In the context of deep international economic integration, many countries have developed Free Trade Zone (FTZ) as an important instrument to attract investment capital, Trade institutions, and global Trade service providers.
In Vietnam, the research and development of international Trade centers and regional Trade centers has been receiving special attention from the Party and the State, accompanied by breakthrough pilot mechanisms and policies. One of the key concerns for investors is the procedure for establishing enterprises within Free Trade Zone.
In this article, Siglaw Firm provides essential information regarding the procedures for establishing enterprises in Free Trade Zone.
What is Free Trade Zone (FTZ)?
Free Trade Zone (FTZ) is a designated area in which the State permits the application of special regulatory regimes on investment, finance, taxation, foreign exchange, and legal governance, with the aim of creating a flexible, competitive business environment aligned with international standards. Enterprises operating within an FTZ typically enjoy more preferential policies compared to ordinary areas, particularly in the finance, banking, and investment sectors.
Currently, Vietnam does not have a standalone law directly governing Free Trade Zone. The establishment and operation of enterprises within an FTZ are based on the following legal framework:
- Law on Enterprises 2020;
- Law on Investment 2020;
- Specialized laws such as the Law on Securities, Law on Credit Institutions, and Law on Anti-Money Laundering;
- Resolutions of the National Assembly and the Government on special and pilot mechanisms and policies (issued for each specific Trade center).
From a legal perspective, enterprises established in Free Trade Zone remain Vietnamese enterprises or foreign-invested enterprises, incorporated under general regulations, but operating within a zone subject to special management mechanisms and incentives.
Eligible Entities for Establishing Enterprises in Free Trade Zone
Pursuant to the Law on Enterprises 2020 and the Law on Investment 2020, the following entities are eligible to establish enterprises in Free Trade Zone, unless otherwise restricted by law:
Domestic Investors
- Individuals holding Vietnamese nationality;
- Organizations established and operating under Vietnamese law.
Domestic investors are entitled to establish enterprises and register operations in an FTZ in accordance with the principle of freedom of business in sectors not prohibited by law.
Foreign Investors
- Individuals holding foreign nationality;
- Foreign organizations.
Foreign investors establishing enterprises in Free Trade Zone must comply with:
- Market access conditions applicable to foreign investors;
- Foreign ownership ratio limitations (if any).
Trade Institutions and Intermediary Organizations
- Banks and credit institutions;
- Securities companies and fund management companies;
- Investment funds and asset management funds;
- Fintech, insurtech, and regtech enterprises.
These entities are permitted to operate only upon full compliance with statutory conditions and the issuance of relevant sector-specific licenses in accordance with applicable laws.
Procedures for Establishing an Enterprise in Free Trade Zone
Step 1: Approval of Investment Policy (if applicable)
Under the Law on Investment 2020, certain large-scale projects or projects that may affect national Trade and monetary security are required to obtain investment policy approval from:
- The National Assembly;
- The Prime Minister;
- Or other competent authorities.
→ Not all projects in an FTZ are subject to this requirement.
Step 2: Issuance of the Investment Registration Certificate (IRC)
An Investment Registration Certificate (IRC) is required in the following cases:
Investment projects of foreign investors;
Investment projects of economic organizations where:
Foreign investors hold more than 50% of charter capital, or where a majority of general partners are foreign individuals (in the case of partnerships);
Economic organizations hold more than 50% of charter capital;
Foreign investors and economic organizations jointly hold more than 50% of charter capital.
Step 3: Issuance of the Enterprise Registration Certificate (ERC)
After obtaining the IRC (if required), investors must proceed with enterprise registration in accordance with the Law on Enterprises 2020 to obtain the Enterprise Registration Certificate (ERC).
Step 4: Post-establishment Procedures
- Opening of an investment capital account (for foreign investors);
- Tax registration and e-invoice registration;
- Obtaining sub-licenses for conditional business lines, where applicable.
In essence, the procedure for establishing an enterprise in Free Trade Zone is not separate from Vietnam’s general enterprise and investment legal framework, but rather operates within a special regulatory and incentive regime. A clear understanding of the FTZ concept, accurate identification of eligible investors, and strict compliance with procedural requirements are critical factors in minimizing legal risks and effectively leveraging the advantages offered by Free Trade Zone.
The above constitutes the complete information provided by Siglaw Law Firm regarding the procedures for establishing enterprises in Free Trade Zone. Should you require further consultation, please feel free to contact Siglaw Firm for comprehensive and free legal advice.
Head Office in Hanoi: No. 44/A32 – NV13, Area A Geleximco, Le Trong Tan Street, Tay Mo Ward, Hanoi, Vietnam.
Email: vphn@siglaw.com.vn
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