi-party chains (foreign manufacturer — distributor — agent — end customer), pinpointing the party in breach is essential. This matters particularly where a parent-company guarantee exists or where the transaction runs through a branch. The signatory must be the legal representative or a duly authorised person under Articles 138–141 of the 2015 Civil Code and Article 12 of the 2020 Enterprise Law; a contract signed without authority risks being declared void under Article 129 of the 2015 Civil Code.
2. Price clauses: fixed, transparent, with an adjustment mechanism
A sale contract must state a clear fixed price. Price is an essential term of a goods sale contract. The price clause should specify: unit price, total contract value, payment currency, payment timing and payment method. Under Article 22 of the Foreign Exchange Ordinance and Articles 3 and 4 of Circular 32/2013/TT-NHNN, foreign exchange may not in principle be used for payment transactions within the territory of Vietnam, except in permitted cases; prices in contracts between parties in Vietnam should therefore be denominated in Vietnamese dong unless an exception applies.
Distinguish three easily confused concepts: selling below cost, dumping, and trading in prohibited goods. Selling below cost means pricing under production or business cost — not in itself unlawful; it becomes prohibited only when linked to eliminating competitors (abuse of a dominant or monopoly position under the 2018 Competition Law). Dumping in international trade concerns imported goods sold in Vietnam below their normal value in the exporting country, which may attract anti-dumping duties. Trading in prohibited goods is an administrative or criminal offence, entirely different in nature. These three concepts must not be used interchangeably in contract clauses or complaints.
Contracts need a clear clause on price-related breaches. Beyond a fixed price, the contract should anticipate: a price-adjustment mechanism for input-cost movements (linked to objective indices, with an adjustment cap), the consequences of a unilateral price change, and the link between the price clause and the penalty clause. Without an adjustment mechanism, the parties are exposed to “fundamental change of circumstances” under Article 420 of the 2015 Civil Code with no pre-agreed solution.
Assess legal risk before adjusting prices. Any decision to raise or lower prices during performance — especially deep discounts or discriminatory pricing across customers — should be reviewed under competition law before implementation. Enterprises with significant market positions warrant extra caution, as their pricing policies are readily examined through the lens of abuse of dominance.
3. Penalties and damages: the 8% cap and the combination rule
This is the most frequently misapplied set of rules in Vietnamese commercial contracts.
The agreed penalty for breach may not exceed 8% of the value of the breached contractual obligation. Under Article 301 of the 2005 Commercial Law, the penalty for breach of a contractual obligation is as agreed by the parties, but capped at 8% of the value of the breached portion of the contract. Important: the 8% cap applies only to commercial contracts (contracts between traders in commercial activities). For purely civil contracts governed by the 2015 Civil Code, the law sets no equivalent hard cap — however, adjudication practice may consider the reasonableness of the agreed penalty, so one should not assume courts will uphold any agreed penalty in a civil contract.
Do not combine penalties and damages beyond the legally permitted limits. The combination rule is set out in Article 307 of the 2005 Commercial Law: unless otherwise agreed, the aggrieved party may simultaneously apply both the penalty and damages remedies. But “simultaneously” does not mean “without limit”: the penalty remains subject to the 8% cap under Article 301, and damages are confined to proven actual loss under Articles 302 and 303. The breaching party’s total financial exposure cannot exceed what the law and the contract together permit.
Prove actual loss before claiming damages. Under Article 303 of the 2005 Commercial Law, liability for damages arises only where three elements coincide: (i) a breach of contract; (ii) actual loss; and (iii) the breach being the direct cause of the loss. The claimant must prove its actual loss — comprising direct actual losses and the direct profits the aggrieved party would have earned absent the breach (Article 302). No proven loss means no damages, however clear the breach.
Base compensation agreements on the correct provision. Note the distinction of legal bases: in commercial contracts, the relationship between penalties and damages is governed by Article 307 of the 2005 Commercial Law; in civil relations generally, the general principles of damages liability are governed by the 2015 Civil Code (Article 307 of the Civil Code addresses liability for damages). When drafting a compensation clause, identify which instrument governs your contract so the cited basis is accurate — citing the wrong instrument is a common error that renders the clause unenforceable in a dispute.
4. Customs declaration and origin of goods
Declare fully and truthfully under Article 86 of the 2014 Customs Law. The customs declarant must declare fully, accurately, truthfully and clearly all criteria on the customs declaration and bears responsibility for the declared contents. Misdeclaring the product name, HS code, value or origin leads not only to tax recovery and administrative fines but potentially to criminal liability in serious fraud cases. The product name on the declaration must match the name in the sale contract (see section 1).
Goods must have clear origin. Origin determines eligibility for preferential tariffs under free trade agreements and is a condition for lawful circulation. Importers should require foreign suppliers to provide appropriate certificates of origin (C/O) and keep them with the import dossier.
5. Import-prohibited list: the Appendix IV transition under the 2025 Investment Law
Goods on the import-prohibited list may not circulate in Vietnam. The lists of goods prohibited from export or import are set out in Appendix IV of the Investment Law. This is an absolute red line: a sale contract covering prohibited goods may be declared void for violating a statutory prohibition (Article 129 of the 2015 Civil Code), not to mention administrative or criminal exposure.
Mind the transition timeline. The 2025 Investment Law (No. 143/2025/QH15) takes effect on 1 March 2026; however, for the lists of prohibited business lines and prohibited goods, enterprises must check the instrument applicable at the time of the specific transaction: the old lists apply through 30 June 2026, and the new Appendix IV of the 2025 Investment Law applies from 1 July 2026. Before signing any import contract during the transition, verify which list your goods fall under at the time of performance.
6. Competition: breach of contract vs. anti-competitive conduct
Identify the correct competition authority. Competition law violations — agreements in restraint of competition, abuse of a dominant or monopoly position, notifiable economic concentrations — fall under the competition regulator (the National Competition Commission) pursuant to the 2018 Competition Law. This is an administrative procedure independent of contract-dispute proceedings before courts or arbitration. Get the forum right from the start: filing with the wrong body wastes time and may let limitation periods lapse.
7. Signatories and transaction approval authority
Check the counterparty’s capacity before signing. Beyond the legal representative (Article 12 of the 2020 Enterprise Law), note that related-party transactions and high-value contracts require approval by the General Meeting of Shareholders or the Board of Directors under Articles 138, 153 and 167 of the 2020 Enterprise Law (the 35% of total asset value threshold is the statutory reference point; an FDI company’s charter may set a lower ratio or value, so always check the specific charter). A contract signed without the required internal approval may be void or unenforceable.
The arbitration agreement is independent. Where the parties choose commercial arbitration, recall the separability principle under Article 19 of the 2010 Law on Commercial Arbitration: the arbitration agreement is fully independent of the contract; invalidity of the contract does not automatically invalidate the arbitration agreement.
Form of contract. A goods sale contract may be concluded orally, in writing or by specific conduct; for high-value transactions with foreign elements, written form is a practical necessity. Electronic contracts and electronic signatures carry legal validity under the 2023 Law on Electronic Transactions (Articles 22, 23, 36 and 38) where integrity and identifiability conditions are met.
8. Contractor tax and cross-border payments
Contractor tax is a moving target — check the latest instruments. When paying foreign suppliers, Vietnamese enterprises commonly must withhold and pay contractor tax on their behalf. Circular 20/2026/TT-BTC (effective 12 March 2026) replaced the corporate income tax rules for foreign contractors under Circular 103/2014, and from 1 July 2026 Circular 103/2014/TT-BTC was repealed in full (Article 99 of Circular 89/2026/TT-BTC) — declarations are now made under Article 30 of Circular 89/2026/TT-BTC. The current withholding and filing mechanics, and how tax clauses should be drafted in contracts (tax-inclusive vs. tax-exclusive pricing — gross-up/net provisions), may differ from past practice. Because this is a transitional area and each transaction has its own tax structure, work with tax counsel to check the latest instruments before finalising payment terms for each specific transaction — do not mechanically copy tax clauses from old contracts.
9. Record and document retention
Retain complete payment records and supporting documents. The full document chain — contracts and appendices, purchase orders, delivery minutes, invoices, bank payment records, customs declarations, certificates of origin — must be retained completely and systematically. This is not only an accounting and tax obligation but the sole shield in a dispute: the party with complete records holds the evidentiary advantage. Retention periods must comply with current accounting and tax legislation.
10. Frequently asked questions
1. Is a sale contract signed with a foreign company governed by Vietnamese law?
It depends on the governing-law clause the parties agree in the contract. Absent such a clause, the applicable law is determined under conflict-of-laws rules — in many cases, Vietnamese law will apply to obligations performed in Vietnam. Always state the governing law and the dispute resolution forum clearly in contracts with foreign elements.
2. Does selling below cost violate Vietnamese competition law?
Not automatically. Selling below cost becomes prohibited only when linked to abuse of a dominant or monopoly position aimed at eliminating competitors under the 2018 Competition Law. Enterprises should assess their market position before applying deep-discount pricing.
3. Can an enterprise claim both a penalty and damages?
Yes. Under Article 307 of the 2005 Commercial Law, the aggrieved party may apply both remedies simultaneously unless otherwise agreed. The penalty is capped at 8% of the breached obligation’s value (Article 301), and damages are limited to proven actual loss (Articles 302 and 303). The two may not be stacked beyond the legally permitted limits.
4. Must contractor tax be withheld when paying foreign suppliers?
It depends on the type of income and the transaction structure. Notably, Circular 20/2026/TT-BTC (effective 12 March 2026) replaced the corporate income tax rules for foreign contractors under Circular 103/2014/TT-BTC, and from 1 July 2026 Circular 103/2014/TT-BTC was repealed in full (Article 99 of Circular 89/2026/TT-BTC), so current treatment may differ from past practice. Consult tax counsel to determine withholding and filing obligations for each specific payment before proceeding.
5. May imported goods on the prohibited list circulate in Vietnam?
No. Goods on the import-prohibited list (Appendix IV of the Investment Law) may not circulate in Vietnam; sale contracts covering such goods risk being declared void. Note the transition: the old lists apply through 30 June 2026, and the new Appendix IV of the 2025 Investment Law applies from 1 July 2026 — check the applicable list at the time of the transaction.
Need a contract review for your business?
A loosely drafted price clause or a penalty above the 8% cap can cost an enterprise its entire advantage when a dispute arises. FLAT LAW FIRM helps FDI enterprises review and draft sale, distribution and investment contracts compliant with Vietnamese law, and assess competition and tax risks. Contact our hotline at 0988424851 for advice.
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References
- Civil Code No. 91/2015/QH13 (effective 1 January 2017).
- Commercial Law No. 36/2005/QH11 (effective 1 January 2006) — Articles 292, 294, 300, 301, 302, 303, 306, 307.
- Enterprise Law No. 59/2020/QH14 (effective 1 January 2021).
- Investment Law No. 143/2025/QH15 (effective 1 March 2026) — Article 6, Appendix IV.
- Competition Law No. 23/2018/QH14 (effective 1 July 2019).
- Customs Law No. 54/2014/QH13 — Article 86.
- Law on Commercial Arbitration No. 54/2010/QH12 — Articles 16, 19.
- Law on Electronic Transactions No. 20/2023/QH15 (effective 1 July 2024).
- Land Law No. 31/2024/QH15 — Article 27.
- Foreign Exchange Ordinance No. 28/2005/PL-UBTVQH11 (as amended 2013) — Article 22; Circular 32/2013/TT-NHNN — Articles 3, 4.
- Circular 103/2014/TT-BTC (repealed from 01/07/2026); Circular 20/2026/TT-BTC (effective 12 March 2026); Circular 89/2026/TT-BTC (Article 99 repealing Circular 103/2014; Article 30 foreign-contractor declaration procedure).
