An insight into Vietnam's new Law on Investment

The Law on Investment 2025 continues Vietnam’s broader efforts to simplify administrative procedures and further refine the legal framework governing investment activities, write senior partner Anh Dang and associate Linh Dao at Vilaf law firm.

On December 11, 2025, the National Assembly of Vietnam passed the new Law on Investment (Law on Investment 2025) in the context of Vietnam’s intensified institutional reforms aimed at improving the investment climate, addressing administrative bottlenecks, and enhancing competitiveness in attracting both domestic and foreign investment.

The Law on Investment 2025 includes seven chapters and 52 articles and will take effect from March 1, 2026, except for Article 7 (Conditional business lines) and Appendix IV (List of conditional business lines), which will take effect from July 1, 2026.

Compared with the Law on Investment 2020, which consisted of 77 articles, the Law on Investment 2025 has been substantially streamlined, signaling a clear policy direction towards reducing pre-licensing procedures and facilitating smoother market entry for investors. This article will discuss about key amendments under the Law on Investment 2025.

Reduction of regulatory barriers for foreign investors in establishing economic organizations in Vietnam

Under the Law on Investment 2020, foreign investors are generally required to have an approved investment project prior to establishing an economic organization, except for certain special projects as decided by the Prime Minister in which foreign investors are permitted to establish an economic organization to implement the investment project before applying for the issuance of the Investment Registration Certificate (IRC).

From March 1, 2026, Article 19.2 of the Law on Investment 2025 will allow foreign investors investing in any investment project to establish an economic organization before applying for the issuance of the IRC.

Importantly, it should also be noted that foreign investors are still required to satisfy the market access conditions, such as the foreign ownership limits, investment forms, etc., at the stage of establishing the economic organization to implement the investment project. Accordingly, foreign investors are still expected to carefully identify and assess their proposed business lines before applying for establishment of an economic organization in Vietnam.

From a practical standpoint, this change reduces administrative burdens, increases regulatory flexibility, and expedites the preparatory stages of market entry for foreign investors in Vietnam. This adjustment to the licensing sequence is presumably a positive regulatory development, as it permits foreign investors to establish a commercial presence in Vietnam prior to obtaining approval of an investment project.

In addition, foreign investors may now open a direct investment capital account (DICA) for the purpose of contributing capital to cover initial project expenditures prior to commencement of the project, without awaiting the issuance of the IRC, a process that has so far been time-consuming, especially for land-using projects.

Nevertheless, these new provisions also give rise to certain legal uncertainties and practical risks, indicating the need for further implementing guidance. For instance, if the application for the IRC is later rejected, it remains unclear how the legal consequences of the already-established project company could be addressed.

Investment projects subject to In-principle Approval (IPA) (“Chấp thuận chủ trương đầu tư” in Vietnamese) and competent approval authorities

Article 24 of the Law on Investment 2025 enumerates 20 specific categories of investment projects that are subject to IPA, primarily in important and sensitive sectors including (i) seaport, airport, telecommunications, publishing, and press projects; (ii) projects involving proposed use of land or maritime areas; and (iii) projects that impact the environment or are implemented in areas affecting national security and defense.

In respect of projects for which investors propose state land allocation or lease without an auction of land use rights, Article 24.8 introduces three circumstances under which such projects are exempt from IPA. This amendment represents a meaningful reduction in administrative procedures for ordinary investment projects.

Moreover, Article 25 of the Law on Investment 2025 adjusts the competence to decide on IPA in a more streamlined and centralized manner. Specifically, the authority to issue an IPA is vested only in the Prime Minister and the Chairmen of the Provincial People’s Committees, while the competence of the National Assembly in this area is now limited to investment projects that require the application of special mechanisms or policies deviating from the provisions of laws or resolutions of the National Assembly.

Reduction in the number of conditional business lines

The number of conditional business activities has been reduced under the Law on Investment 2025. Under the list of conditional business activities (under Appendix IV thereto), the Government has removed 38 conditional business lines, including tax procedure services, customs procedure services, data center services and has revised the scope of 20 other business lines. The remaining conditional sectors are primarily concentrated in finance, accounting, forestry, fisheries, agriculture, construction, and transportation.

As a result, projects operating in the removed sectors will no longer be subject to conditional business requirements or additional licensing as previously imposed. This reform is expected to lower compliance costs, facilitate market entry, and foster a more competitive and business-friendly investment environment.

Narrowing the cases requiring adjustment of investment projects

Article 33 of the Law on Investment 2025 removes two circumstances that previously required procedures for adjustment of investment projects, namely: (i) an increase or decrease of 20% or more of the total investment capital of the investment project; and (ii) a change in appraised technology.

Accordingly, from March 1, 2026, only will five circumstances require investors to carry out investment project adjustment procedures. This revision reflects the State’s intention to reduce involvement in business autonomy of investors and to place greater responsibility on investors to make and take responsibility for their own decisions.

Expansion of the scope of application of special investment procedures

Pursuant to Article 28.1 of the Law on Investment 2025, investors are entitled to opt for registration of their investment projects under the special investment procedures for projects implemented in industrial parks, export processing zones, hi-tech parks, concentrated digital technology parks, free trade zones, international financial centers, and functional zones within economic zones, except for projects that are subject to investment policy approval as prescribed by the Government.

Compared with Law on Investment 2020, the Law on Investment 2025 has significant changes in special investment procedures. Accordingly, pursuant to Article 28.1 of the Law on Investment 2025, the special investment procedure would no longer be confined to certain sectors as previously prescribed under Article 36(a).1 of the old law, but extended to all investment projects in the areas subject to the special investment procedures, except for those subject to IPA as prescribed by the Government.

In addition, investors applying for special investment procedures are not required to carry out procedures for IPA, technology appraisal, preparation of an environmental impact assessment report, preparation of detailed planning, issuance of a construction permit, or other procedures for approval, acceptance, or permission in the fields of construction and fire prevention and fighting.

Instead, pursuant to Article 28.2 of the Law on Investment 2025, investors are only required to submit a written undertaking to comply with applicable legal requirements, including those relating to construction, environmental protection, and fire prevention and fighting as noted above.

Investment incentive and investment support

Instead of adopting a detailed listing approach to investment-incentivized business lines as provided under Article 16.1 of the Law on Investment 2020, the Law on Investment 2025 introduces a fundamentally different regulatory approach to investment incentives.

Specifically, pursuant to Article 15.1 of the Law on Investment 2025, investment-incentivized sectors and trades are defined based on policy objectives, rather than by an exhaustive enumeration of specific industries. Under this approach, investment incentives are granted to sectors prioritized for investment attraction in order to (hopefully) achieve the following objectives:

(i) Development of science and technology, innovation, digital transformation, the digital technology industry, and the semiconductor industry;

(ii) Development of the green economy, circular economy, sharing economy, digital economy, and other emerging economic models;

(iii) Development of industrial clusters and value chains; attraction of investment featuring modern governance, high added value, spillover effects, and integration into global production and supply chains;

(iv) Development of renewable energy, new energy, and clean energy, and ensuring national energy security;

(v) Development of agriculture and forestry; protection of the environment and natural resources; and development of the marine economy;

(vi) Construction and development of infrastructure;

(vii) Development of education and training, healthcare, high-performance sports, and national culture;

(viii) Development of key chemical industries, key mechanical engineering industries, supporting industries, and the pharmaceutical industry; and

(ix) Other objectives as prescribed by the Government.

One notable development is that the list of locations eligible for investment incentives has been updated to align with the newly enacted regulations. Accordingly, in addition to industrial zones, export processing zones, hi-tech zones, concentrated digital technology zones, and economic zones which were already entitled to investment incentives under the Law on Investment 2020, the Law on Investment 2025 expands the scope of incentivized locations to include industrial clusters, hi-tech agriculture zones, free trade zones, and international financial centers.

With respect to projects entitled to special investment incentives and support, the Law on Investment 2025 further expands the scope of application. In addition to the projects specified under Articles 17.2(a) and 17.2(b) of the Law on Investment 2025, the Government is now authorized to decide on the application of special investment incentives and support to other investment projects (including both new investment projects and expansion projects) that fall within specially incentivized sectors, provided that such projects meet the minimum investment capital threshold and capital disbursement schedule as prescribed by the Government.

In addition, the Prime Minister is empowered to decide on the application of other investment incentives where it is necessary to encourage the development of a particularly important investment project or a special administrative-economic unit. This adjustment is expected to enhance flexibility and accelerate decision-making in the application of investment incentives, compared to the previous regime under which such authority was vested in the National Assembly and was contingent upon submission by the Government.

Changes to regulations on outbound investment

The Law on Investment 2025 abolishes the procedure for approval of outbound investment policy, along with related provisions governing capital flows in outbound investment activities. Matters such as opening outward investment capital accounts, transferring capital abroad, using profits overseas, and repatriating profits to Vietnam will be addressed separately under forthcoming regulations on foreign exchange management.

In parallel, Article 42 of Law on Investment 2025 narrows the scope of outbound investment projects subject to procedures for issuance, adjustment or termination of the Outbound Investment Registration Certificate (Outbound IRC). Such procedures will now apply only to projects meeting investment capital levels as prescribed by the Government or projects in conditional outward investment business lines under Article 41, such as banking, securities, and real estate.

For large scale outward investment projects, the new amended law requires the Ministry of Finance to report to the Prime Minister for consideration and approval prior to the issuance or adjustment to the Outbound IRC in accordance with Article 42.2 of the Law on Investment 2025.

Termination of the operation of investment projects

Article 36.2 of the Law on Investment 2025 introduces two significant changes concerning the circumstances under which the competent authorities may mandatorily terminate, or partially terminate, the operation of an investment project. Accordingly, the investment registration authority may decide to terminate or partially terminate an investment project, among other cases, in the following circumstances:

(i) where the investment project falls within a case of land revocation in accordance with the land law; and

(ii) where a project company has been dissolved but has not terminated the investment project or transferred or otherwise assigned ownership of the investment project in accordance with applicable law.

With respect to circumstance (ii), this provision helps to harmonize the Law on Investment 2025 with other relevant legislations and, at the same time, clearly delineates the legal consequences arising from the termination of the investor’s legal status. By contrast, certain concerns remain in relation to circumstance (i) above.

Under this provision, an investment project may be subject to mandatory termination even where the investor has not committed any violation and has not caused delays or land non-use. For instance, where land is recovered by the State for purposes of national defense, security, or national and public interests, the project may still be required to terminate its operations.

This is a significant point for investors to note, as it directly affects their legitimate rights and interests, particularly in cases where land recovery arises from objective factors beyond the investor’s control. Previously, pursuant to Article 48.2(dd) of the Law on Investment 2020, termination of an investment project on the grounds of violations of land regulations applied solely to cases where the land was not put into use or was put into use behind schedule in accordance with land legislation.

Although the implementing regulations (i.e. the procedures for project termination) have not yet been officially promulgated by the Government, the Law on Investment 2025 broadens the scope of such circumstances, thereby giving rise to concerns among investors.

To conclude, the Law on Investment 2025 continues Vietnam’s broader efforts to simplify administrative procedures and further refine the legal framework governing investment activities. Although the amendments are largely perceived as investor-friendly and progressive, their effectiveness in practice will ultimately depend on the clarity and timeliness of the implementing regulations, as well as the consistency and uniformity of application by authorities at both central and local levels.

It is expected that the implementing regulations guiding the Law on Investment 2025 will be promulgated in the near future, providing a clear legal basis for the consistent and effective implementation of the investment-related provisions in practice.