From June 16, 2025, enterprises in which foreign investors hold 50.01% or more of the charter capital will be identified as foreign-invested enterprises (FDI). This regulation puts an end to the previously inconsistent application in classifying enterprises with foreign capital, particularly in cases where foreign investors hold controlling power but have not yet reached the threshold of an “absolute majority.” Clarifying the 50.01% threshold is not merely a technical legal adjustment; it directly governs the application of market access conditions, investment procedures, foreign exchange management, and business transactions of enterprises in Vietnam.
This article is prepared by DNP Viet Nam Law Firm to assist enterprises and investors in correctly identifying their legal status, thereby fully recognizing potential legal consequences and providing a basis for applying and adjusting investment and business activities in accordance with the Vietnamese legal framework.
1. Threshold of foreign ownership and legal consequences for enterprises
Legal basis: Circular No. 03/2025/TT-NHNN of the State Bank of Vietnam: Regulations on the opening and use of Vietnamese dong accounts for implementing foreign indirect investment activities in Vietnam.
- Circular No. 03/2025/TT-NHNN has adjusted the criteria for determining enterprises subject to management under the foreign direct investment regime. Specifically, enterprises with foreign investors owning more than 50% of the charter capital will no longer be regarded as entities conducting foreign indirect investment, but will instead be classified as foreign direct investment enterprises.
- Clause 13 Article 4 of the 2005 Ordinance on Foreign Exchange (as amended by Clause 1 Article 1 of the 2013 Ordinance amending the Ordinance on Foreign Exchange) defines foreign indirect investment in Vietnam as the activity whereby foreign investors invest in Vietnam through the purchase and sale of securities, other valuable papers, capital contributions, acquisition of shares, and through securities investment funds and other financial intermediary institutions in accordance with the law, without directly participating in the management of investment activities.
- The adjustment of the threshold from 51% to “more than 50%” is not merely a technical change, but entails two direct legal consequences:
- First, any enterprise in which foreign investors hold a controlling ownership ratio will be brought under the foreign direct investment management regime and be subject to stricter control over foreign exchange and capital flows.
- Second, this change transforms the legal status of the enterprise in foreign exchange management relations: the enterprise is no longer managed as an entity conducting foreign indirect investment with a flexible mechanism, but is considered an FDI enterprise, resulting in more stringent requirements regarding capital accounts and the scope of transactions.
2. Direct consequences regarding the type of investment account to be used
- Enterprises in which foreign investors own more than 50% of the charter capital will no longer be eligible to continue using an indirect investment capital account (IICA), regardless of the form of investment, listing status, or the timing of the investment.
- Correspondingly, enterprises falling within the above category are required to open a direct investment capital account (DICA) at an authorized bank.
- The DICA becomes the sole lawful channel for conducting capital transactions involving foreign elements of the enterprise. Any capital transaction not conducted through the DICA carries the risk of being deemed a violation of foreign exchange management regulations, even in cases where such transaction does not substantively alter the ownership structure.
- In essence, the requirement to open a DICA reflects the State’s shift toward controlling enterprises based on the logic of “foreign direct investment capital flows”, rather than allowing enterprises to operate under the flexible mechanism of foreign indirect investment.
3. Scope of transactions required to be conducted through the DICA
3.1. Capital transactions
Capital transactions that are required to be conducted through the DICA include:
- Initial capital contributions and any increases or decreases in charter capital;
- Transfer of capital contributions or shares between foreign investors and the enterprise or with other entities;
- Foreign loans, repayment of foreign loans, and other capital transactions in accordance with foreign exchange management regulations.
3.2. Profit transactions
In addition to capital transactions, profit transactions are also required to be conducted through the DICA, including:
- Remittance of profits abroad to investors;
- Distribution of profits to foreign investors in proportion to their ownership.
For enterprises using a DICA, profit remittance is a capital transaction subject to strict control over conditions and procedures, and is not a freely transferable right.
4. Conditions for remitting profits abroad in the context of mandatory use of the DICA
Profit remittance may only be carried out when the enterprise simultaneously satisfies the following conditions:
- All tax obligations to the State of Vietnam have been fully fulfilled;
- Valid financial statements have been prepared and audited in accordance with regulations;
- The remittance transaction is conducted properly through the DICA.
“The above content is provided by DNP Viet Nam Law Firm for reference purposes only. For detailed, accurate, and tailored legal advice that meets your specific needs, please contact us using the information provided below.”
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