Vietnam has significantly changed its investment framework in less than two years driven by the Law on Investment 2025 (Law No. 143/2025/QH15), the 2025 Corporate Income Tax Law, the Digital Technology Industry Law, the new Personal Income Tax regime and a number of implementing decrees. Together, these reforms affect how foreign manufacturers enter the market, what taxes they pay and how they are monitored after operations begin.
This article looks at the incentives currently available to manufacturers, the structuring decisions that can affect eligibility, and the licensing, site selection and compliance requirements that investors need to consider from the outset.
Vietnam’s investment momentum
The investment figures show how quickly interest in Vietnam is growing. In the first seven months of 2026, the country recorded USD 38.06 billion in registered foreign investment, an increase of 58% compared with the same period last year. Disbursed investment reached USD 15.20 billion, with 82.6% going into processing and manufacturing. From 1 July 2026, the number of conditional business sectors will also fall from 237 to 198, with 38 sectors removed from the list altogether.
At the same time, Resolution 10-NQ/TW (Resolution 10), issued on 8 June 2026, sets an ambitious target of USD 200–300 billion in registered investment between 2026 and 2030. Around 75% is expected to come from developed economies.
For manufacturers considering Vietnam, the key issue is no longer simply whether the country offers attractive investment conditions. The more important question is which reforms apply to a particular project and which decisions need to be made before the investment application is submitted.
Incentives available to manufacturing investors
Vietnam offers manufacturers a range of tax and financial incentives, spanning investment support funds, corporate and personal income tax relief, R&D deductions and import duty exemptions. The specific incentives available depend on the sector, location and scale of the investment.
Vietnam Investment Support Fund
The government issued Decree No. 182/2024/ND-CP establishing an Investment Support Fund for eligible high-tech enterprises. Effective from fiscal year 2024, the Fund provides support for operating and initial investment costs, with specific provisions for R&D centres in the semiconductor and AI sectors. Eligible companies may receive support for up to five years, and the cash support is exempt from corporate income tax.
The Law on Investment 2025
Effective from 1 March 2026, the Law on Investment 2025 reverses that logic to allow foreign investors to establish an enterprise first and apply for the IRC for the project later, while still meeting market access conditions at the incorporation stage.
The Digital Technology Industry Law
It introduces additional incentives for certified digital technology enterprises, including a two-year full CIT exemption, followed by a 50% reduction for four years, as well as land rent exemptions. Enterprises in manufacturing, construction or transportation may also qualify for additional CIT reductions if they employ significant numbers of female staff or ethnic minorities.
The 2025 Law on Corporate Income Tax (CIT)
It retains preferential CIT rates of 10% and 17% and tax holidays for qualifying investment projects in encouraged sectors and locations, on top of tiered SME rates of 15% and 17% under the 2025 CIT Law. Large MNE groups with global revenues above EUR 750 million are subject to Vietnam’s Global Minimum Tax rules, which can neutralise preferential CIT rates below 15%.
R&D fund and super-deduction
Businesses may allocate up to 20% of annual pre-tax profits into a tax-deductible internal R&D fund. Under Decree 320/2025, qualifying R&D expenses may also be deducted at up to 200% of actual expenditure, provided the enterprise is not in a net loss position after applying the deduction.
The Personal Income Tax Law
The Personal Income Tax Law, effective from 1 July 2026, exempts income derived from scientific research, technology and innovation activities. Highly skilled technology professionals and high-quality digital technology workers will also enjoy a five-year exemption on employment income.
Import tax incentives
They have been expanded to cover machinery, equipment, materials and components used directly in science and technology activities and the digital technology industry. Scientific organisations, high-tech enterprises and newly established high-tech manufacturing projects will receive import tax exemptions for five years from the start of research or production activities.
Market entry and entity structuring for manufacturing
Manufacturers entering Vietnam must also decide how to structure their entity and where they can legally produce, decisions that shape tax treatment, operational flexibility and compliance obligations from the outset.
These decisions need to be made in the right sequence, as Thao Nguyen, Senior Manager, Licensing and Corporate Secretarial, explains:
“The most expensive mistakes we see are not regulatory, they are sequencing mistakes. Investors who treat licensing as paperwork to be handled after the site and structure are chosen end up rebuilding both. The ones who succeed decide three things before they file anything: where the factory sits, whether it is an EPE and how origin will be documented for every product line. Get that sequence right and Vietnam is one of the faster markets in Asia to enter. Get it wrong and you spend your first-year unwinding decisions instead of producing.”
Licensing and key considerations for Export Processing Enterprises (EPEs)
Vietnam allows manufacturing investors to register as an EPE, a structure designed for companies producing exclusively for export. EPEs enjoy import duty and VAT exemptions on raw materials and equipment but must meet strict licensing and operational conditions.
To qualify, an EPE must:
- Declare EPE status at the time of IRC/ERC registration
- Be located in an export processing zone or a customs-controlled area within an industrial zone
- Obtain customs approval and implement separate accounting and inventory systems
While offering tax advantages, EPEs face limitations:
- Domestic sales are treated as imports and taxed accordingly
- Subject to tight customs supervision and reporting
- Cannot retroactively apply for EPE status after company setup
EPE is best suited for export-heavy manufacturers. Investors should decide early, during licensing and site selection, to avoid restructuring costs later.
Manufacturing activities open to foreign investors
In most cases, foreign investors can establish 100% foreign-owned manufacturing entities in Vietnam, provided their business lines do not fall under sectors that are restricted or prohibited under Vietnamese law.
While Vietnam maintains an overall open policy towards manufacturing, especially for export-oriented industries, investors should not assume automatic access. Legal due diligence on market entry conditions, WTO commitments and licensing feasibility is essential to ensure a smooth approval process and long-term operational certainty.
Production activities in Vietnam are not specifically committed to foreign investors, but can be classified into three groups:
Prohibited manufacturing industries
This group includes production activities that are prohibited for both local and foreign-invested companies (such as the production of prohibited drugs, chemicals or minerals) as well as those that are prohibited for foreign-invested companies only (such as the manufacture of military equipment and weapons for export).
Conditional/Restricted manufacturing industries
This group includes production activities that are subject to conditions for all companies, regardless of whether they are domestic or foreign-invested in Vietnam (such as the manufacture of cosmetics, automobiles and aircraft) as well as those that are subject to conditions for foreign-invested companies only (such as the production of video recordings, television programmes, paper, cigarettes and building materials).
Unconditional manufacturing industries
This group includes activities that do not fall into either of the two groups listed above. It encompasses most common manufacturing activities in Vietnam, such as the production of phones, garments, plastic packaging, furniture and stationery.
Regulatory and practical considerations for production location
Manufacturing enterprises are typically permitted to establish production facilities in areas designated according to state and provincial planning. These areas are generally divided into two categories: those located in industrial zones, such as industrial parks, economic zones, export processing parks and high-tech parks, and those located outside industrial zones, such as industrial clusters, residential areas and urban areas.
While both options exist in theory, government policy strongly favours the concentration of manufacturing activities within industrial zones. These areas offer purpose-built infrastructure such as electricity, water, waste treatment, fire safety and better environmental control. They also facilitate access to logistics networks, suppliers and customs procedures, which are especially important for export-oriented businesses.
In reality, obtaining regulatory approval for production facilities outside industrial zones is increasingly difficult. Local planning authorities typically discourage new factories in residential or urban areas due to environmental and zoning concerns. As a result, manufacturing outside of designated industrial zones is rarely approved, except for certain small-scale or legacy projects.
Environmental protection requirements for project approval
Environmental compliance is not merely a box-ticking exercise; it can make or break the approval of a manufacturing project in Vietnam. The government prioritises projects that apply clean technology and avoid resource depletion, in line with its broader green development strategy.
Under the 2020 Law on Environmental Protection, investment projects are classified into four groups (I to IV) based on potential environmental risks. This classification determines the level of environmental assessment required:
Projects in Group I–III must obtain an Environmental Permit before construction or operation, while those that generate waste but fall outside Group I–III must still undergo Environmental Registration.
In practice, manufacturing plants using hazardous chemicals or discharging wastewater, exhaust or solid waste will often fall under Group I or II, requiring early and detailed environmental impact assessment, ideally even before applying for the IRC.
Key operational requirements for new market entrants
New entrants to the Vietnamese market, particularly foreign-invested manufacturers, must comply with several foundational requirements to operate legally and efficiently:
- Capital contribution and profit repatriation must be processed through a dedicated capital account at a licensed bank. This ensures transparency and compliance with Vietnam’s foreign exchange control regulations.
- Borrowing and repayment of loans, whether from domestic banks or foreign affiliates, must follow strict procedures, including potential registration with the State Bank of Vietnam and regular reporting, depending on the loan type and duration.
- Use of foreign currency in transactions is tightly regulated. In most domestic transactions, the use of Vietnamese Dong (VND) is mandatory, even if the parties agree on pricing in USD or EUR. Only certain cross-border payments and imports may legally involve foreign currencies.
- Import and export activities, from sourcing production materials to shipping finished goods, require engagement with Vietnam Customs. This includes proper declarations, duty payments (if applicable) and compliance with technical regulations and trade documentation.
Licensing and operational practices for goods’ origin compliance
To manage origin compliance effectively, manufacturers should consider:
- Integrating origin qualification into the investment and factory design phase, rather than post-production.
- Building internal SOPs to ensure supply chain transparency and proper C/O handling.
- Structuring contracts with foreign buyers to clarify obligations relating to origin status.
- Training staff to manage regulatory inquiries, especially in sensitive markets like the U.S.
- Seeking advance rulings or legal opinions for high-value, mixed-origin product lines.
Acclime supports foreign manufacturers across each stage of establishing and operating in Vietnam. We advise on entity structuring and investment registration, EPE qualification, incentive eligibility and application, industrial zone selection, environmental permitting and the customs and origin compliance frameworks that determine whether an export strategy holds up under scrutiny. Our teams give investors the clarity to build in Vietnam with confidence.
Reach out to our experts:
- Rizwan Khan – Managing Partner – r.khan@acclime.com
- Thao Nguyen – Senior Manager, Licensing and Corporate Secretarial – t.nguyen@acclime.com
