Under the Law on Investment 2025, foreign investors and foreign-invested economic organizations are two subjects that are often confused but are governed by different applicable regulations. This article, prepared by DNP Viet Nam Law Firm, aims to clarify the fundamental differences between these two subjects under the current legal framework.
I. Definitions
1. Foreign Investor
Pursuant to Clause 19, Article 3 of the Law on Investment 2025, a foreign investor means an individual holding a foreign nationality or an organization established under foreign law that conducts investment and business activities in Vietnam.
Practical examples:
- Organizations: Samsung Electronics Vietnam, Intel Products Vietnam, etc.
- Individuals: Shin Dong Bin – Chairman of Lotte Group, Tony Tan Caktiong – Founder of Jollibee, etc.
2. Foreign-Invested Economic Organization
Pursuant to Clause 22, Article 3 of the Law on Investment 2025, a foreign-invested economic organization means an economic organization having foreign investors as members or shareholders.
Practical examples: Saigon Beer – Alcohol – Beverage Corporation, Vinamilk.
II. Comparison
1. Similarities:
– Both are considered investors pursuant to Clause 18, Article 3 of the Law on Investment 2025.
– Both conduct business activities within the territory of Vietnam.
– Both involve foreign elements.
2. Differences:
| Criteria | Foreign Investor | Foreign-Invested Economic Organization |
|---|---|---|
| Entity | Individual, organization | Organization |
| Ownership structure | 100% foreign ownership as they are foreign individuals or organizations established under foreign law | Not required to be 100% foreign-owned; may include state capital and domestic private capital |
| Shareholders | Foreign individuals, organizations established under foreign law; no domestic capital | Domestic investors, the State, and foreign investors |
| Restrictions | Always subject to the list of sectors prohibited from market access and sectors subject to conditional market access | Only subject to such lists in certain cases depending on the foreign ownership ratio |
| Investment Registration Certificate | Mandatory to obtain an Investment Registration Certificate | Not mandatory, except in the following cases: – Foreign investors hold more than 50% of charter capital or a majority of general partners are foreign individuals in the case of a partnership; – An economic organization specified above holds more than 50% of charter capital; – Foreign investors and such economic organizations hold more than 50% of charter capital |
| Market access conditions | Must always satisfy market access conditions for foreign investors when engaging in sectors listed as restricted | Only required to satisfy such conditions in the above-mentioned cases |
III. Conclusion
For foreign investors, under the Law on Investment 2025, this group must satisfy multiple conditions when conducting investment activities. They are not permitted to access sectors that are not open to foreign investors and must avoid engaging in prohibited investment activities in Vietnam.
For foreign-invested economic organizations, under the Law on Investment 2025, although they are also subject to relatively complex conditions, they face fewer restrictions compared to foreign investors. The requirement to comply with additional conditions and procedures depends on the foreign ownership ratio. Such organizations must satisfy additional requirements relating to the Investment Registration Certificate and market access conditions depending on the level of foreign ownership.
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