Accurately identifying the subjects to which the 2020 Investment Law applies is a crucial first step for individuals and organizations to establish their legal rights and obligations when conducting business activities. According to Article 2 of the 2020 Investment Law, the scope of regulation is not limited to domestic enterprises but also extends to economic entities with foreign elements. This article will analyze in detail the specific groups of subjects and the particular regulations related to economic organizations under the current legal system.
Original legal basis for the scope of application
To ensure accuracy in implementation, investors need to directly compare the provisions with the original terms in the current investment legal system:
- Article 2 of the 2020 Investment Law: Directly stipulates the entities subject to the Law's regulations.
- Article 3 of the 2020 Investment Law: Provides detailed explanations of terms related to domestic investors and foreign investors.
- Article 23 of the 2020 Investment Law: Regulations on the implementation of investment activities by economic organizations with foreign investment capital.
General provisions regarding the scope of application are specified in Article 2.
The 2020 Investment Law comprehensively defines the scope of application to encompass all entities participating in the investment cycle. Specifically, the groups of entities include:
- Investors conduct investment and business activities in Vietnam and from Vietnam abroad.
- The competent state agency is responsible for managing, approving, and supervising investment and business activities.
- Other organizations and individuals directly or indirectly involved in investment and business activities.
This clear distinction makes it easier for entities to compare administrative procedures and enjoy preferential policies appropriate to their legal status.
Analysis of domestic investor groups
According to Clause 20, Article 3 of the 2020 Investment Law, domestic investors are the core force in the economy, including individuals and legal entities that meet the following criteria:
- Individuals must be Vietnamese citizens. Note that the Law does not impose conditions regarding place of residence or permanent residence on individuals when determining the eligibility of domestic investors.
- An economic organization that does not have foreign investors as members or shareholders.
- Economic organizations that are legally established in Vietnam and meet the capital ownership standards as stipulated by enterprise law.
For this group, the process of implementing updated administrative procedures up to 2026 is often simplified, especially in accessing business investment sectors that do not require specific conditions.
Foreign investors and criteria for identification
Foreign investors are subject to numerous specific regulations aimed at ensuring economic security while still creating space for development:
- Foreign nationals participating in capital contributions, purchasing shares, or directly implementing projects in Vietnam.
- Organizations established under foreign law that conduct investment and business activities in Vietnam.
- The criteria for determination are based on passports for individuals or business registration certificates/equivalent documents for organizations (Source: Investment Law 2020).
Accurately identifying foreign investors is the basis for regulatory agencies to apply national security assessment procedures in capital transfer transactions or project adjustments.
Foreign-invested economic organizations
This is a group of stakeholders with unique characteristics, requiring careful analysis of ownership ratios to determine the appropriate procedures:
- An economic organization in which foreign investors hold more than 50% of the charter capital or where the majority of the partners are foreign individuals.
- An economic organization that meets the above criteria holds 50% or more of the charter capital.
- When these organizations undertake new investment projects or contribute capital or purchase shares, they must comply with the same conditions and procedures as foreign investors as stipulated in Article 23 of the 2020 Investment Law.
This classification aims to ensure transparency in FDI flows and help the government effectively manage sensitive sectors.
Comparing benefits among different target groups.
To provide a visual overview of the differences in legal approaches, the table below summarizes the key characteristics based on practical application:
| Comparison criteria | Domestic investors | Foreign direct investment (FDI) economic organizations | Foreign investors |
|---|---|---|---|
| Establishment procedures | Regular business registration | IRC may be needed depending on the circumstances. | An investment project or M&A transaction must be carried out. |
| Access to the profession | Most industries are not prohibited. | According to international commitments and FTAs | Restrictions under the Market Access Category |
| Investment incentives | By geographical area and sector | Prioritize high technology and green technologies. | According to the Investment Protection Agreement |
Note: Whether an Investment Registration Certificate (IRC) is required or whether M&A (mergers and acquisitions) procedures are necessary will depend on the ownership stake and the specific business sector. Not all cases involving foreign elements require an IRC before business establishment.
Common mistakes when identifying objects
In legal consulting practice, many businesses often make the following mistakes when determining the scope of application:
- Confusing FDI enterprises with Vietnamese companies that have a low percentage of foreign shareholders (below 50% of the total): These enterprises are still subject to the same procedures as domestic investors.
- Confusion between new investment procedures and equity investment procedures: Each form has different appraisal processes and market access conditions.
- Ignoring the specific conditions of Free Trade Agreements (FTAs) when determining the rights of foreign investors.
The checklist automatically identifies the target audience for the business.
Businesses can assess their legal standing by asking the following four questions:
- Is the investor a Vietnamese or foreign national?
- What is the percentage of foreign investor ownership in the economic organization (above or below 50%)?
- Is the proposed business sector included in the list of restricted market access categories for foreign investors?
- Does the project plan to be implemented in an area that requires a national defense and security assessment?
Accurately answering these questions will help investors identify the right target audience and prepare the most optimal legal documentation.
Conclusion on the scope of application of the 2020 Investment Law
Identifying the correct scope of application is key for businesses to protect their legal rights and take advantage of government incentives. In the context of 2026, when the electronic processing of documents becomes mandatory, a clear understanding of their legal position will significantly shorten the time required for procedures. Investors should regularly refer to implementing guidelines to ensure all investment activities remain within the legal framework.
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Content production is overseen by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
