China to Vietnam: Key Legal Considerations for Chinese Investors Entering Vietnam

Driven by supply chain diversification and favorable trade agreements, Chinese FDI in Vietnam continues to surge. However, navigating this growth requires adapting to Vietnam’s rapidly evolving legal landscape, including the newly enacted Investment Law and corporate tax updates. This article outlines essential legal considerations for Chinese investors—covering investment structuring, manufacturing setups, tax compliance, and cross-border transactions—while highlighting practical risk management strategies for operating in Vietnam.

1.      Why Vietnam?

Vietnam’s position as a manufacturing and supply-chain hub

Vietnam sits at the centre of the regional supply-chain reconfiguration away from single-country dependence on China. Its long coastline, network of deep-water ports, growing industrial zone infrastructure, young workforce and competitive labour costs have made it a preferred landing point for manufacturing capacity that is being relocated or duplicated out of China. Vietnam’s participation in the WTO, CPTPP, RCEP and EVFTA, together with the ACFTA, gives goods legitimately manufactured in Vietnam preferential access to major export markets that is not always available to goods made in China.

2025 investment trends: China ranks second by capital, first by project count

Vietnam’s FDI data for 2025 illustrates the scale of this shift. Singapore led all sources of newly registered capital at USD 4.84 billion (27.9% of the total), followed by China at USD 3.64 billion (21%). Hong Kong, Japan, Sweden, Taiwan and South Korea ranked third through seventh. Combined registered FDI from these seven economies reached USD 17.34 billion in 2025.

FDI Registered Capital into Vietnam by Country/Territory (2025) – Top 7 Investors. Source: General Statistics Office data, as reported by vneconomy.vn.

Although China ranks second by registered capital, it tops the ranking by number of new projects licensed in 2025 – reflecting a pattern of numerous mid-sized manufacturing and trading investments rather than a small number of mega-projects. This is consistent with what most practitioners see on the ground: Chinese investment is broad-based across supporting industries, components, textiles, building materials and light manufacturing, rather than concentrated in a handful of flagship deals. The overall trend reflects both ongoing supply-chain diversification away from China and investors’ strategic use of Vietnam’s extensive FTA network to access global markets.

China–Vietnam trade and supply-chain opportunities

China remains Vietnam’s largest source of imported raw materials, components and machinery, and Vietnam is one of China’s largest trading partners in ASEAN. Many Chinese investors set up Vietnamese manufacturing or assembly operations specifically to process Chinese-origin inputs into finished goods that qualify for Vietnamese (or ASEAN) preferential origin, before exporting to the US, EU or elsewhere. This model creates real commercial value but also raises the origin, customs and transfer pricing issues discussed below.

2.      Market Access and Investment Structure

The Law on Investment No. 143/2025/QH15 (“LOI 2025”), effective from 1 March 2026, has materially changed the sequencing and scope of this process.

Market access assessment

The investor should first identify the precise business lines that will be conducted in Vietnam. A manufacturing project may involve more than the production activity itself. It may also include importation of raw materials, distribution of finished products, after-sales services, logistics, warehousing, software, technical support or retail activities. Each activity may be subject to different foreign-ownership restrictions, market-access conditions or sector-specific licences.

Although manufacturing is often open to 100% foreign ownership, projects involving controlled products, specialised technology, chemicals, telecommunications, energy, natural resources, finance, real estate or distribution require separate analysis.

Greenfield investment or acquisition

Chinese investors may establish a new subsidiary or acquire an existing company or project. A greenfield investment provides greater control over ownership, location, operations and compliance systems, while an acquisition may offer faster market entry through an existing factory, workforce, licences or supply chain. However, acquisitions carry inherited risks relating to tax, land, construction, environmental, employment, customs, IP and corporate compliance. Comprehensive due diligence and appropriate contractual protections—such as conditions precedent, warranties, indemnities and escrow—are therefore essential.

Choosing between an LLC and a JSC

• Limited Liability Company (LLC) is commonly used for a wholly foreign-owned manufacturing subsidiary or a joint venture. It generally has a simpler internal governance structure and fewer equity-transfer formalities than a joint stock company. A single-member LLC may be suitable where one Chinese parent or investment vehicle will hold all charter capital. A multi-member LLC may be used where there are several investors or a joint-venture partner.
• Joint Stock Company (JSC) may be preferable where the investor expects: multiple equity holders; successive fundraising rounds; employee or management share participation; flexible equity transfers; a future public offering; or a more formal capital-market-oriented structure. The choice should reflect the anticipated ownership structure, fundraising requirements, governance arrangements and exit strategy.

The choice should therefore be based on the anticipated ownership structure, financing strategy, governance requirements and exit plans. A JSC should not be viewed as necessary only where the investor intends to pursue an IPO, and an LLC should not be selected merely because the initial investment will be held by one shareholder.

The investor should also distinguish the corporate form from the investment structure. A 100% foreign-owned LLC, a joint-venture LLC and a JSC with foreign shareholders may all be possible, but the applicable market-access conditions, approval requirements and governance arrangements may differ.

投资者还应将公司形式与投资结构区分开来。100%外资持股的LLC、合资LLC和拥有外国股东的JSC都可能可行，但适用的市场准入条件、审批要求和治理安排可能不同。

3.      Location, Land and Manufacturing Approvals

Selecting an industrial zone

Selecting an industrial zone is a strategic decision for Chinese investors. The preferred location should reflect the project’s production model, supply-chain routes and access to suppliers, ports, labour and utilities. Northern provinces may suit projects connected with Chinese suppliers and border logistics, while southern locations may offer advantages in ports, labour and export markets. Investors should verify electricity, water, wastewater, hazardous-material facilities, transport and expansion capacity. They should also confirm the developer’s land-use rights, leasing authority, planning approvals, remaining land-use term and infrastructure commitments. Commercial promises should be recorded in binding documents, not left in marketing materials.

选择工业区对中国投资者而言是一项战略决策。首选地点应反映项目的生产模式、供应链路线以及对供应商、港口、劳动力和公用事业的接入。北部省份可能适合与中国供应商和边境物流相关的项目，而南部地点可能在港口、劳动力和出口市场方面具有优势。投资者应核实电力、水、废水、危险材料设施、运输和扩建能力。还应确认开发商的土地使用权、租赁权限、规划审批、剩余土地使用期限和基础设施承诺。商业承诺应记录在具有约束力的文件中，而非留在营销材料中。

Ready-built factory or land lease

现成厂房或土地租赁

A ready-built factory can accelerate fit-out and operations while reducing the investor’s construction responsibilities. However, the investor should verify the landlord’s leasing authority, permitted use, completion documents, structural capacity, utilities, fire safety, wastewater arrangements and alteration restrictions. The lease should allocate responsibility for maintenance, upgrades, insurance, reinstatement and inspections. A build-to-suit project offers greater control over design and expansion but carries construction, cost and approval risks. In either case, the investor should review the lease term, which is generally linked to the developer’s remaining land-use term, and should not assume that extension is automatic.

Construction and environmental requirements

Manufacturing projects should be supported by a regulatory matrix identifying the approvals required at each stage, including investment, construction, environmental, technology, fire-safety and commissioning procedures. Although the new investment framework may streamline certain licensing steps, it does not eliminate the underlying obligations. Investors should assess emissions, wastewater, waste, chemicals and energy requirements during project design and budget for appropriate treatment systems. Fire-safety design, equipment, access, storage and acceptance should also be planned early. Changes to the factory layout or production process after approval may require additional reviews and delay commissioning.

Key legal issues when selecting a location

• Confirm the land/factory is free of disputes, mortgages or third-party rights, and that the sub-lessor (IZ developer) itself holds valid land-use rights for the relevant plot;
• Check the zone’s planning approval covers the intended manufacturing activity;
• Verify electricity, water and wastewater capacity against the project’s actual production needs;
• Where land conversion is involved, confirm whether the relevant provincial authority has final decentralised approval power under LOI 2025 or whether the project’s scale still requires central-level sign-off;
• Confirm any incentive commitments made by the IZ developer or local authority are properly reflected in the IRC, not just in marketing materials.

4.      Tax & Investment Incentives

Vietnam’s tax framework for foreign-invested enterprises (FIEs) has changed materially over the past 18 months, and Chinese investors should model their structure in the current rules.

Corporate Income Tax, Value-Added Tax and Foreign Contractor Tax

• Corporate Income Tax (CIT): the standard rate is 20%. A new CIT Law (Law No. 67/2025/QH15), replacing the previous CIT Law in its entirety, took effect on 1 October 2025 and applies from the 2025 tax year, with implementing guidance under Decree 320/2025/ND-CP and Circular 20/2026/TT-BTC. Reduced rates of 15% and 17% apply to micro‑ and small enterprises with annual revenue up to VND 3 billion and up to VND 50 billion, respectively, subject to statutory conditions including related‑party restrictions. Preferential rates (e.g. 10%) remain available for qualifying sectors and/or locations.
• Value-Added Tax (VAT): the standard rate is 10%, but a reduced 8% rate applies to most goods and services and has been extended by Resolution 204/2025/QH15 and Decree 174/2025/ND-CP through 31 December 2026, with certain sectors (telecommunications, banking/finance, insurance, real estate, and a few others) excluded from the reduction.
• Foreign Contractor Tax (FCT): applies where the Vietnamese company pays a foreign entity (including its Chinese parent or affiliates) for services, royalties, interest, or certain goods supplies with services attached. Typical rates for services are around 5% deemed CIT plus 5% deemed VAT, but rates vary by activity and by whether the foreign contractor elects the deduction method or the direct/withholding method.

Transfer pricing

Chinese-invested companies often conduct related-party transactions involving imports, exports, services, IP licences, loans and cost-sharing. A transfer-pricing policy should be prepared before the first intercompany invoice and supported by a functional analysis of the parties’ functions, assets and risks. The policy should address pricing, service fees, financing, freight, warranties, year-end adjustments, comparables and documentation. Intercompany pricing must reflect the group’s commercial arrangements and actual operations in Vietnam. Customs valuation, accounting records, transfer-pricing documentation and tax filings should also be consistent, as unexplained differences may attract scrutiny from tax or customs authorities.

Import duties and incentives

Potential exemptions may apply to qualifying fixed assets imported for an investment project and materials imported for the manufacture or processing of export goods. Eligibility depends on the nature of the goods, the investment project, the intended use and the relevant customs procedures.

Before importing machinery or materials, the investor should confirm whether an exemption list, registration, notification or other procedure is required. It should also maintain records linking the imported goods to the approved project and production process.

Other incentives may arise from supporting industries, high-technology activities, encouraged sectors, economic zones and disadvantaged locations. Each incentive should be assessed together with its continuing conditions. Failure to satisfy implementation, accounting, production or reporting requirements may affect the benefit or result in a tax adjustment.

5.      China–Vietnam Cross-Border Transactions

Imports from China

Imports of raw materials, components and machinery from China should be reviewed for tariff classification, customs value, origin, import duty, import VAT, product licences, conformity assessment, specialised inspection and labelling.

Where the Chinese supplier is a related party, the Vietnamese company should ensure that the customs valuation position is consistent with the transfer-pricing policy and accounting records. The company should have supporting documentation for the HS classification, product specifications, customs value and origin of the goods.

A practical import-control process should be established before the first shipment. It should provide for pre-import classification, review of technical documents, confirmation of licensing requirements, approval of customs values, verification of supplier documentation and retention of records for post-clearance inspection.

Supply-chain and local-value analysis

Vietnam’s dependence on imported inputs may affect both production cost and origin qualification. These issues should be assessed together when the manufacturing process is designed. The investor should map the bill of materials, identify the origin of each significant input, describe the processing steps performed in Vietnam and calculate the value added in Vietnam. It should also determine the tariff classification of the finished product and the product-specific rule of origin applicable to each export market. A low level of local processing may make it difficult to obtain or defend a certificate of origin, particularly for light assembly, repackaging or simple processing. The investor should therefore avoid treating origin documentation as a post-production customs matter.

Rules of Origin (ROO) and Certificate of Origin (C/O) risk

Since April 2025, Vietnam has significantly strengthened controls on the origin of goods and materials amid concerns over origin fraud and tariff evasion. Goods that use Chinese-origin inputs but are insufficiently processed or transformed in Vietnam before export to the U.S. face heightened risk of being classified as transshipped goods, which can attract tariffs of up to 40%. Certificates of Origin that are falsified, or that lack sufficient evidence of local value-added content, are now under close scrutiny by both Vietnamese and U.S. customs authorities. Investors – particularly trading companies and lighter-assembly operations – must maintain robust, well-documented records of local processing and value addition (bills of materials, production records, and value-added calculations for each SKU) from the first shipment, not retroactively, to withstand this scrutiny.

Technology, services and intellectual-property payments

Cross-border payments for technology, trademarks, software, technical services, research and development or management support should be reviewed for FCT, transfer pricing, foreign exchange, withholding, deductibility, intellectual-property ownership and technology-transfer requirements.

The parties should clearly define the licensed or transferred rights, territory, duration, deliverables, payment basis, personnel involved and ownership of developments. Where technology is transferred or licensed, the investor should determine whether registration or approval is required and whether the agreement is consistent with the actual use of the technology in Vietnam.

Exposure to trade-remedy and anti-circumvention investigations

Factories with low domestic value-added content are increasingly likely to become the subject of anti-circumvention or trade-remedy investigations by importing-country authorities, which can disrupt export operations if origin documentation is not prepared well in advance. This risk should be assessed at the manufacturing-process design stage – e.g., which processing steps are actually performed in Vietnam, and how they are documented – rather than only at the point an investigation is opened.

6.      Key Legal Risks & Pre-Investment Checklist

General legal and operational risks

Most commercial and labour disputes between Chinese investors and Vietnamese counterparties stem from differences in language and in legal-administrative systems, creating real risk of misunderstanding contracts and procedures; many investors lack a bilingual Vietnamese–Chinese legal team, which creates difficulty from the very first step of investment registration. Recognition and enforcement of foreign arbitral awards and court judgments in Vietnam also remains imperfect, which can significantly prolong dispute resolution – governing law and the dispute-resolution mechanism (including choice of arbitration seat and institution) should be considered carefully at the contract-drafting stage, not left as boilerplate.

The “nominee ownership” risk

Because certain business lines remain restricted for foreign investors, some Chinese investors have used a Vietnamese individual to hold shares or company registration on their behalf (“nominee arrangements”). This carries substantial legal risk: if the nominee later reneges, the real investor can lose control of the company entirely and will find it very difficult to prove ownership or recover invested capital through litigation, since such arrangements are generally not enforceable as intended and offer little practical protection. Investors should structure around restricted sectors through a compliant joint venture, a licensed local partner, or by waiting for the sector to open, rather than through nominee shareholding.

Licensing and market-access risks

Licensing risks may arise if a foreign-invested enterprise operates outside its registered business lines or the objectives stated in its IRC. Investors should also allow sufficient time for projects in conditional sectors or those requiring investment-policy approval, even under the streamlined framework of the 2025 Law on Investment. Faster initial licensing does not eliminate ongoing regulatory scrutiny. Authorities may continue to monitor land use, environmental compliance, capital contribution, periodic reporting, tax obligations and project implementation. An investment licence should therefore be treated as the beginning of an ongoing compliance relationship, not the end of the licensing process.

Tax risks

Tax risks may arise where related-party imports, exports, service fees or royalties are not supported by contemporaneous transfer-pricing documentation. In addition, FCT may be under-withheld on payments to the Chinese parent for services, royalties or interest, potentially resulting in tax arrears, interest and penalties.

Land and environmental risks

Land-related risks include failing to verify the industrial-zone developer’s land-use rights or sub-lease authority before signing, as well as relying on infrastructure that cannot support the project’s actual production requirements. Any deferral of EIA or technology appraisal procedures under LOI 2025 should not be treated as an exemption from environmental compliance or as justification for under-budgeting treatment systems and related approvals.

Trading and manufacturing-specific risks

Incomplete rules-of-origin and certificate-of-origin records may expose exports to transshipment allegations and additional duties in the importing market. Factories with limited Vietnamese processing may also face anti-circumvention or other trade-remedy investigations. Investors should therefore assess Vietnam’s reliance on imported inputs when modelling production costs, local value addition and origin compliance together.

Checklist of what Chinese investors should do before investing

• Confirm the target sector and any foreign ownership or conditional-sector restrictions and select the LLC/JSC structure and (if applicable) a genuine, licensed local partner accordingly. Do not use nominee shareholding as a workaround for a restricted sector.
• Decide subsidiary vs. acquisition, and if acquiring, scope tax, land, labour and beneficial-ownership due diligence up front.
• Determine whether the project can use the LOI 2025 pre-IRC establishment route, and if so, calendar the 12-month deadline to complete the IRC.
• Shortlist industrial zones based on logistics to China/seaports, utility capacity and available incentives, and verify the developer’s land-use rights and zone planning approval.
• Put in place a transfer pricing policy and supporting documentation for all intended flows with the Chinese parent before the first intercompany invoice is issued.
• Design the manufacturing process and its documentation (bills of materials, production records, value-added calculations) with rules-of-origin defensibility in mind from day one, especially where Chinese-origin inputs form a significant share of the finished product.
• Choose governing law and a dispute-resolution mechanism deliberately, with enforceability of the outcome in Vietnam (or against Vietnamese assets/counterparties) in mind.
• Build realistic licensing, construction and commissioning timelines into the project schedule, and budget internal legal, tax and environmental compliance capacity for the full life of the project – not only the licensing stage.

Outlook

Vietnam remains an important destination for Chinese investors seeking to establish or diversify manufacturing and regional supply-chain operations. The opportunity is supported by Vietnam’s geographical position, industrial infrastructure and trade-agreement network. The legal and compliance requirements for foreign-invested projects are nevertheless becoming more structured. Investors should not rely solely on an investment licence, a proposed tax incentive or an advertised factory. Market access, structure, site selection, environmental compliance, customs, origin documentation, related-party pricing, employment and dispute resolution should be assessed as an integrated workstream. A project-specific legal, tax, customs and technical review should be completed before incorporation, acquisition, signing land or factory arrangements, or commencing material cross-border transactions.

This article is for general information purposes only and does not constitute legal advice. Vietnam’s regulations on investment, land use, tax and rules of origin are evolving rapidly, and Chinese investors should seek specific advice tailored to their investment structure, sector and location before proceeding.