Legal Due Diligence Checklist for Foreign Investors in Vietnam (2025 Update)

Key Takeaways

Vietnam’s 2025 legal reforms demand continuous due diligence, especially in high-growth sectors like real estate and manufacturing.
Investors must verify IP rights, beneficial ownership, and compliance with labor, tax, and environmental laws.
Clear contracts, local legal expertise, and robust dispute resolution strategies are critical to mitigate investment risks.

In the context of Vietnam’s rapidly evolving legal and economic environment, legal due diligence has become a critical imperative for foreign investors looking to enter or expand within the Vietnamese market in 2025. As the nation positions itself as a strategic hub for global manufacturing, high-tech innovation, and regional supply chain relocation, Vietnam is simultaneously undertaking robust legal reforms that directly impact foreign direct investment (FDI) activities. These reforms—driven by Vietnam’s international trade commitments, digital transformation agenda, and the need to enhance regulatory transparency—have introduced significant complexities to the investment process, particularly for cross-border mergers, acquisitions, and greenfield investments.

Legal Due Diligence Checklist for Foreign Investors in Vietnam (2025 Update)

This 2025 update of the legal due diligence checklist is designed as a comprehensive resource for foreign investors, legal advisors, and corporate decision-makers to navigate Vietnam’s business laws with confidence. It reflects not only legislative developments in investment, enterprise, real estate, and labor law, but also the broader regulatory expectations emerging from government initiatives such as the e-ID system (VNeID), mandatory Ultimate Beneficial Ownership (UBO) disclosures, and environmental compliance under the Extended Producer Responsibility (EPR) framework.

Vietnam attracted over USD 21.5 billion in FDI in the first half of 2025—a 32.6% year-on-year increase—demonstrating the country’s strong momentum and its ability to weather global economic uncertainties. The manufacturing and processing industries remain the primary magnets for foreign capital, while real estate, renewable energy, logistics, and digital services are witnessing renewed investor interest. However, this investment success is accompanied by increasing legal scrutiny, regulatory tightening in sensitive sectors, and a surge in commercial and labor disputes, many involving foreign elements. According to the Vietnam International Arbitration Centre (VIAC), legal disputes rose by 46.2% in 2023, with international investors involved in a significant portion of the caseload.

For foreign investors, the stakes are higher than ever. Conducting legal due diligence is no longer a box-ticking exercise—it is a strategic, risk-mitigation imperative that must be sector-specific, forward-looking, and rigorously aligned with Vietnam’s updated legal architecture. Investors must now assess not only statutory compliance and contract enforceability, but also legal risks stemming from shifting policy priorities, hidden ownership structures, environmental liabilities, labor disputes, and digital governance readiness.

This detailed guide explores the most critical elements of legal due diligence for foreign investors entering Vietnam in 2025. It provides practical insights into:

How recent legal reforms affect FDI approval, licensing, and corporate governance
What legal red flags to look for in M&A transactions, land-use rights, labor contracts, and environmental obligations
How to adapt due diligence strategies for high-risk sectors such as banking, real estate, and tech
Why leveraging local legal counsel and up-to-date compliance intelligence is essential for long-term success

To support data-driven decision-making, this guide also includes tables, legal risk matrices, and updated checklists tailored for foreign investors exploring equity investments, joint ventures, acquisitions, and new company formation in Vietnam.

Key Topics Covered in This Blog:

Legal Due Diligence Focus Areas	Relevance in 2025	Practical Implications
Corporate Structure & Licensing	Critical under revised Enterprise Law	Verification of business licenses, UBO compliance, and charter capital
Contractual Obligations	High due to dispute surge	Review of major contracts, enforceability clauses, and arbitration provisions
Labor Compliance	Newly revised Labor Law 2025	Examination of employment contracts, foreign worker permits, and union policies
Land and Real Estate Rights	Affected by the 2025 Land Law & Real Estate Law	Validation of land-use certificates, zoning, and project approvals
Intellectual Property	Ongoing infringement risks	Confirmation of IP registrations and existing or potential litigation
Environmental & ESG Factors	EPR and new EIA rules apply	Assessment of waste treatment, emission controls, and stakeholder consultation processes
Tax & Financial Compliance	Subject to stricter audits	Review of tax filings, transfer pricing records, and financial statements

In an era where legal compliance is intertwined with reputational risk, deal success, and operational continuity, foreign investors must adopt a comprehensive, adaptive approach to legal due diligence in Vietnam. This blog serves as both a strategic reference and a practical checklist to help navigate the regulatory terrain and ensure investments are not only profitable but also legally sound and future-proof.

By the end of this guide, readers will gain a detailed understanding of Vietnam’s legal due diligence landscape in 2025 and will be equipped with the tools and insights necessary to make informed, compliant, and resilient investment decisions in one of Southeast Asia’s most dynamic economies.

Legal Due Diligence Checklist for Foreign Investors in Vietnam (2025 Update)

Vietnam’s Investment Climate in 2025: A Strategic Inflection Point
The Strategic Imperative of Legal Due Diligence in Vietnam (2025 Update)
Understanding the Strategic Role of Legal Due Diligence for Foreign Investors
Core Legal Due Diligence Checklist Components for Foreign Investors in Vietnam (2025 Update)
Corporate Governance and Structure: Key Considerations in 2025 Legal Due Diligence for Foreign Investors in Vietnam
Investment Licenses and Regulatory Compliance: A Strategic Due Diligence Priority for Foreign Investors in Vietnam (2025 Update)
Contracts and Material Agreements: Core Components of Legal Due Diligence for Foreign Investors in Vietnam (2025 Update)
Employment and Labor Law Due Diligence for Foreign Investors in Vietnam (2025 Update)
Real Estate and Land Use Rights Due Diligence for Foreign Investors in Vietnam (2025 Update)
Intellectual Property (IP) Due Diligence for Foreign Investors in Vietnam (2025 Update)
Litigation and Disputes Due Diligence in Vietnam (2025 Update)
Environmental Compliance Due Diligence for Foreign Investors in Vietnam (2025 Update)
Navigating Common Legal Risks and Mitigation Strategies in Vietnam (2025 Update)
Strategic Importance of Free Trade Agreements (FTAs) in Legal Due Diligence for Foreign Investors
Foreign Direct Investment (FDI) Trends in Vietnam: Implications for Legal Due Diligence (2025 Update)
Legal Due Diligence Checklist for Foreign Investors in Vietnam (2025 Update)
Dispute Resolution in Vietnam: Key Trends and Implications for Legal Due Diligence (2025 Update)
Comprehensive Synthesis of Vietnam’s 2025 Legal Reforms and Investment Environment

1. Vietnam’s Investment Climate in 2025: A Strategic Inflection Point

Vietnam, in 2025, has firmly established itself as a premier destination for foreign direct investment (FDI) in Southeast Asia. This momentum is sustained by accelerated GDP growth, proactive regulatory reforms, and heightened global investor confidence.

Total FDI inflows in H1 2025: Reached $21.51 billion, reflecting a 32.6% year-over-year increase
GDP growth (H1 2025): Stood at 7.52%, the highest first-half growth in over 15 years
Top sectors attracting FDI:
- Manufacturing & Processing: $12 billion (55.6% of total)
- Real Estate: $5.17 billion (a 2x increase YoY)

FDI Sector Breakdown (H1 2025)

Sector	Capital Inflow (USD)	Share of Total FDI (%)
Manufacturing & Processing	12.00 Billion	55.6%
Real Estate	5.17 Billion	24.0%
Others (Retail, Energy, Tech)	4.34 Billion	20.4%

The Imperative for Legal Due Diligence in Vietnam

Despite the country’s investor-friendly outlook, Vietnam’s regulatory complexity and lack of corporate transparency in mergers and acquisitions (M&A) underscore the necessity for a rigorous legal due diligence (LDD) process.

Primary objectives of LDD:
- Uncover hidden legal liabilities or regulatory violations
- Validate the legitimacy of licenses, contracts, and compliance protocols
- Mitigate post-investment disputes and arbitration risks
Growing legal scrutiny:
- Vietnam International Arbitration Centre (VIAC) handled 424 cases in 2023, up 46.2% from 2022
- A rise in legal disputes related to investment contracts, employment, and regulatory breaches

Legal Landscape Updates Relevant to 2025 Investors

Foreign investors must remain informed of critical regulatory reforms shaping Vietnam’s business environment in 2025. Several new laws and amendments became effective in early and mid-2025, significantly influencing due diligence requirements.

Key Legal Reforms in 2025

Law / Regulation	Effective Date	Key Impact on Investors
Amended Law on Enterprises	July 1, 2025	Revised governance rules and reporting mandates
New Law on Real Estate Business	January 1, 2025	Clarified land-use rights and off-plan projects
Revised Law on Investment	January 15, 2025	Introduced Special Investment Procedures
Labor Code Amendments	July 1, 2025	Updated employment standards and foreign labor rules
Environmental Protection Law Update	January 6, 2025	Tightened ESG compliance and disclosure
Credit Institutions Regulation	March 2025	New ownership and reporting standards for investors in banking

Comprehensive Legal Due Diligence Checklist (2025)

1. Corporate Governance & Legal Entity Structure

Review of Enterprise Registration Certificate (ERC)
Verification of company charter and shareholder agreements
Confirmation of registered capital and capital contribution schedule
Assessment of board resolutions, internal voting mechanisms, and ownership records

2. Investment Licensing & Sector Compliance

Examination of Investment Registration Certificate (IRC)
Sub-licenses and operational permits (e.g., environment, construction, education, fintech)
Review of business lines against Vietnam’s “Negative List” for foreign investors
Compliance with WTO Commitments and bilateral trade agreements

3. Real Estate, Land Use & Property Rights

Legal status of land-use rights (LURCs)
Review of land lease agreements with local authorities
Verification of zoning, planning, and permitted land use
Check for mortgage, encumbrances, or disputes involving properties

4. Commercial Agreements & Liabilities

Comprehensive review of:
- Customer and supplier contracts
- Joint ventures, franchises, and distribution arrangements
- Intellectual property licenses and licensing agreements
Identify contingent liabilities, indemnity clauses, and termination risks

5. Employment & Labor Obligations

Review of labor contracts and employee handbooks
Confirmation of compliance with updated Labor Code (July 2025)
Analysis of insurance, tax, and social security obligations
Union relationships and potential labor disputes

6. Litigation, Arbitration & Dispute Resolution

Ongoing or historical litigation cases
Disputes registered at VIAC or People’s Courts
Review of dispute resolution clauses in commercial contracts
Intellectual property litigation, especially in tech and branding sectors

7. Intellectual Property & Technology Rights

Trademark and patent registrations
IP ownership in joint development projects
Software licenses, data protection compliance, and technology transfer terms

8. Environmental & Regulatory Compliance

Environmental Impact Assessments (EIA) and permits
ESG disclosure obligations under the new Environmental Law
Fines or past non-compliance with sustainability regulations

Common Risks Identified During Legal Due Diligence in Vietnam

Risk Category	Description	Recommended Mitigation
Unregistered Ownership	Discrepancy in actual vs. declared shareholders	Require notarised share transfer records
Invalid Licensing	Missing or expired IRC/ERC or sub-licenses	Apply for retrospective or renewed licensing
Land Disputes	Overlapping land-use rights or unlawful land occupation	Engage local legal counsel for title checks
Undisclosed Liabilities	Hidden debts or contractual obligations	Conduct forensic accounting and audit
Labor Violations	Unpaid insurance, lack of contracts, non-compliant layoffs	Rectify through negotiated settlement

Conclusion: Future-Proofing Investment Through Legal Vigilance

The Vietnamese market in 2025 presents unparalleled opportunities, yet also demands sharper scrutiny from foreign investors. Legal due diligence is no longer a procedural formality—it is a strategic safeguard essential for informed investment decisions. With evolving regulations and a maturing legal ecosystem, investors are advised to leverage local legal counsel, maintain compliance readiness, and institutionalize risk management protocols.

By adhering to this updated legal due diligence checklist, foreign investors can mitigate exposure, secure operational continuity, and confidently engage in Vietnam’s promising investment landscape.

2. The Strategic Imperative of Legal Due Diligence in Vietnam (2025 Update)

Vietnam continues to assert itself as a leading investment destination in Asia, underpinned by consistent economic growth, a forward-looking regulatory framework, and a rising profile in global value chains. As the regional competition for capital intensifies, foreign investors are increasingly drawn to Vietnam’s diversified economy and favorable business climate, especially via mergers and acquisitions (M&A), which offer accelerated market entry and operational scalability.

Macroeconomic and FDI Performance Snapshot: 2024–H1 2025

Metric	2024 Full Year	H1 2025	% Change YoY (H1)
Total FDI Registered Capital	$38.23 billion	$21.51 billion	+32.6%
FDI Disbursement	$25.35 billion	(Data not yet released)	+9.4% YoY (2024)
Capital Adjustment Transactions	630 deals / $4.07 billion	826 deals / $8.95 billion	+31.1% (volume), +2.2x (value)
Equity Contributions & Share Purchases	1,588 deals / $1.89 billion	1,708 deals / $3.28 billion	+7.6% (volume), +73.6% (value)
Newly Licensed Projects	1,636 projects / $8.24 billion	1,990 projects / $9.3 billion	+21.7%

Insight: These figures reveal not only a strong influx of new capital but a deeper commitment from existing investors through increased reinvestment and M&A-driven market consolidation.

Sectoral Composition of FDI: Manufacturing Dominance and Real Estate Resurgence

Vietnam’s FDI profile remains concentrated in manufacturing and processing, which continues to anchor the country’s industrial development and export competitiveness. However, a notable shift has emerged in 2025, with the real estate sector witnessing a significant resurgence, signaling renewed confidence in Vietnam’s urbanization and infrastructure growth trajectory.

Top Sectors by FDI in H1 2025

Sector	Investment Volume (USD)	Share of Total FDI (%)	YoY Performance
Manufacturing & Processing	$12.0 billion	55.6%	Slight decline from 2024
Real Estate	$5.17 billion	24.0%	More than 2x increase
Scientific & Technical Activities	$1.18 billion	5.5%	Emerging sector
Water Supply & Waste Treatment	$902.9 million	4.2%	Steady growth

Note: The real estate sector, while traditionally volatile, is benefiting from a mix of legal reforms, urban master planning, and increasing foreign institutional interest.

Geographic Distribution: Regional Hubs Fueling National Growth

Foreign direct investment has spread across 54 out of 63 provinces and cities in Vietnam during H1 2025, reflecting a broad-based confidence in the country’s economic potential. Notably, Hanoi has emerged as a surprising frontrunner, fueled by high-value infrastructure and technology-driven projects.

Top FDI Destinations in Vietnam – H1 2025

Province/City	FDI Volume (USD)	% of Total National FDI	YoY Performance
Hanoi	$3.66 billion	17%	2.8x increase
Bac Ninh	$3.15 billion	14.6%	+7.1%
Ho Chi Minh City	$2.7 billion	12.6%	2x increase
Hai Phong (2024)	$4.94 billion	12.9%	+42.4%

Strategic Insight: Emerging industrial hubs such as Bac Ninh and Hai Phong remain key magnets for high-tech manufacturing, while Ho Chi Minh City and Hanoi are evolving into financial and digital innovation centers.

Investor Nationalities: Singapore and South Korea Lead the Charge

Vietnam’s investment partners are geographically diverse, but certain economies remain dominant. Singapore retained its leading position in both 2024 and H1 2025, while South Korea surged significantly in early 2025.

Top Foreign Investors in Vietnam – H1 2025

Country	Investment (USD)	Share of Total FDI (%)	YoY Change (%)
Singapore	$4.6 billion	21.4%	-24.8%
South Korea	$2.93 billion	16%	+147%
(2024) Singapore	$10.21 billion	26.7%	+31.4% YoY

Bilateral Momentum: South Korea’s growing presence signals deeper strategic alignment, particularly in manufacturing, electronics, and consumer finance.

The Rising Complexity of Legal Due Diligence: Beyond Entry-Level Vetting

As foreign investors expand their footprint in Vietnam through capital adjustments, share acquisitions, and real estate investments, the legal due diligence (LDD) process must evolve to reflect the increasingly complex nature of deals. Instead of merely verifying new greenfield licenses, investors now face the challenge of thoroughly vetting established foreign-invested enterprises (FIEs), joint ventures, and Vietnamese corporate counterparts.

Key Drivers Shaping the 2025 LDD Landscape

Volume of M&A Activity:
- Investors are not only entering but consolidating through capital adjustments and equity acquisitions, requiring deeper legal audits of historical compliance and governance frameworks.
Real Estate-Driven Investment Complexity:
- With real estate FDI doubling in H1 2025, due diligence must now include scrutiny of land-use rights, lease contracts, and compliance with the 2025 Law on Real Estate Business, which imposes stricter conditions on pre-sale projects and land zoning.
Shifting Legal Focus from Licensing to Operational Risk:
- Investors must assess employment practices, environmental compliance, corporate disputes, and intellectual property ownership, especially when targeting revenue-generating FIEs.
Emerging Focus on High-Tech and Fintech Sectors:
- Vietnam aims to attract $150–200 billion in FDI by 2025, with targets in AI, semiconductors, and fintech. Legal due diligence for these industries involves IP audits, cybersecurity compliance, and alignment with international technology transfer protocols.

Legal Due Diligence Strategy Matrix for 2025 Investments

Type of Investment	Key Legal Areas to Audit	Sector Sensitivities
Greenfield Projects	Licensing, Land Use, ERC/IRC	Manufacturing, Renewable Energy
Capital Adjustments	Governance Records, Historical Filings	FIEs, Industrial Zones
Share Acquisitions (M&A)	Contractual Liabilities, IP Ownership, Litigation	Real Estate, Fintech, E-commerce
Real Estate Investments	LURCs, Title Validity, Zoning, Construction Permits	Residential, Industrial Parks
High-Tech Ventures	IP Protection, Transfer Pricing, Regulatory Sandbox	AI, Blockchain, Semiconductor

Conclusion: Legal Preparedness as a Prerequisite for Sustainable Investment

Vietnam’s legal and regulatory transformation, coupled with its rapid FDI growth trajectory, demands a robust and adaptive legal due diligence framework. Investors must go beyond checklist-level compliance and embrace a strategic legal approach that accounts for sectoral complexity, evolving laws, and operational risk exposure.

In 2025 and beyond, legal due diligence is not merely a risk-mitigation tool—it is a foundational element of long-term value creation in Vietnam’s rapidly evolving investment landscape.

3. Understanding the Strategic Role of Legal Due Diligence for Foreign Investors

Legal due diligence (LDD) in Vietnam, particularly in 2025, transcends the boundaries of procedural obligation. It functions as an indispensable strategic instrument for investors seeking to navigate the complexities of Vietnam’s regulatory terrain and rapidly evolving legislative ecosystem.

Core Functions and Strategic Objectives of LDD

Identify Hidden Legal Risks: Detect undisclosed liabilities, pending litigations, or legal deficiencies that may adversely impact deal value or post-acquisition performance.
Verify Corporate Legitimacy: Confirm the legal status of the target company, including the validity of incorporation, licensing, and governance documentation.
Ensure Statutory and Regulatory Compliance:
- Review alignment with local, national, and sector-specific regulations
- Monitor adherence to recent legislative changes (e.g., 2025 Law on Enterprises, SIP)
Enable Informed Deal Structuring:
- Adapt deal strategy based on findings (e.g., shift from share deal to asset deal to isolate liabilities)
- Evaluate risks related to tax obligations, contract enforceability, and cross-border transactions
Safeguard Long-Term Operational Viability:
- Analyze employment compliance, environmental exposure, and intellectual property protection to support sustainable market entry and growth

Legal Due Diligence: From Risk Identification to Deal Optimization

A well-executed LDD process does more than mitigate legal exposure—it directly enhances decision-making and optimizes transaction structures based on regulatory realities and commercial intent.

Value Chain of Legal Due Diligence in Transaction Lifecycle

LDD Phase	Key Activities	Outcome for Investors
Pre-Transaction Review	Corporate charter check, license validity, sectoral compliance	Go/no-go decision-making
Operational Assessment	Contract review, HR liabilities, tax exposures	Structuring options, pricing adjustments
Deal Structuring Support	Risk mapping, asset vs. share deal analysis, escrow mechanisms	Improved risk allocation and negotiation leverage
Post-Transaction Planning	Governance alignment, local compliance integration	Smoother market entry and legal harmonization

Navigating Vietnam’s Legal Environment: Challenges and Strategic Responses

Inherent Complexities in Vietnam’s Legal Framework

Although Vietnam is recognized for its pro-investment reforms, foreign investors must contend with several systemic legal and procedural hurdles. The Vietnamese regulatory ecosystem, while reformative, remains characterized by fragmented jurisdictional authority and a lack of uniform enforcement.

Key Legal Challenges Facing Foreign Investors

Limited Corporate Transparency:
- Incomplete public records and non-disclosure of ultimate beneficial owners (UBOs)
- Difficulty verifying litigation history or undisclosed liabilities
Evolving and Overlapping Laws:
- Multiple ministries overseeing overlapping regulations
- Frequent issuance of circulars and decrees, sometimes inconsistent across provinces
Foreign Ownership Restrictions:
- Conditional sectors (e.g., logistics, fintech, education) subject to equity caps or approvals
- Requirement to engage with Vietnamese nominees or joint ventures in restricted areas

Common Legal Barriers in Vietnam’s Investment Ecosystem

Legal Barrier	Description	Practical Implication
Conditional Business Restrictions	Sector-specific limits on foreign ownership and control	Requires creative structuring (e.g., indirect ownership)
Regulatory Ambiguity	Lack of detailed guidance in implementing laws	Heightened compliance risk; dependent on local practice
Contract Enforcement Risk	Inconsistent contract interpretation across jurisdictions	Essential to include dispute resolution clauses (e.g., VIAC)
Taxation and Profit Repatriation	Complex double-taxation and remittance rules	Legal and accounting structuring needed
VNeID and Digital Onboarding	Uncertainty around mandatory enterprise digital ID systems (e.g., e-ID)	May delay onboarding or documentation authentication

Recent Legal Reforms: Transparency with Complexity

Vietnam’s sweeping legal reforms introduced in 2025 have redefined compliance obligations. While aimed at improving governance and harmonizing with international standards, the rapid implementation pace has created a demanding adjustment period for investors.

Major Legislative Developments Impacting LDD in 2025

New Regulation	Effective Date	Investor Impact
Amended Law on Enterprises	July 1, 2025	New corporate governance and transparency obligations
Law on Real Estate Business (2025)	January 1, 2025	Strict conditions on land transfers, off-plan sales
Environmental Protection Law Amendments	January 6, 2025	Expanded ESG compliance and environmental liability
Labor Code Revisions	July 1, 2025	Enhanced worker rights, mandatory digital onboarding
Special Investment Procedure (SIP)	January 15, 2025	Streamlined FDI registration but increased disclosure
UBO Disclosure Mandates	Rolling implementation	Requires updated shareholder registers and transparency

Note: While these laws signify progressive regulatory alignment, inconsistent implementation and the absence of detailed guiding circulars in many areas (e.g., VNeID activation for foreigners) have made compliance a moving target.

Adaptive Legal Due Diligence: Beyond the Static Checklist

Given Vietnam’s dynamic legal trajectory, traditional LDD methods must evolve into an adaptive, intelligence-led process. Foreign investors should adopt a flexible, real-time approach that integrates legal trend monitoring, cross-sector insights, and provincial-level interpretation variance.

Recommended Legal Due Diligence Enhancements for 2025

Adopt a Modular Due Diligence Framework:
- Separate modules for corporate, regulatory, land, tax, labor, IP, and ESG due diligence
Leverage Legal Technology & Local Expertise:
- Use automated data extraction tools for license and litigation tracking
- Engage legal counsel with proven provincial authority engagement
Integrate Policy Monitoring Mechanisms:
- Track decrees and draft circulars from key ministries (MPI, MOF, MOLISA, MONRE)
- Stay aligned with regional investment incentives and compliance deviations

Conclusion: Legal Due Diligence as a Strategic Advantage in Vietnam

As Vietnam moves forward with an ambitious and reform-oriented investment agenda, the importance of legal due diligence has never been greater. It enables investors to not only mitigate legal exposure but also navigate structural challenges, anticipate regulatory risks, and identify negotiation levers.

In 2025, the legal landscape demands that foreign investors embrace legal due diligence as a living, strategic tool—one that goes beyond box-ticking and serves as a foundation for enduring operational success in a rapidly evolving Southeast Asian powerhouse.

4. Core Legal Due Diligence Checklist Components for Foreign Investors in Vietnam (2025 Update)

Vietnam’s legal environment in 2025 presents a considerably more intricate regulatory framework compared to previous years. Foreign investors engaging in market entry, M&A transactions, or project expansions must perform a meticulous legal due diligence (LDD) process that accounts for the latest legislative developments. This section outlines the updated key areas of legal review, aligned with Vietnam’s recent legal reforms and policy shifts.

I. Regulatory Reforms Shaping the 2025 LDD Checklist

Vietnam has introduced a series of critical laws and decrees in 2025 that significantly impact foreign investment operations, corporate structuring, employment practices, environmental compliance, and financial services. Each of these laws contains specific provisions that directly influence the depth and scope of legal due diligence.

Table 1: Legal Reforms Impacting Foreign Investor Due Diligence in 2025

Law / Decree	Effective Date	Key Legal Updates	Implications for Foreign Investors
Law on Enterprises (No. 57/2024/QH15)	July 1, 2025	– Mandatory Beneficial Ownership (UBO) disclosures – Compulsory e-ID Vietnam (VNeID) account for legal representatives	– Greater corporate transparency expected – Onboarding delays possible for foreign directors unable to obtain VNeID – Increased exposure in multi-layered ownership chains
Law on Real Estate Business (No. 29/2023/QH15)	January 1, 2025	– Enhanced due diligence on land-use rights (LURCs) – Limits on pre-collection in off-plan sales – Restrictions on developer leasing and deposits	– Real estate project structures must be redesigned for compliance – Greater protections for buyers; increased documentation required for LURC and capital source verification
Law on Investment & Decree 19/2025/NĐ-CP	Jan 15 & Feb 10, 2025	– Special Investment Procedure (SIP) for high-tech projects – Transition to post-compliance monitoring	– Investment timelines reduced from 250–350 days to under 120 days – SIP eligibility unlocks procedural shortcuts; however, imposes strict post-approval accountability
Decree 69/2025 (Amending Decree 01/2014)	May 19, 2025	– Refined calculation of Foreign Ownership Limits (FOL) – FIEO-F1 shareholdings now counted toward FOL – FOL extension (up to 49%) during bank rescue scenarios	– High stakes for M&A in financial institutions – New interpretation of indirect ownership increases complexity – Short grace periods necessitate real-time compliance
Vietnam Labor Code 2025	July 1, 2025	– New protections for gig workers and foreigners – Strengthened union engagement and dispute resolution – Priority to local hiring requirement	– Comprehensive HR and policy audits necessary – Foreign staff hiring likely to face delays or increased documentation – Elevated labor law liability exposure
Decree 05/2025/ND-CP (Amending Decree 08/2022)	January 6, 2025	– Two-tiered Environmental Impact Assessment (EIA) process – Expanded wastewater discharge metering – Enhanced Extended Producer Responsibility (EPR) requirements	– Due diligence on environmental risk must be granular – Legal exposure to non-compliance penalties increases – Cross-sector impact on production and logistics industries

II. Essential Components of the 2025 Legal Due Diligence Checklist

Legal due diligence in 2025 must go far beyond conventional verification. Investors are now required to map legal risk exposure across a broader spectrum of compliance categories. The checklist below serves as a foundation for legal counsel and corporate advisors conducting transactional risk assessments in Vietnam.

1. Corporate Governance & Shareholding Structure

Validate all enterprise registration documents (ERC/IRC)
Review charter capital contribution schedules and shareholding agreements
Identify ultimate beneficial owners (UBOs) as mandated under new Enterprise Law
Assess foreign director eligibility for VNeID onboarding

2. Licensing and Operational Compliance

Confirm all sub-licenses relevant to regulated sectors (e.g., education, fintech, pharmaceuticals)
Ensure business activities match registered business lines
For SIP-eligible investments:
- Evaluate shortcut criteria
- Prepare post-monitoring compliance strategy

3. Land and Real Estate Legalities

Examine validity of land-use right certificates (LURCs) and leasehold agreements
Ensure adherence to real estate capital requirements and off-plan pre-sale regulations
Identify restrictions on third-party deposit contracts and leasing conditions under Law 29/2023

4. Employment and Labor Relations

Audit compliance with new Labor Code, including:
- Gig worker contracts
- Equal treatment of foreign employees
- Trade union registration and engagement
Review foreign worker quotas and labor market test exemptions

5. Environmental and ESG Compliance

Assess requirement for Environmental Impact Assessments (EIA) and environmental licenses
Audit waste discharge volumes to determine metering obligations
Evaluate company’s Extended Producer Responsibility (EPR) exposure based on product categories
Monitor public consultation outcomes and grievance records

6. Financial and Tax Review

Confirm tax compliance status and any outstanding liabilities
Examine VAT refunds, corporate tax exemptions, and incentives under SIP or industrial zones
Review remittance capabilities under capital contribution and profit repatriation laws

7. Foreign Ownership and Capital Control

Verify sectoral Foreign Ownership Limits (FOL) compliance
Map out direct and indirect shareholding layers (especially via FIEO structures)
Assess implications of capital dilution or pro-rata issuance events

III. Dynamic Matrix: LDD Prioritization Based on Investment Type

Matrix: Legal Due Diligence Focus by Deal Type – Vietnam 2025

Investment Type	High Priority LDD Focus Areas	Legal Risks If Ignored
Greenfield Projects	– Licensing, Land Use, Labor – SIP eligibility and post-compliance	– Licensing delays, loss of incentives, project shutdowns
Share Acquisitions	– UBO checks, Litigation history, Contract enforceability, IP ownership	– Undisclosed liabilities, voidable contracts, tax penalties
Real Estate Transactions	– LURCs, Capital obligations, Pre-collection caps, Floor area conditions	– Asset forfeiture, fines, license suspension
Banking / Finance Deals	– FOL limits, indirect shareholding via FIEO, Decree 69 interpretation	– Forced divestment, regulatory intervention
Environmental-Sensitive	– EIA approvals, wastewater discharge, EPR compliance	– Closure orders, environmental penalties, reputational loss

Conclusion: Legal Precision Is No Longer Optional in Vietnam

In the context of Vietnam’s legal reform wave in 2025, legal due diligence must evolve from a static checklist into a multi-dimensional risk intelligence tool. With evolving ownership rules, labor regulations, and environmental laws converging in rapid succession, investors must embrace a proactive, jurisdiction-aware, and compliance-oriented approach to mitigate exposure and enable transaction certainty.

To effectively navigate this high-stakes legal environment, foreign investors are advised to collaborate closely with local counsel, regulatory authorities, and cross-functional due diligence specialists—ensuring that each legal component is fully understood, properly documented, and strategically addressed.

5. Corporate Governance and Structure: Key Considerations in 2025 Legal Due Diligence for Foreign Investors in Vietnam

In 2025, the corporate governance component of legal due diligence in Vietnam has become significantly more complex and vital due to the introduction of new regulatory obligations. Foreign investors must conduct a rigorous assessment of the target company’s legal and organizational structure, not only to confirm its lawful incorporation and internal governance but also to ensure alignment with recent reforms enhancing transparency and digitalization.

Verification of Corporate Validity and Legal Standing

Establishment Records
- Verify business registration certificate and charter documents
- Confirm proper licensing and sub-licensing for sector-specific activities
- Ensure existence and accuracy of capital contribution records
Ownership Structure and Shareholding
- Assess direct and indirect ownership (including parent and sister companies)
- Identify all classes of shares and voting rights
- Cross-check for any nominee arrangements or trust structures
Corporate Management and Decision-Making Framework
- Review board composition, roles of legal representatives, and management personnel
- Examine power of attorney and internal approval matrix
- Investigate prior shareholder resolutions and their legality

Mandatory Beneficial Ownership Disclosure (UBO): Law on Enterprises 2025 Update

Under the revised Law on Enterprises (Law No. 57/2024/QH15) effective July 1, 2025, enterprises in Vietnam are legally obligated to declare and maintain records of their beneficial owners (UBOs). This provision aligns with FATF Recommendation 24 and aims to combat money laundering, tax evasion, and hidden control of companies.

Key Due Diligence Steps Regarding UBO Compliance:

Confirm the enterprise has submitted UBO data to the Business Registration Authority
Verify maintenance of UBO records for at least five years post-dissolution or bankruptcy
Ensure processes are in place to update UBO information promptly upon changes
Check whether the enterprise qualifies for exemption (e.g., publicly listed companies)
Review internal controls to safeguard UBO data confidentiality and retention

Table 1: UBO Disclosure Compliance Matrix (2025)

Legal Requirement	Foreign-Invested Enterprise (FIE) Compliance Check	Notes for Legal Advisors
UBO information submitted and updated?	Yes / No	Must match latest shareholder data
Data retention system in place?	Yes / No	5-year minimum post-dissolution
Procedures for reporting changes in UBO?	Yes / No	Within regulated timeframe
Publicly listed or exempt entity?	Yes / No	Cross-check with securities regulator
Internal audit trail of ownership changes?	Yes / No	Demonstrates transparency and accountability

Digital Identity Registration (e-ID): New Compliance Layer

In parallel, Decree 69/2024/ND-CP introduces a compulsory digital identity (e-ID Vietnam) requirement for companies to interact with government systems online. Effective July 1, 2025, this regulation enforces the mandatory registration of an organizational e-ID using the personal Level 2 VNeID account of the company’s legal representative.

Due Diligence Implications for e-ID Compliance:

Confirm whether the company has successfully registered for an organizational e-ID account
Evaluate legal representative’s eligibility and ability to obtain a Level 2 VNeID (especially if foreign)
If the legal representative is foreign and cannot yet obtain VNeID, verify written authorization of a Vietnamese employee or officer
Assess the risk of operational delays in cases where e-ID registration is pending
Determine internal capacity to conduct online administrative procedures (tax filing, licensing, public services)

Chart 1: VNeID Registration Risk Assessment for Foreign-Invested Enterprises (2025)

[High Risk] - Foreign Legal Rep + No Local Authorised Staff → Significant procedural delay  
[Medium Risk] - Foreign Legal Rep + Local Proxy Registered → Operational dependency on proxy  
[Low Risk] - Vietnamese Legal Rep + Completed e-ID Registration → Full digital compliance

Strategic Impact of 2025 Reforms on Foreign Investors

The combination of mandatory UBO disclosure and e-ID registration reflects Vietnam’s broader push towards greater corporate transparency, digital governance, and alignment with global anti-money laundering norms. While these reforms enhance regulatory clarity and investor protections, they also introduce several operational and compliance challenges.

Implications for Legal Due Diligence Process:

Additional compliance layers must be verified during M&A, joint ventures, or greenfield investments
Complex, multi-layered ownership structures (often used by foreign investors) may face new burdens under UBO disclosure obligations
The e-ID system, while facilitating future efficiency, may initially delay key administrative processes, especially in the case of foreign legal representatives without access to VNeID
Legal due diligence should now include digital readiness assessments, including availability of local proxies, IT compliance, and integration with e-government platforms

Recommendations for Foreign Investors and Legal Advisors

Incorporate UBO verification and e-ID readiness into pre-investment risk assessments
Engage local legal and administrative professionals to facilitate e-ID registration and ongoing digital compliance
Structure transactions with an understanding of potential reporting obligations and digital limitations
Establish contingency plans for operational continuity in cases of delayed digital identity approvals
Prioritize investment targets with clear and transparent ownership structures and demonstrated digital compliance

By taking a more strategic and structured approach to corporate governance due diligence—one that reflects both regulatory change and digital transformation—foreign investors can reduce legal exposure, ensure compliance with evolving standards, and confidently participate in Vietnam’s investment landscape in 2025 and beyond.

6. Investment Licenses and Regulatory Compliance: A Strategic Due Diligence Priority for Foreign Investors in Vietnam (2025 Update)

In 2025, Vietnam’s investment licensing framework and regulatory landscape have undergone transformative changes, requiring foreign investors to adopt a more structured, sector-specific legal due diligence (LDD) strategy. With the implementation of Law No. 57/2024/QH15 and related decrees, the government has introduced mechanisms aimed at both liberalizing high-tech investment entry and tightening oversight in sensitive sectors like finance. These shifts necessitate a dual-layered compliance approach, balancing opportunity exploitation with legal risk mitigation.

Verification of Investment Licensing and Operational Legitimacy

Investment Registration Certificate (IRC) Assessment
- Confirm issuance and current validity of IRC for foreign-invested enterprises (FIEs)
- Examine the alignment of business lines in the IRC with actual business activities
- Verify if the IRC includes any conditional sectors or investment incentives
Enterprise Registration Certificate (ERC) Review
- Cross-check the ERC for consistency with IRC and licensing history
- Confirm any amendments to ERC have been duly filed and approved
- Ensure that any change in ownership, capital, or scope has been properly reflected
Sector-Specific Licensing Requirements
- Review all specialized permits (e.g., education, healthcare, logistics, IT, construction)
- Confirm compliance with sectoral regulations under relevant Vietnamese ministries
- Identify any licensing gaps that could pose risks of administrative penalties or suspension

Special Investment Procedure (SIP) Under Law No. 57/2024/QH15 and Decree 19/2025/NĐ-CP

Introduced in early 2025, the Special Investment Procedure (SIP) streamlines regulatory approval for strategic high-tech sectors. This initiative is designed to attract FDI into areas that support national innovation and digital transformation.

Eligible SIP Investment Areas:

Research & Development (R&D) Centers
Innovation Hubs and Startup Incubators
Semiconductor and Integrated Circuit Manufacturing
AI, Robotics, and Smart Manufacturing

Designated SIP Locations:

High-Tech Parks
Export Processing Zones
Information Technology Concentration Areas
Strategic Industrial Clusters

Table 1: Traditional vs. SIP Investment Approval Pathway

Regulatory Procedure	Traditional Investment Track	SIP Track (2025)
Investment Policy Approval (IPA)	Required	Waived
Environmental Impact Assessment (EIA)	Required	Deferred to post-licensing
Technology Appraisal	Required	Not mandatory
Construction Permit	Required	Can be fast-tracked/waived
Timeline (Average Completion Time)	250–350 days	Reduced to <90 days
Monitoring Mechanism	Pre-approval	Post-commitment supervision

Implications for Legal Due Diligence:

Determine whether the target project qualifies under SIP regulations
Assess compliance capacity with post-licensing commitments: construction, fire safety, environment
Review contractual obligations with local authorities tied to SIP incentives
Evaluate risk exposure due to post-control enforcement mechanisms

Foreign Ownership Restrictions in Financial Institutions: Decree 69/2025 Highlights

Simultaneously, Decree 69/2025, effective May 19, 2025, tightens regulatory scrutiny of foreign shareholding in Vietnamese credit institutions, including banks and finance companies. The decree introduces a more granular method of calculating foreign ownership and applies sector-specific thresholds that impact investment structuring.

Key Provisions for Foreign Shareholding:

Non-Bank Credit Institutions (e.g., Finance Companies):
- Maximum foreign ownership limit (FOL) capped at 50% of charter capital
Commercial Banks (Non-State-Owned):
- Temporary increase in FOL allowed up to 49% during mandatory transfer participation of weak banks
- Reversion to standard 30% cap after the approved recovery plan expires
FIEO-F1 Entities (Foreign Majority-Owned Enterprises):
- Now included in FOL calculations, tightening previously indirect ownership routes
Grace Period for Share Dilution:
- A 6-month window is granted to foreign investors to divest excess shares in cases of pro-rata capital increases

Matrix 1: Foreign Ownership Compliance Requirements by Institution Type

Institution Type	Standard FOL Limit	Temporary Exception	Conditions
Non-Bank Credit Institutions	50%	N/A	Subject to approval from SBV
Commercial Banks (non-state-controlled)	30%	49% (transfer only)	Must be part of an approved recovery
Banks under transfer plan	30% → 49%	Limited-duration	Reverts post-restructuring

Implications for Legal Due Diligence:

Identify if the target credit institution is subject to a foreign ownership cap
Calculate combined direct and indirect foreign equity (including FIEO-F1 structures)
Review any pro-rata share issuances and determine risk of FOL breaches
Check compliance with grace period provisions and required divestment plans
Understand long-term shareholding limits under sector-specific rules

Dual Regulatory Track: Simplification vs. Restriction

The Vietnamese government’s investment framework in 2025 demonstrates a dual regulatory approach:

Liberalization for High-Tech Investment:
- The SIP aims to drastically reduce entry barriers for advanced technology investors
- Emphasis is placed on fast-track licensing and post-approval self-accountability
Caution and Control in Sensitive Sectors:
- Financial institutions face tighter foreign equity regulations and complex ownership calculations
- These changes are intended to strengthen financial sector stability while balancing investor access

Chart 1: Regulatory Openness Index by Sector (2025)

High-Tech, R&D, Semiconductor → [Open – Streamlined]  
Manufacturing, Logistics, Retail → [Moderately Regulated]  
Finance, Banking, Insurance → [Highly Regulated – Restricted]

Strategic Takeaways for Foreign Investors and Legal Advisors

Custom-Tailor Due Diligence to Investment Sector:
- Use SIP-focused diligence for tech and innovation projects
- Apply stricter FOL and ownership tracing for financial institutions
Incorporate Ownership Risk Mapping:
- Include matrixes to trace direct/indirect foreign capital pathways
- Monitor thresholds and anticipate potential divestment needs
Assess Long-Term Licensing Risks:
- Consider whether future business expansion will require additional licenses
- Identify contingencies in case of regulatory tightening or sectoral policy shifts
Leverage Legal Technology and Compliance Tools:
- Implement digital compliance tracking for SIP commitments
- Use AI-based monitoring for FOL thresholds in multi-layered corporate structures

By adopting a forward-thinking, sector-attuned approach to licensing and regulatory due diligence in Vietnam, foreign investors can position themselves to capitalize on liberalized pathways while safeguarding against the evolving constraints of foreign ownership rules in sensitive industries.

7. Contracts and Material Agreements: Core Components of Legal Due Diligence for Foreign Investors in Vietnam (2025 Update)

In the evolving Vietnamese legal and commercial environment, contractual documentation plays a pivotal role in any foreign direct investment (FDI) transaction. As Vietnam continues to modernize its legal system and introduce reforms across various sectors, the enforceability, validity, and legal sustainability of contracts have become strategic areas of concern during legal due diligence (LDD). This section explores the legal complexities and structural risks embedded in material agreements from the perspective of international investors operating in Vietnam in 2025.

Comprehensive Legal Audit of Contracts and Agreements

Inventory and Classification of Agreements
- Compile a complete list of all active contracts, both operational and strategic
- Categorize agreements by type: supply, distribution, partnership, M&A, financing, real estate, employment, IP licensing, etc.
- Identify material agreements with third-party termination clauses, change-of-control provisions, or exclusivity terms
Review of Contractual Obligations and Liabilities
- Examine each contract’s terms for compliance with current Vietnamese civil, commercial, labor, and investment laws
- Assess financial liabilities, indemnity clauses, and termination penalties
- Flag any “onerous provisions” that could expose the investor to disproportionate legal or financial risk
Assessment of Legal Enforceability
- Determine whether contracts meet formal validity requirements under Vietnamese law (e.g., notarization, translation, language)
- Evaluate enforceability in Vietnamese courts or via international arbitration
- Confirm that key provisions such as governing law, dispute resolution, and jurisdiction are clearly defined and enforceable

Key Contractual Risk Factors for Foreign Investors

Foreign investors are particularly vulnerable to hidden risks in agreements due to differences in legal systems, business expectations, and contract law interpretation. These risks can derail transactions or expose acquirers to post-closing liabilities.

Table 1: Common Contractual Risk Factors in Vietnam (2025)

Risk Area	Description	LDD Implication
Ambiguous Terms	Unclear payment schedules, obligations, or delivery terms	May lead to performance disputes and legal ambiguity
Change-of-Law Clauses	Absence of adaptive mechanisms for regulatory changes	Contracts may become non-compliant or void
Termination Triggers	Hidden clauses allowing third-party contract termination	Risk of post-transaction asset disruption
Language Discrepancies	Inconsistent bilingual contracts (Vietnamese and English versions)	Vietnamese version prevails by law—creates interpretation risk
Governing Law & Jurisdiction	Foreign law contracts unenforceable in local courts	Enforceability challenges unless properly structured
Non-Compliance of Counterparties	Vietnamese partners failing to meet contractual obligations	Raises breach risks and enforcement complexity

Cross-Border Contract Complexities: The Cultural and Legal Gap

Bilingual Drafting Challenges
- Vietnamese law mandates that contracts involving local parties be in Vietnamese or have an official Vietnamese version
- Translation inconsistencies can cause legal contradictions if not professionally handled
- The Vietnamese version holds legal precedence in disputes
Legal System Misalignment
- Civil law foundations in Vietnam often differ from common law concepts familiar to Western investors
- Key concepts such as “consideration” or “equity” do not apply in the same manner
Business Practice Differences
- Contractual commitments may be interpreted more informally by local entities
- Reliance on relationship-based enforcement rather than formal legal redress

Impact of the 2025 Legal Reforms on Contractual Validity

Vietnam’s dynamic legal environment necessitates that all contracts be periodically re-evaluated for compliance with new legal developments. The 2025 updates to laws governing investment, corporate governance, labor, and the environment can render older contracts partially invalid or non-compliant.

Matrix 1: Contract Resilience vs. Legal Reform Exposure (2025)

Contract Type	High Reform Exposure	Key 2025 Legal Areas Affecting Contract
Land Lease Agreements	Yes	Land Law Amendments, Environmental Zoning Regulations
Labor & Employment	Moderate	New Social Insurance Rules, Updated Labor Code Provisions
Investment MOUs/JOAs	High	Law on Investment (Revised 2024), Foreign Ownership Limits
Licensing/Tech Transfer	Moderate to High	IP Law Amendments, Technology Assessment Regulations
Loan & Finance Contracts	Low to Moderate	Currency Controls, SBV Guidelines on Cross-Border Lending

Legal Due Diligence Actions Required:
- Compare contractual terms with updated legal requirements in 2025
- Amend outdated clauses or renegotiate contracts where laws have changed materially
- Ensure environmental, social, and governance (ESG) compliance is integrated into long-term agreements

Strategic Legal Considerations for Contractual Due Diligence

Embed Flexibility into Contracts
- Include revision triggers and renegotiation clauses in anticipation of future legal changes
- Build in compliance buffer zones for labor, environment, and technology rules
Strengthen Dispute Resolution Frameworks
- Prioritize international arbitration clauses where enforceable under Vietnamese law
- Choose dispute forums with strong precedent or bilateral enforcement treaties with Vietnam
Monitor Regulatory Developments Continuously
- Assign legal teams or local counsel to track changes in applicable laws affecting key agreements
- Maintain a live contract compliance dashboard for high-value or long-duration contracts

Visual Summary: Contractual Risk Heatmap for Foreign Investors (2025)

Low Risk – Payment Schedules, Delivery Clauses  
Medium Risk – Language Discrepancies, Governing Law, Licensing Requirements  
High Risk – Change-of-Law, Termination Clauses, Non-Compliance by Counterparty, FOL Restrictions  
Critical Risk – Environmental Obligations, Land Use Rights, Hidden Liabilities

Conclusion

Contracts and material agreements are not merely operational tools but strategic assets that must be rigorously reviewed during legal due diligence. In Vietnam’s 2025 legal landscape, with its sectoral reforms and heightened regulatory complexity, foreign investors must scrutinize contracts not only for historical validity but for future-proof compliance. Ensuring enforceability, clarity, and resilience to legal shifts is central to protecting investor interests and unlocking long-term success.

8. Employment and Labor Law Due Diligence for Foreign Investors in Vietnam (2025 Update)

Legal due diligence regarding employment and labor issues is a pivotal component of investment assessments in Vietnam, particularly in the context of the sweeping updates introduced by the 2025 Labor Code. For foreign investors pursuing mergers, acquisitions, or greenfield projects, ensuring full compliance with Vietnamese labor regulations is not only a matter of regulatory obligation but also a key determinant of post-transaction operational stability.

As Vietnam aligns more closely with international labor standards, the burden on employers—especially foreign enterprises—has increased significantly. This section provides a structured breakdown of employment-related due diligence tasks, identifies critical risk areas, and presents key updates under the 2025 legal framework.

Core Areas of Labor Due Diligence (2025 Framework)

Foreign investors must ensure that target companies adhere to both historical and newly amended labor regulations. A multi-pronged review is essential.

Employment Contract Audit
- Examine the structure and legality of labor contracts across all employee types
- Ensure alignment with the updated definitions of labor relationships under the 2025 law
- Verify equal treatment for local and foreign employees regarding compensation and benefits
Review of Internal Labor Policies
- Assess company-wide rules on working hours, overtime, leave policies, and disciplinary procedures
- Check for formal registration of internal labor regulations with the Department of Labor, Invalids and Social Affairs (DoLISA)
- Confirm the inclusion of mandatory employee protections and grievance procedures
Employee Classification and Benefits
- Review classifications of full-time, part-time, temporary, and freelance workers
- Ensure proper contributions to social insurance, health insurance, and unemployment insurance
- Validate compliance with new rules on voluntary UI enrollment for freelancers and gig workers
Labor Dispute History and Litigation Risks
- Examine records of labor disputes or pending cases with current or former employees
- Assess company performance in collective bargaining, union negotiations, and dispute resolution
- Identify reputational or financial liabilities stemming from past non-compliance

Vietnam Labor Code 2025: Key Changes Impacting Investors

The 2025 update marks a significant evolution in Vietnamese labor law, expanding its scope and aligning with global best practices. This has direct implications for due diligence.

Table 1: Major Legal Changes in Vietnam Labor Law (Effective July 1, 2025)

Legal Update	Summary	Impact on Employers
Expanded Employment Definitions	Inclusion of freelancers, gig, and part-time workers	New groups fall under regulatory and insurance coverage
Equal Treatment for Foreign Workers	Equal pay, benefits, and working conditions as local employees	Requires contract revisions and compensation audits
Enhanced Collective Bargaining Power	Stronger union rights, data access, and negotiation capacity	Increased union involvement in corporate decisions
Mandatory Job Market Database Participation	Integration with national labor system to match labor demand and supply	Requires data sharing with government systems
Employer Burden of Proof for Foreign Hires	Must prove no qualified Vietnamese applicant was available for foreign recruitment	Adds procedural complexity to hiring foreign workers
Strengthened Anti-Discrimination Mandates	Protection against bias based on gender, age, disability, ethnicity	Requires inclusive HR policies and training
Mandatory Training and Development Duties	Employers must invest in upskilling employees	New cost and planning considerations

Compliance Risk Matrix: Labor-Related Due Diligence (2025)

Risk Category	Risk Level	Potential Consequence	Due Diligence Action
Misclassified Employment Type	High	Fines, back pay, invalid contract terms	Cross-check employment contracts vs. legal classifications
Unregistered Labor Policies	High	Contract invalidity, dispute vulnerability	Confirm registration with DoLISA
Non-compliance in Insurance	High	Sanctions, reputational damage	Review insurance contribution records and calculations
Foreign Worker Missteps	Medium-High	Visa revocation, employment permit denial	Audit recruitment justifications and quotas
Labor Dispute History	Medium	Legal claims, reputational risk	Analyze frequency, resolution methods, and union engagement
Lack of Trade Union Protocol	Medium	Legal challenges, operational disruptions	Assess trade union interaction, collective agreements

Implications for Foreign Investors and Acquirers

Restructuring Employment Contracts
- All contracts must now reflect equal rights for foreign and Vietnamese workers
- Additional clauses should address collective bargaining obligations and overtime limitations
Due Diligence on Workforce Composition
- Break down employee headcounts by category (full-time, part-time, contractual, foreign)
- Evaluate workforce cost structure in light of increased social security liabilities
Inclusive Hiring and Diversity Policy Review
- Examine recruitment channels and filtering methods for potential bias
- Verify whether HR policies have been updated in line with anti-discrimination laws
Integration with National Labor Market Database
- Assess the company’s IT infrastructure for compliance with mandatory labor data submission
- Review internal policies for job postings, vacancy listings, and job matching protocols

Chart: Evolution of Vietnamese Labor Rights (2020 vs 2025)

Worker Group             | 2020 Legal Status         | 2025 Legal Status
------------------------ | ------------------------- | --------------------------
Freelancers/Gig Workers  | Largely unregulated       | Voluntary UI, labor rights recognized
Foreign Employees        | Fewer protections         | Full parity with locals
Trade Unions             | Limited negotiation power | Enhanced bargaining and data access
Temporary Workers        | Minimal benefits          | Covered under revised contract terms

Conclusion

The revised 2025 Vietnam Labor Law significantly increases compliance requirements for employers, particularly foreign-owned enterprises and investors. Legal due diligence must evolve beyond static document checks to include a forward-looking review of HR systems, labor engagement practices, and alignment with evolving government priorities on labor rights, social insurance, and inclusive employment. Failure to anticipate and address these regulatory shifts could expose investors to legal, financial, and reputational risks, undermining the value and viability of their investments in Vietnam.

9. Real Estate and Land Use Rights Due Diligence for Foreign Investors in Vietnam (2025 Update)

In the context of Vietnam’s tightening real estate regulatory landscape, legal due diligence on land use rights and property assets is now more essential than ever for foreign investors. With the enactment of the Law No. 29/2023/QH15 on Real Estate Business and the Amended Law on Residential Housing, both effective from January 1, 2025, the legal framework governing land use rights (LURCs), real estate transactions, and developer obligations has been significantly restructured.

For foreign investors participating in M&A transactions, greenfield projects, or property-based joint ventures, ensuring that target entities fully comply with these updated requirements is a prerequisite to mitigate transactional and post-investment risk.

Core Due Diligence Priorities in Real Estate and Land Use

Legal due diligence in this area must go beyond surface-level asset verification to investigate all legal and financial obligations tied to land and property rights.

Verification of Legal Ownership and Usage Rights
- Confirm that the target enterprise holds legitimate Land Use Rights Certificates (LURCs) for all properties used or owned.
- Evaluate whether the land was legally acquired or leased, including proper documentation and approvals from relevant authorities.
- Identify any overlaps, shared rights, or disputes regarding title or land boundaries.
Inspection of Encumbrances and Security Interests
- Review all mortgage or pledge agreements where land use rights or premises serve as collateral.
- Check registration records at the Land Registration Office to identify outstanding liens or encumbrances.
- Assess the implications of such encumbrances on the intended transaction (e.g., asset transferability).
Zoning, Planning, and Land Use Compliance
- Validate alignment with local zoning laws and urban master plans.
- Confirm the permitted use of the land and whether it aligns with the business activities of the target entity.
- Check for any planned government land recoveries or rezoning that could impact operations.
Assessment of Environmental and Infrastructure Commitments
- Ensure compliance with environmental impact assessments (EIAs), especially for industrial or commercial land.
- Examine developer responsibilities for internal infrastructure (roads, drainage, utilities) as mandated under the 2025 real estate laws.

Key Legal Developments in the 2025 Real Estate Laws

The new legal regime introduces nuanced but transformative changes in Vietnam’s real estate sector. Foreign investors must internalize these developments during due diligence to anticipate compliance obligations and avoid invalid or unenforceable property rights.

Table 1: Highlights of the 2025 Real Estate Law Reforms

Legal Provision	Key Change	Implication for Investors
Defined Ownership of “Separate Floor Areas”	Legal recognition of discrete floor areas (e.g., retail spaces, office levels) as transferable assets	Enables asset-level investment but under strict demarcation criteria
Buyer’s Right to LURCs	Buyers/transferees entitled to receive their own LURCs	Facilitates clear title transfer in acquisitions
Developer Capital Requirements	Minimum equity: 20% (under 20 ha), 15% (20 ha or more) of project capital	Requires due diligence on developer financial health
Cap on Deposits for Future Properties	Max 5% of contract value as deposit, included in the 30% pre-handover cap	Protects buyers from overexposure pre-completion
Leasing of Future Properties	Leasing rights removed for under-construction properties	Restricts early cashflow strategies for developers
Ban on Third-Party Deposit Contracts	Only developers can sign deposit agreements	Centralizes liability and transaction legitimacy

Developer Financial Capacity Compliance Matrix

Project Type	Land Area (ha)	Minimum Developer Capital Requirement	Investor Due Diligence Task
Urban Development	< 20	≥ 20% of Total Investment Capital	Verify audited balance sheets and capital sources
Industrial/Commercial	≥ 20	≥ 15% of Total Investment Capital	Assess working capital against project milestones
Off-Plan Sales Projects	Any	Subject to additional liquidity controls	Review developer’s pre-sale limits and escrow usage

Due Diligence on “Separate Floor Areas”

The 2025 update formalizes ownership and transactional rights for individual floor areas in high-rise or mixed-use developments, which were previously governed by soft market practice.

Due Diligence Actions Required:
- Confirm that the floor area is physically and legally demarcated.
- Verify its intended commercial or residential function as registered with authorities.
- Review building management contracts and shared facility use policies.
- Ensure that land use rights extend to the portion of the land on which the floor is situated.

Chart: Requirements for Legal Transfer of Separate Floor Areas

Condition                            | Mandatory for Transfer
------------------------------------|-------------------------
Clear Physical Demarcation          | ✅
Distinct Function (e.g., retail)    | ✅
Registered Building Plan Approval   | ✅
Identifiable Portion of LURC        | ✅
Title Separate from Other Units     | ✅

Pre-Sale Collection and Deposit Compliance

The amended law introduces tighter financial rules to mitigate risks in off-plan sales—a common area of abuse in the past.

Investor Focus Points:
- Scrutinize sales contracts for compliance with new pre-collection caps.
- Verify deposit handling procedures and whether amounts exceed the legal threshold.
- Ensure no unauthorized third parties are conducting deposit transactions.

Strategic Implications for Foreign Investors

The reformed legal structure demands a higher standard of transactional transparency and professional accountability. While this increases the due diligence burden, it enhances legal certainty for long-term investors.

Risk Reduction
- Stricter capital and deposit rules reduce the risk of developer insolvency or buyer exploitation.
- Legal recognition of asset classes like floor areas increases investment flexibility.
Higher Compliance Bar
- Investors must now perform in-depth audits of developer liquidity, asset encumbrances, and land legality.
- Greater emphasis on title clarity and zoning compliance raises the technical threshold for legal reviews.
Market Maturation
- Real estate FDI surged in H1 2025, signaling investor confidence despite stricter regulations.
- These reforms position Vietnam as a more reliable, rules-based investment environment.

Conclusion

With the 2025 legal reforms reshaping Vietnam’s real estate investment landscape, due diligence on land use rights and property compliance has become a cornerstone of risk management for foreign investors. The introduction of stricter rules on developer capital, deposit handling, and off-plan sales reflects the government’s commitment to protect buyers and professionalize the market. Legal clarity on “separate floor areas” and stricter rules against speculative leasing empower investors to make informed, legally secure acquisitions. Comprehensive due diligence under this new regime must not only validate ownership and legal usage of land and premises but also assess compliance with evolving regulatory thresholds designed to ensure financial stability and legal accountability in Vietnam’s fast-developing property market.

10. Intellectual Property (IP) Due Diligence for Foreign Investors in Vietnam (2025 Update)

For foreign investors entering Vietnam—especially in IP-intensive sectors such as technology, pharmaceuticals, manufacturing, and consumer goods—a thorough legal review of intellectual property (IP) assets is a fundamental component of investment due diligence. Despite Vietnam’s rising profile as an attractive FDI destination, it continues to present IP-related legal risks, making it imperative for investors to validate ownership, enforceability, and protection status of key intangible assets.

Vietnam’s legal framework for IP has undergone incremental improvements in recent years, but enforcement remains inconsistent. As of 2021, over 1,500 IP infringement cases were reported, reflecting the tension between economic growth and legal enforcement in Vietnam’s rapidly developing market.

Core Components of Intellectual Property Legal Due Diligence

An effective IP due diligence strategy in Vietnam involves multiple legal, commercial, and administrative verifications to ensure that the target entity’s IP portfolio is both legitimate and enforceable.

Verification of Ownership and Registration
- Confirm legal ownership of trademarks, patents, industrial designs, copyrights, trade secrets, and domain names.
- Cross-check official registration records with the National Office of Intellectual Property (NOIP) of Vietnam.
- Validate the chain of title, especially in M&A transactions, licensing, or R&D-based joint ventures.
IP Scope and Territorial Coverage
- Determine whether the IP is registered only domestically or also internationally under the Madrid Protocol, Patent Cooperation Treaty (PCT), or other regional frameworks.
- Assess if the registered IP sufficiently covers all operational and product categories of the business.
Review of IP Contracts and Licensing Agreements
- Evaluate licensing agreements to ensure legal compliance under Vietnam’s IP Law and Commercial Law.
- Identify exclusivity clauses, sublicensing rights, territorial restrictions, and royalty structures.
- Analyze any IP transfer agreements, especially those involving foreign parent companies.
Litigation and Enforcement Risk Assessment
- Review historical or pending IP litigation, disputes, oppositions, or cease-and-desist letters involving the target entity.
- Check the effectiveness of prior enforcement actions in Vietnam’s civil and administrative courts.
- Consider IP counterfeiting exposure in relevant sectors or regions within Vietnam.

Table 1: Types of IP Assets and Common Due Diligence Pitfalls

IP Asset Type	Due Diligence Focus	Common Pitfalls
Trademarks	Ownership, use in commerce, brand integrity	Non-use, similarity to local marks, or improper classification
Patents	Validity, licensing, application scope	Lack of novelty, unregistered improvements, unclear co-ownership
Copyrights	Authorship, scope, licensing rights	No formal registration, conflicting claims of ownership
Trade Secrets	Confidentiality protections, NDAs, internal protocols	Weak enforcement, lack of written protections
Industrial Designs	Visual design registration, scope of protection	Short protection term, unregistered variations
Domain Names	Consistency with trademark strategy, ownership by the legal entity	Owned by individuals or third parties, risk of cyber-squatting

IP Enforcement Climate in Vietnam

Despite Vietnam’s adherence to TRIPS, WTO, and various bilateral IP treaties, enforcement remains a major operational concern for IP owners.

Matrix: Sectoral IP Risk Exposure (2025)

Sector	FDI Volume (2024-2025)	IP Dispute Risk	Enforcement Reliability
Technology	Very High	High	Moderate
Pharmaceuticals	High	Very High	Low
Manufacturing	Very High	Moderate	Moderate
Consumer Goods	High	High	Low
Media & Entertainment	Medium	Very High	Low

IP enforcement in pharma and entertainment is particularly weak due to complex litigation procedures and low penalties.
Counterfeiting and trademark infringement are the most common types of IP violations, especially in local markets and e-commerce platforms.
Administrative remedies (through Vietnam’s IP Inspectorate) are often quicker but limited in deterrence compared to civil court litigation.

Recommended IP Due Diligence Actions for Foreign Investors

Given the evolving and sometimes opaque IP environment in Vietnam, foreign investors should adopt a multi-layered approach to IP due diligence.

Conduct Full Portfolio Audit
- Review all registrations, renewals, and application statuses across IP categories.
- Validate the legal entity under which each asset is registered.
Check Regulatory Compliance
- Ensure all IP-related agreements comply with Vietnamese law on licensing, royalties, and foreign remittances.
- Assess if IP assignments and technology transfers are registered with relevant state agencies when required.
Assess IP Valuation and Commercialization Readiness
- Analyze how IP contributes to enterprise value (e.g., brand equity, patent-backed revenue).
- Evaluate the monetization strategies, including licensing and joint development.
Risk Mitigation Strategies
- Implement trademark watch services and anti-counterfeit programs.
- Include robust IP indemnities and warranties in transaction agreements.
- Consider escrow arrangements for critical IP during transitional periods post-acquisition.

Conclusion: Strategic Implications for IP-Driven FDI

Vietnam offers robust opportunities for innovation-led investment, but its IP regulatory and enforcement framework still presents gaps. For foreign investors, particularly those from high-IP-value industries, conducting comprehensive and technically informed IP due diligence is not optional—it is essential.

The rise in IP infringement cases underscores the need for investors to validate that all relevant IP rights are:

Properly registered and enforceable in Vietnam.
Free of encumbrances or disputes.
Integrated into a broader protection and monetization strategy.

By proactively addressing these risks, investors can not only secure their intangible assets but also leverage them for competitive advantage in one of Southeast Asia’s fastest-growing markets.

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11. Litigation and Disputes Due Diligence in Vietnam (2025 Update)

As part of an advanced legal due diligence checklist for foreign investors in Vietnam, an in-depth assessment of litigation and dispute-related matters is critical. The surge in commercial and cross-border disputes—particularly those involving foreign direct investment (FDI) enterprises—underscores the urgent need for investors to understand both historical and potential legal risks.

The data from the Vietnam International Arbitration Centre (VIAC) reveals an escalating trend in arbitration cases, particularly in high-growth sectors such as real estate, infrastructure, and trade. These figures signal not only increased business activity but also the complexity and risk exposure foreign investors face in Vietnam’s legal and regulatory environment.

Scope and Objectives of Litigation Legal Due Diligence

A properly structured litigation due diligence process focuses on both existing legal disputes and the potential for future litigation. This includes a comprehensive analysis of historical conflict patterns and the robustness of internal risk mitigation frameworks.

Review of Ongoing and Past Litigation
- Identify and summarize all ongoing lawsuits, arbitrations, and administrative proceedings involving the target entity.
- Investigate past litigation outcomes to assess reputational impact and frequency of legal entanglements.
- Evaluate any settlements, penalties, or judgments that could affect business continuity or financial statements.
Legal Risk Profiling
- Analyze litigation trends within the target’s industry to benchmark common risk exposures.
- Identify red flags such as high volumes of supplier or employment disputes.
- Examine the legal jurisdiction and governing law clauses used in contracts with international parties.
Regulatory and Governmental Disputes
- Assess exposure to regulatory fines, compliance investigations, or land use disputes.
- Review all interactions with Vietnamese authorities, particularly in sectors such as construction, banking, and environmental services.
Future Litigation Risk Analysis
- Evaluate internal policies, governance practices, and contract enforcement mechanisms that may contribute to legal vulnerability.
- Determine whether the target employs standard dispute resolution strategies, such as arbitration clauses or pre-litigation negotiation protocols.

Table 1: VIAC Case Growth by Year

Year	New Cases Filed	YoY Increase	Notable Trends
2020	200+	–	Stable case load amid pandemic disruptions
2021	270	+21%	Rise in FDI disputes and contractual cases
2022	292	+8.15%	Surge in cross-border trade disagreements
2023	424	+46.2%	Historic high; sharp rise in real estate cases

Litigation Trends Involving Foreign Investors (1993–2023)

Between 1993 and 2022, VIAC handled 2,513 cases, with a significant proportion involving foreign elements—an indication of rising legal friction in cross-border investments.

Percentage of Cases Involving Foreign Elements
- 1993–2022: 60.01% of all cases had foreign elements or parties.
- 2021: FDI-related disputes constituted 39.2%; foreign parties involved in 18.1% of all cases.
- 2020: 79.2% of disputes involved Vietnamese and FDI enterprises; 20.8% had at least one foreign national.
Dispute Categories (2022–2023)
- Sale of Goods: 37.5% (2022), remained dominant in 2023.
- Construction and Infrastructure: 17.1% (2022), with a sharp increase in 2023.
- Finance and Banking: 10.4% (2022), remains sensitive to regulatory shifts.

Chart: Dispute Distribution by Sector at VIAC (2022)

| Sector             | % of Total Disputes |
|--------------------|----------------------|
| Sale of Goods      | 37.5%                |
| Construction       | 17.1%                |
| Finance & Banking  | 10.4%                |
| Logistics          | 9.8%                 |
| Real Estate        | 8.2% (2022) → ↑ in 2023 |

Geographical Breakdown of Disputing Parties

Understanding the origin of litigants offers valuable insight into cross-border legal exposure:

Regional Origin (2022)
- Asia: 68.9%
- Europe: 17.4%
- Americas: 9.3%
Top Disputing Countries
- China, Singapore, and Japan were the most frequent foreign parties involved in VIAC arbitration proceedings.

Litigation Exposure Matrix: FDI Sectoral Risk (2025)

Sector	FDI Activity Level	Dispute Frequency	Legal Complexity
Real Estate	Very High	Very High	High
Infrastructure	High	High	High
Manufacturing	Very High	Medium	Medium
Pharmaceuticals	High	Medium	High
Banking & Fintech	Moderate	Medium	High
Retail & E-commerce	High	Low	Low

Key Takeaways for Foreign Investors: Mitigating Litigation Risk

The surge in commercial arbitration cases involving foreign investors in Vietnam—particularly those related to real estate and trade—is not merely coincidental but directly correlated to the rise of FDI inflows in volatile sectors. As Vietnam’s regulatory landscape evolves, the complexities surrounding legal compliance and contract enforcement will only intensify.

To navigate these dynamics successfully:

Prioritize Contractual Clarity
- Draft contracts with precise jurisdiction clauses, clear obligations, and enforceable remedies.
- Incorporate arbitration clauses with designated forums such as VIAC or international tribunals (e.g., SIAC, ICC).
Implement Robust Legal Governance
- Perform internal audits of past litigation, risk management frameworks, and dispute resolution protocols.
- Establish early-warning mechanisms for conflict detection within procurement, HR, and regulatory departments.
Sector-Specific Legal Strategy
- Investors in construction and real estate must include due diligence on land use rights, building permits, and contractor disputes.
- Investors in finance and fintech should focus on regulatory compliance and contract enforceability under evolving digital laws.
Use Arbitration Strategically
- Arbitration is increasingly preferred over court litigation for resolving disputes in Vietnam.
- It offers confidentiality, efficiency, and enforceability across borders under the New York Convention, to which Vietnam is a signatory.

Conclusion: Legal Disputes Are a Leading Indicator of Investment Risk

Vietnam’s rapid economic expansion and increasing FDI inflows are accompanied by a sharp uptick in legal disputes, especially those involving foreign elements. The record-breaking 46.2% increase in VIAC cases in 2023 is a critical signal: while opportunity is abundant, so is legal risk.

Foreign investors must not only examine the existence of current litigation but must also take a forward-looking approach, analyzing the target’s sector vulnerabilities, governance culture, and legal preparedness. Legal due diligence on litigation is no longer a defensive measure—it is a strategic imperative for informed investment decision-making in Vietnam’s dynamic and high-growth market.

12. Environmental Compliance Due Diligence for Foreign Investors in Vietnam (2025 Update)

In Vietnam’s increasingly regulated environmental landscape, legal due diligence in environmental compliance has become an essential component of foreign direct investment (FDI) risk management. The introduction of Decree 05/2025/ND-CP, effective from January 6, 2025, reflects a strong governmental push to elevate environmental protection standards and better align with international sustainability frameworks. This due diligence component is particularly crucial in high-impact sectors such as manufacturing, construction, and energy, where regulatory scrutiny is intensifying.

Scope and Focus Areas of Environmental Due Diligence

Review of Environmental Impact Assessments (EIAs)
- Evaluate whether comprehensive EIAs have been conducted for each project phase.
- Verify compliance with the amended public consultation requirements.
- Confirm the presence of records documenting feedback from at least two-thirds of directly affected individuals.
Assessment of Environmental Permits and Licensing
- Analyze the status and validity of all required environmental licenses.
- Scrutinize the procedural compliance with Decree 05’s clarified license appraisal and issuance framework.
- Investigate whether the entity is subject to post-control monitoring mechanisms, even if exempt from Investment Policy Approval (IPA).
Verification of Pollution Control Measures
- Confirm installation of mandatory wastewater output meters and independent power meters for facilities discharging ≥50 m³/day.
- Review operational logs and compliance audits related to effluent discharge, solid waste, and air emissions.
Evaluation of Extended Producer Responsibility (EPR) Obligations
- Identify the company’s obligations under the updated EPR framework.
- Determine compliance with specified compulsory recycling ratios for batteries, lubricants, electronics, etc., as listed in Annex XXII of Decree 05.
- Assess the implementation model: self-recycling, third-party outsourcing, or intermediary delegation.
- Check for possible exemption if total product sales revenue is under VND 30 billion.

Key Regulatory Updates: 2025 Summary Table

Regulatory Area	2024 Standard	Updated Requirement (2025)
EIA Consultation	General public opinion sought	Mandatory consultation with ≥⅔ of affected individuals; documented evidence required
Wastewater Monitoring	Basic reporting	Facilities with ≥50 m³/day must install dual metering systems (electric + wastewater)
Environmental Licensing	Less structured process	Clear appraisal procedures, timelines, and post-control mechanisms even without IPA
EPR Applicability Threshold	Less defined	Entities under VND 30B revenue exempt; obligations triggered for higher-volume producers
Recycling Ratios	Ambiguous	Detailed per-product ratios updated every three years by competent authorities

Strategic Implications for Foreign Investors

Increased Compliance Costs
- Stricter rules on EIAs and metering require new equipment, professional consultants, and more frequent audits.
- EPR-related responsibilities may involve building internal recycling systems or outsourcing to certified recyclers.
Due Diligence Priorities
- Conduct detailed EIA audits, including stakeholder engagement documentation.
- Request full environmental license portfolios and match them against regulatory requirements.
- Analyze historical environmental performance and any recorded non-compliance or penalties.
Sector-Specific Risks
- Manufacturing & Processing: High exposure to EPR, wastewater discharge, and air emission liabilities.
- Real Estate & Construction: Risk of incomplete EIA compliance or poor community engagement practices.
- Agriculture & Energy: Likely subject to complex multi-stage licensing and ecosystem impact analysis.

Risk Matrix: Environmental Non-Compliance Exposure

Risk Category	Likelihood	Impact	Key Sectors Affected	Mitigation Strategy
EIA Non-Compliance	High	Severe	Real Estate, Construction	Third-party legal & environmental review
Wastewater Regulation Breach	Medium-High	High	Manufacturing, Food Processing	Upgrade infrastructure; install monitoring tech
EPR Obligation Violation	Medium	High	Consumer Goods, Electronics	Engage certified recycling partners
Licensing Irregularities	Medium	Medium	All sectors with significant land use	Legal review of licenses & approval processes

Conclusion

Environmental compliance under Vietnam’s evolving legal landscape is no longer a checkbox exercise but a strategic pillar for long-term investment success. Decree 05/2025/ND-CP mandates a much more rigorous approach to public participation, licensing processes, and waste management accountability. Foreign investors must embed environmental compliance into the core of their due diligence checklist to safeguard not only operational continuity but also brand integrity and regulatory alignment.

Moving forward, thorough legal due diligence should incorporate a multidimensional review of EIA documentation, environmental licensing, waste discharge practices, and EPR commitments, especially for investments in high-growth sectors. Proactive compliance with these stringent standards will position investors as responsible stakeholders aligned with Vietnam’s sustainable development agenda.

13. Navigating Common Legal Risks and Mitigation Strategies in Vietnam (2025 Update)

As Vietnam continues to attract increasing volumes of foreign direct investment (FDI), the country’s regulatory landscape grows more sophisticated and sector-specific. While the investment climate remains promising, foreign investors must contend with a variety of legal risks that are often interlinked. Proper identification, evaluation, and mitigation of these risks are essential components of any robust legal due diligence (LDD) strategy in Vietnam.

Key Legal Risks Facing Foreign Investors

1. Restrictions in Conditional Business Sectors

Vietnam maintains a negative list and conditional investment list under the Law on Investment.
Foreign investors in sectors such as transportation, telecommunications, and media face ownership caps and operational constraints.
Example: Foreign ownership in Vietnamese-flagged shipping fleets is capped at 49%.
Failure to comply with sectoral restrictions may lead to rejection of the Investment Registration Certificate (IRC) or post-licensing restructuring orders.

2. Dynamic and Fragmented Legal Environment

Frequent changes in investment, land, labor, tax, and cybersecurity regulations introduce significant legal uncertainty.
Laws such as the Cybersecurity Law, Decree 53/2022/ND-CP, and evolving data localization rules lack clear transition mechanisms.
Inconsistent enforcement between provinces further complicates compliance.

3. Profit Repatriation and Taxation Barriers

While profit repatriation is legally allowed, practical hurdles arise due to:
- Tax clearance delays
- Document deficiencies
- Foreign exchange approval procedures
Vietnam’s General Department of Taxation is intensifying scrutiny of:
- Transfer pricing
- Related-party transactions
- Tax incentive abuses

4. Under-Capitalization Risks

Although there is no nationwide minimum capital rule, under-capitalization risks are assessed by:
- Sector (e.g., finance, real estate)
- Project scale and duration
Insufficient declared capital may lead to:
- Licensing refusal
- Operational bottlenecks
- Cash flow shortfalls or insolvency

5. Language, Cultural, and Bureaucratic Barriers

Legal documents must be prepared in Vietnamese or with certified translations.
Miscommunication during negotiations and regulatory filings due to language differences is common.
Cultural misalignments often affect contract execution and negotiation styles.

6. Risk of Engaging Unreliable Local Partners

Many sectors require or benefit from Vietnamese partners.
Risks include:
- Lack of transparency in financials
- Poor corporate governance
- Diverging business objectives
Weak partnership agreements can lead to loss of managerial control or prolonged disputes.

Legal Risk Landscape Matrix for Foreign Investors in Vietnam

Risk Category	Typical Triggers	Legal Consequences	Mitigation Strategy
Conditional Sectors	Exceeding ownership limits	IRC rejection, forced restructuring	Sector-specific legal review pre-application
Regulatory Volatility	Legislative changes without grandfathering	Retroactive compliance obligations	Ongoing legal monitoring systems
Profit Repatriation	Tax/audit clearance delays	Liquidity bottlenecks	Early financial audits and repatriation planning
Under-Capitalization	Insufficient capital declared in IRC	License denial or revocation	Strategic financial modeling and capital planning
Language/Cultural Differences	Poor contract translation or local miscommunication	Disputes, delays in approvals	Employ bilingual legal counsel, localized HR onboarding
Local Partner Risks	Lack of background checks or misaligned goals	Governance issues, legal claims	Due diligence on partners and enforceable contracts

Recommended Strategies for Legal Risk Management in Vietnam

1. Implement Comprehensive Legal Due Diligence

A full-spectrum LDD process is essential to flag latent risks prior to market entry.
This includes:
- Corporate structure analysis
- Statutory compliance verification
- Sector-specific regulatory exposure

2. Engage Reputable Local Legal Advisors

Vietnamese legal experts are vital in navigating:
- Local customs in business law
- Procedural compliance at provincial authorities
They provide insights into opaque areas such as:
- Land use rights
- Environmental licensing
- Labour compliance

3. Develop Legally Resilient Contracts

Contracts should:
- Be bilingual and notarised
- Include detailed clauses on payment, force majeure, and arbitration
- Account for changes in applicable laws via change-in-law provisions

4. Adopt a Regulatory Monitoring System

Foreign entities must track laws affecting:
- Data privacy and localization
- Environmental obligations
- Foreign currency operations
Automation tools or subscription to legal bulletins can support this function.

5. Ensure Adequate Capital and Financial Flexibility

Capital contributions must align with:
- Operational forecasts
- Compliance thresholds
Prepare contingency funding for unexpected regulatory or tax obligations.

6. Conduct Rigorous Vetting of Local Partners

Assess partners for:
- Legal standing
- Financial solvency
- Alignment of business interests
Use Memoranda of Understanding (MoUs) and joint venture agreements with defined exit clauses.

7. Establish Internal Compliance and Governance Protocols

Appoint local compliance officers or legal liaisons
Train staff on Vietnamese regulatory frameworks
Maintain detailed documentation for audits and inspections

Interconnected Nature of Legal Risks: A Holistic Due Diligence Approach

Legal risks rarely operate in isolation. A poorly defined corporate structure can lead to tax non-compliance, while an unreliable partner may derail investment registration. This necessitates an integrated due diligence framework combining legal, tax, environmental, and financial assessments.

Legal Risk Interconnectivity Matrix

Legal Area	Linked Risk Domains	Impact if Ignored
Corporate Structure	Taxation, Beneficial Ownership, Anti-Money Laundering	Penalties, invalid registration
Regulatory Licensing	Environmental, Sectoral, Labor, IP	Operational shutdown, reputational loss
Partner Governance	Investment Control, Financial Compliance, Dispute Management	Project derailment, capital loss

Final Remarks

Vietnam’s evolving legal ecosystem offers both opportunity and complexity. As the government intensifies enforcement and transparency measures—such as UBO (Ultimate Beneficial Owner) disclosures and stricter tax audits—foreign investors must move beyond surface-level checks.

Instead, they must adopt a comprehensive legal due diligence approach grounded in local realities, proactively managed through local counsel, and tightly aligned with financial and strategic objectives. The integration of compliance, governance, and contract clarity is not just a best practice—it is a critical investment safeguard in 2025 and beyond.

14. Strategic Importance of Free Trade Agreements (FTAs) in Legal Due Diligence for Foreign Investors

Vietnam’s progressive integration into the global economy through multiple high-standard Free Trade Agreements (FTAs) plays a pivotal role in shaping the legal due diligence landscape for foreign investors in 2025. These agreements—including the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—have become foundational elements influencing cross-border investment decisions, legal rights, and operational expectations.

Overview of Vietnam’s Key FTAs and Their Legal Implications

EVFTA (European Union – Vietnam FTA)
- Eliminates 99% of tariffs over 10 years
- Offers national treatment for EU investors
- Provides enforceable investment protection mechanisms, including Investor-State Dispute Settlement (ISDS) clauses
CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)
- Reduces trade and investment barriers among 11 member countries
- Recognizes non-tangible assets such as intellectual property, licenses, and business authorizations as protected “investments”
- Ensures non-discriminatory access to domestic markets for foreign investors

Legal Due Diligence Priorities Triggered by FTAs

Foreign investors must take into account FTA commitments when evaluating legal risks and compliance obligations in Vietnam. Legal due diligence should incorporate:

Verification of National Treatment and Market Access Rights
- Confirm that the target company’s sector is open to full or partial foreign ownership under both Vietnamese law and FTA-specific concessions
Assessment of Protected Investment Categories
- Review all intangible assets (IP, licenses, permits) to ensure they are covered under the definition of “investments” under the relevant FTAs
Evaluation of Dispute Settlement Mechanisms
- Identify whether the investor is eligible for international arbitration protections offered under ISDS frameworks
Review of Capital Repatriation Provisions
- Ensure the company’s financial practices and banking procedures allow for repatriation of profits in accordance with both FTA protections and local currency control laws

Matrix: FTA Benefits vs. Legal Due Diligence Requirements

FTA Benefit	Legal Due Diligence Focus Area	Why It Matters
Tariff Elimination	Customs and trade license verification	Prevents hidden cost barriers in product pricing
National Treatment	Foreign ownership entitlement review	Confirms compliance with investment limits by sector
Protection of Intangible Assets	Intellectual Property and License audit	Assesses exposure to IP infringement or licensing violations
Investor-State Dispute Resolution (ISDS)	Arbitration clause analysis in contracts	Ensures eligibility for international legal protection
Free Movement of Capital and Profits	Tax compliance and profit repatriation procedures	Mitigates risks from currency controls and tax audits
Expanded Market Access	Scope of business licensing and product registration	Avoids licensing issues in newly opened service and product sectors

Quantifiable Impact of FTAs on Vietnam’s Investment Climate

FTA	Notable Impact on Vietnam’s Economy	Years in Effect
EVFTA	6.2% increase in export turnover to the EU in the first year	Since August 2020
CPTPP	23% increase in two-way investment flows between Canada and AP7 (2019–2023 vs. 2014–2018)	Since January 2019

Holistic Due Diligence Under FTA-Protected Environments

Although FTAs significantly enhance macroeconomic protections and legal certainty for foreign investors, they do not override the nuances of Vietnam’s domestic legal regime. Therefore, investment due diligence must adopt a dual-layered approach:

Macro-Level (FTA Alignment)
- Understand treaty-based protections and dispute resolution options
- Identify strategic advantages in market entry, tariffs, and capital flow
Micro-Level (Domestic Law Compliance)
- Conduct detailed reviews of Vietnamese laws on labor, real estate, tax, corporate governance, and environment, particularly those updated in 2025
- Examine company-specific risks such as UBO disclosure compliance, recycling obligations under Decree 05/2025, and licensing accuracy

Strategic Implications for Foreign Investors in Key Sectors

Sector	FTA Opportunity	Due Diligence Risk Area
Manufacturing	Tariff reduction on exported goods to EU and CPTPP countries	Environmental compliance (wastewater, EPR obligations)
Technology & IP	Recognition of IP as protected investment	Verification of IP ownership and licensing validity
Real Estate	Greater legal predictability through ISDS	Compliance with 2025 updates on land use and ownership structure
Services	Market liberalization under EVFTA/CPTPP	Licensing under WTO/FTA schedule and investment conditionality

Conclusion: FTAs as a Legal Foundation, Not a Substitute for Diligence

While Vietnam’s participation in EVFTA and CPTPP offers unprecedented protections for foreign investors—such as guarantees of non-discrimination, capital mobility, and IP rights enforcement—these agreements only form the framework of a secure investment environment. True risk mitigation demands comprehensive legal due diligence that examines how a target business aligns with both international treaty protections and Vietnam’s evolving domestic laws, particularly under the 2025 legislative updates.

Foreign investors must not conflate FTA-driven assurances with operational immunity. Instead, they should use these treaties as legal levers to bolster negotiation positions, enhance dispute readiness, and optimize cross-border financial planning—while remaining vigilant in assessing regulatory, sectoral, and local compliance risks on the ground in Vietnam.

15. Foreign Direct Investment (FDI) Trends in Vietnam: Implications for Legal Due Diligence (2025 Update)

Vietnam’s Foreign Direct Investment (FDI) landscape has witnessed accelerated growth in both volume and sectoral diversification, especially entering 2025. This trajectory is underpinned by the country’s economic resilience, robust reforms, and deepening integration into global trade frameworks. For foreign investors, these developments underscore the criticality of tailoring legal due diligence (LDD) efforts to match the pace and complexity of market activity.

Macroeconomic Indicators Reinforcing Investor Confidence

Total FDI in H1 2025:
- Surged to $21.51 billion, reflecting a 32.6% year-on-year (YoY) increase over the same period in 2024.
- January 2025 alone recorded an FDI spike of 48.6% YoY, with $4.33 billion in new and adjusted investments.
Full-Year 2024 Performance:
- Total FDI inflows reached $38.23 billion (up 3% YoY).
- Disbursed FDI hit an all-time high of $25.35 billion, representing a 9.4% annual increase.
GDP Growth in H1 2025:
- Recorded a robust 7.52%, the fastest first-half growth in the past 15 years.

Breakdown of Investment Activities

FDI Activity Type	H1 2025 Volume	YoY Change	Notable Trends
New Project Licenses	1,990	+21.7%	Total registered capital: nearly $9.3 billion
Capital Adjustment Transactions	826	+31.1%	Total capital raised: $8.95 billion
Capital Contributions & Share Acquisitions	1,700+	+7.6%	Transaction value: $3.28 billion (+73.6% YoY)

The rise in capital adjustments suggests a trend toward expansion and scaling of existing operations, not just new entries.

Sectoral Distribution of FDI

Manufacturing & Processing
- Attracted $12 billion, making up 55.6% of H1 2025 FDI.
- In 2024, led with $25.58 billion, or 66.9% of total FDI.
Real Estate
- Marked resurgence with $5.17 billion, over 2x YoY growth.
- Accounted for 24% of total registered capital in H1 2025.
Science & Technology Services
- Drew $1.18 billion, reflecting rising interest in high-tech sectors.
Utilities (Water & Waste Management)
- Captured $902.9 million, indicating growing demand for sustainable infrastructure.

Strategic Growth Areas: Fintech, AI, and Semiconductors

National FDI Target (2025):
- Aim to reach $150–200 billion in cumulative FDI stock.
Fintech Sector Forecast:
- Expected value of $20 billion by end-2025.
- Projected to hit $50 billion by 2030, growing at 20.2% CAGR.

Investor Origins: Country-Level Trends

Country	H1 2025 FDI (USD)	Share of Total	YoY Growth	Key Observations
Singapore	$4.6 billion	21.4%	-24.8% YoY	Still top contributor despite a relative decrease
South Korea	$2.93 billion	16%	+147% YoY	Rapid expansion in strategic manufacturing sectors
2024 Leader	Singapore	$10.21 billion	26.7%	Maintained dominant position through tech investments

Regional Distribution of FDI

Province/City	H1 2025 FDI (USD)	Share of National FDI	Growth vs. 2024
Hanoi	$3.66 billion	17%	~3x higher than H1 2024
Bac Ninh	$3.15 billion	14.6%	+7.1% YoY
Ho Chi Minh City	$2.7 billion	12.6%	Doubled from H1 2024
2024 Top: Bac Ninh	$5.12 billion	13.4%	2.8x increase from 2023

Legal Due Diligence Implications from FDI Trends

Need for Geographical Sensitivity
- LDD must reflect local regulatory conditions, especially in high-investment provinces such as Hanoi, Bac Ninh, and HCMC.
- Local People’s Committees and zoning authorities may impose region-specific administrative requirements.
Sector-Specific Risk Profiling
- High FDI in manufacturing, real estate, and high-tech necessitates thorough due diligence on:
  - Land-use rights and leasehold structure
  - Environmental impact assessments (especially for industrial zones)
  - Technology transfer, licensing, and IP protection
  - Construction and zoning permit legality
Growing Importance of Post-Entry Compliance
- Due diligence should extend beyond the acquisition phase to encompass:
  - Post-investment reporting obligations
  - Regulatory monitoring of capital increases and profit repatriation
  - Changes in local labor and tax laws

Summary Table: LDD Focus Points Based on FDI Trends

FDI Sector	Legal Due Diligence Priorities
Manufacturing	EIA compliance, land lease terms, labor law adherence, tax incentives
Real Estate	Land use rights, ownership caps, construction permits
Technology/Fintech	IP ownership, cross-border data rules, licensing requirements
Utilities	Public-private partnership agreements, environmental licensing
High-Tech (AI, Semi)	Tech transfer regulations, cybersecurity, R&D incentives

By aligning LDD procedures with the evolving structure of Vietnam’s FDI landscape, foreign investors can mitigate regulatory risks, identify compliance gaps, and ensure strategic alignment with both national and local investment priorities. The 2025 data affirms not only Vietnam’s macroeconomic appeal but also the need for highly customized legal due diligence that accounts for dynamic legal, sectoral, and geographical variables.

16. Legal Due Diligence Checklist for Foreign Investors in Vietnam (2025 Update)

As foreign direct investment (FDI) continues to grow in Vietnam, the mergers and acquisitions (M&A) landscape presents a more differentiated and strategic environment. For foreign investors planning acquisitions in Vietnam, legal due diligence (LDD) has become increasingly critical—especially in light of recent trends that show a decline in deal sizes, a shift toward local participation, and significant developments in key sectors such as real estate.

Key Trends in Vietnam’s M&A Market (2023–Q1 2025)

M&A activity has shown a fluctuating pattern over the past three years.
There has been a notable contraction in deal size and value, despite a modest rise in transaction volume in 2024.
The real estate sector has re-emerged as a dominant force in Vietnam’s M&A arena.
Domestic investors have increasingly become active participants, signaling a more competitive and mature deal environment.

M&A Market Overview (Table)

Year/Period	Number of Transactions	Total Disclosed Value (USD billion)	Average Deal Size (USD million)	Foreign-led Deal Value (USD billion)
2023	232	10.03 (estimated)	52.3	8.917
2024	447	6.93	41.5	4.947
Q1 2025	24	0.56 (estimated)	23.5	1.3 (inbound, Jan–Apr)

Note: Estimates are based on publicly disclosed data and average deal sizes. Inbound volume for Q1 2025 reflects the first four months only.

Critical Observations for Legal Due Diligence in M&A

Declining Deal Size:
- The drop in average deal size from $52.3M (2023) to $23.5M (Q1 2025) highlights a move toward smaller, possibly less complex transactions.
- Investors should calibrate LDD strategies to assess risks in mid-cap and small-cap targets.
Shifting Foreign Participation:
- Foreign-led deal value fell 45% from 2023 to 2024 due to external macroeconomic pressures.
- This reduction may impact the negotiating power of foreign entities, making thorough LDD essential to identify leverage points in transactions.
Surging Domestic Investor Activity:
- Domestic investors accounted for 29% of deal value in 2024, up from 16% in 2023.
- Foreign buyers now face competition from sophisticated local acquirers, necessitating faster and more accurate LDD processes to secure deals.
Real Estate Sector Resilience:
- This sector constituted 36% of total M&A deal value in 2024.
- With the implementation of new 2025 real estate regulations, foreign investors must conduct LDD that covers land use rights, ownership limitations, and local compliance frameworks.

Strategic LDD Implications for Foreign Investors

Increased Competition for Assets:
- The maturity of local investors raises the bar for acquisition strategies, requiring comprehensive LDD to uncover competitive advantages.
Shift to Greenfield and Minority Deals:
- As large M&A transactions become scarcer, foreign capital is increasingly moving into:
  - Greenfield investments
  - Minority share acquisitions
- LDD should therefore focus more on startup structure, capital contribution mechanisms, founder liabilities, and potential dilution risks.
Sector-Specific Focus:
- Real estate, healthcare, and renewable energy are among the sectors requiring tailored legal due diligence due to frequent regulatory revisions.

Sector-Specific Legal Risk Matrix (2025 M&A Focus)

Sector	Key LDD Focus Areas	Legal Risk Level	Remarks
Real Estate	Land-use rights, foreign ownership caps, construction laws	High	New 2025 laws reshape transaction structures
Technology	IP ownership, software licensing, data privacy compliance	Medium	IP transfer due diligence is essential
Manufacturing	Labor contracts, environmental approvals, leasehold rights	Medium	Often located in IPZs with local variations
Healthcare	Licensing, MOH approvals, foreign ownership restrictions	High	Sensitive sector with caps and approvals
Energy	PPA agreements, BOT terms, regulatory licenses	High	Critical infrastructure subject to state terms

Comparative Chart: M&A vs. FDI Deal Trends (2023–2025)

USD Billion

40 ─────────────────────────────────────────────
   │                                █ FDI Inflows (2024: $38.23B)
   │                                █
35 ────────────────────────        █
   │                                █
30 ────────────────                █
   │                                █
25 ────────                        █
   │                                █
20 ────                            █
   │                                █
15 ─                                █
   │                                █
10 ─            █ M&A Value (2023: $10.03B) ───────────────
   │                                █
 5 ─                     █ M&A Value (2024: $6.93B) ────────
   │
 0 ─────────────────────────────────────────────────────────
         2023              2024                2025 (Q1)

LDD Recommendations for Foreign Acquirers in Vietnam (2025)

Conduct Enhanced Regulatory Mapping:
- Use legal tech or local law firms to cross-check compliance with Vietnam’s evolving investment and antitrust regulations.
Prioritize Contract Review:
- Focus on shareholder agreements, change-of-control clauses, and undisclosed contingent liabilities in target entities.
Investigate Local Compliance Practices:
- Many businesses operate with informal or hybrid models—reviewing tax compliance, labor law adherence, and environmental clearances is essential.
Account for Administrative Variances:
- Variability in regulatory interpretation between Hanoi, Ho Chi Minh City, and Bac Ninh necessitates localized legal strategies.
Prepare for Post-Merger Integration Risks:
- Ensure contractual protections for transitional periods, IP transfer obligations, and retention of key personnel are in place.

This section underscores that legal due diligence in Vietnam’s M&A market in 2025 requires a targeted, sector-aware, and forward-looking approach. As the market matures and competition intensifies, precision in legal review becomes a strategic imperative for foreign investors looking to secure sustainable and compliant deal structures.

17. Dispute Resolution in Vietnam: Key Trends and Implications for Legal Due Diligence (2025 Update)

The landscape of dispute resolution in Vietnam is undergoing rapid transformation, with a notable surge in arbitration cases involving foreign elements. This trend has significant implications for legal due diligence processes undertaken by foreign investors entering or expanding operations within Vietnam. As the volume and complexity of disputes grow, particularly in sectors experiencing high levels of foreign direct investment (FDI) such as real estate, sale of goods, and construction, investors must adopt a more cautious and structured approach in evaluating legal risks.

Overview of VIAC Dispute Trends (2020–2023)

The Vietnam International Arbitration Centre (VIAC) has become the focal point for commercial dispute resolution involving both domestic and international parties. The sharp growth in the number of arbitration cases is a key metric highlighting the evolving legal risk environment.

Table 1: VIAC Case Volume and Foreign Involvement (2020–2023)

Year	Total Cases	YoY Change (%)	% with FDI or Foreign Elements	Predominant Dispute Types
2020	>200	N/A	79.2% (Vietnamese & FDI), 20.8% (Foreign)	Not disclosed
2021	270	+21%	39.2% (FDI), 18.1% (Foreign)	Not disclosed
2022	292	+8.15%	60.01% (Cumulative 1993–2022)	Sale of Goods (37.5%), Construction (17.1%), Finance & Banking (10.4%)
2023	424	+46.2%	Not disclosed	Sale of Goods, Construction, Real Estate (significant surge)

Insight: VIAC’s record of 424 arbitration cases in 2023 reflects not only Vietnam’s growing economic complexity but also its maturing legal infrastructure. The consistent rise in disputes signals that foreign investors must undertake rigorous due diligence to assess potential legal exposures pre- and post-investment.

Patterns in Sectoral Disputes: What Foreign Investors Need to Watch

The data indicates that disputes are highly concentrated in a few key economic sectors. This concentration reveals where legal friction is most likely to arise and where heightened diligence is imperative.

Sale of Goods
- Dominates VIAC’s caseload, consistently ranking as the top dispute type.
- Indicates issues with contract enforcement, quality control, and delivery terms.
- High-risk for foreign manufacturers or distributors.
Construction and Infrastructure
- Includes public-private partnerships and EPC contracts.
- Often involves multi-party agreements and complex regulatory compliance.
- Suggests need for robust contract structuring and review of payment/security clauses.
Real Estate
- Surged significantly in 2023, paralleling renewed FDI in this sector.
- Due diligence must assess land use rights, project licenses, and overlapping claims.
- Sector is directly impacted by new 2025 regulatory reforms and zoning changes.

Geographic Origins of Disputes

Understanding the nationality of disputing parties can offer investors additional insights into regional legal interoperability and common friction points.

Chart: Regional Origins of Disputing Parties at VIAC (2022)

Asia            ███████████████████████ 68.9%
Europe          ██████                17.4%
Americas        ███                   9.3%
Others          ██                    4.4%

Top 3 Countries:
- China
- Singapore
- Japan

Implication: Vietnam’s regional integration means that investors from Asia-Pacific are more likely to find themselves in arbitration. Legal counsel familiar with ASEAN and CPTPP frameworks is essential.

Key Takeaways for Legal Due Diligence

In light of VIAC data and dispute trends, foreign investors must refine their due diligence methodology to mitigate future legal exposure:

Historical Disputes
- Review the target company’s litigation/arbitration history.
- Examine prior VIAC and civil court outcomes and settlement agreements.
Contractual Practices
- Assess template agreements, dispute resolution clauses, and indemnities.
- Verify the inclusion of arbitration clauses that favor neutral jurisdictions or VIAC.
Governance & Documentation
- Audit the clarity and enforceability of board resolutions, shareholder agreements, and internal compliance policies.
- Determine whether dispute risk arises from internal conflicts or third-party relations.
Sector-Specific Risk Assessment
- Use dispute trend data to identify red flags specific to the industry.
- For real estate and construction: Confirm zoning permits, environmental compliance, and contractor solvency.
Arbitration Readiness
- Ensure the company is prepared for arbitration—financially and procedurally.
- Check whether management is experienced in international dispute resolution.

Legal Due Diligence Matrix: Dispute Risk Scoring

Table 2: Risk Assessment Matrix for Dispute Potential

Legal Area	Risk Factor for FDI	Red Flag Indicators	Due Diligence Strategy
Commercial Contracts	High	Lack of clear dispute clauses; history of terminations	Contractual audit; enforceability review
Real Estate	High	Title inconsistencies; litigation on property	Land use verification; court registry check
Construction Projects	Medium-High	Multi-party obligations; incomplete works	EPC contract review; performance bonds
IP & Licensing	Medium	Weak IP protection; unclear royalty clauses	Check trademark registry; review licensing
Employment & HR	Medium	Unstructured labor contracts; dismissal disputes	HR policy audit; compliance with labor code

Conclusion: Arbitration Surge and Strategic Legal Planning

The escalating number of disputes handled by VIAC reflects a parallel evolution in Vietnam’s investment climate—growing in opportunity but equally in legal complexity. This trend sends a clear message to foreign investors: while Vietnam is a welcoming and dynamic market, the risks associated with legal disputes are real and rising. A well-structured legal due diligence checklist must therefore not only verify compliance and asset validity but also scrutinize litigation history, sector-specific vulnerabilities, and the robustness of dispute resolution frameworks. Arbitration preparedness, coupled with contract clarity and sectoral insights, is now a cornerstone of successful FDI in Vietnam.

18. Comprehensive Synthesis of Vietnam’s 2025 Legal Reforms and Investment Environment

Vietnam’s legal framework in 2025 is undergoing a strategic transformation, balancing liberalization with regulatory tightening. This dual trajectory reflects the government’s intention to attract high-quality foreign direct investment (FDI) while enhancing legal transparency and compliance mechanisms across key economic sectors.

Legal Modernization and Administrative Reform Trends

Special Investment Procedure (SIP):
- Designed to expedite approvals for large-scale, high-tech, and strategic projects.
- Reduces procedural delays and administrative layers.
- Allows for a consolidated application process across ministries.
E-Governance Enhancements:
- Introduction of Enterprise Electronic Identification (e-ID/VNeID).
- Facilitates online registration, licensing, and compliance filings.
- Empowers remote monitoring and regulatory access for state agencies.
Ultimate Beneficial Ownership (UBO) Disclosure Mandate:
- Mandatory for all companies operating in Vietnam.
- Enforced through Decree amendments in 2025.
- Non-compliance may result in penalties and registration restrictions.
Sector-Specific Regulatory Tightening:
- Real Estate: Heightened licensing scrutiny and restrictions on foreign ownership in residential property.
- Banking & Finance: Revised criteria for foreign ownership in credit institutions.
- Labor: Expanded trade union powers and minimum wage framework adjustments.
- Environment: New obligations under the Extended Producer Responsibility (EPR) and stricter public consultation for Environmental Impact Assessments (EIA).

Matrix 1: Key Legal Shifts in 2025 by Sector

Sector	2025 Legal Change Highlights	Implications for Foreign Investors
High-Tech/Strategic	Introduction of Special Investment Procedure (SIP)	Faster approvals, especially for tech and digital infrastructure
Real Estate	Stricter licensing, increased foreign ownership restrictions	Requires thorough title verification and zoning due diligence
Labor	Revised Labor Code; stronger unionization rights	Must review all employment agreements and collective policies
Environment	EPR & EIA reforms with greater public engagement	Ongoing compliance costs and reputational risks
Corporate Law	Mandatory Beneficial Ownership (UBO) disclosures	Legal structure reassessment needed to ensure transparency

Vietnam’s FDI Landscape: 2025 Investment Performance

The momentum of FDI inflows into Vietnam in the first half of 2025 reflects sustained investor confidence, particularly in processing and manufacturing.

Key Investment Highlights

FDI Performance (H1 2025):
- Total registered FDI: USD 21.51 billion
- Year-on-year growth: +32.6%
- Leading sectors: Manufacturing, Processing, Real Estate
M&A Landscape:
- Deals shifting toward smaller transactions.
- Increased participation from Vietnamese institutional investors.
- Reflects a maturing domestic capital ecosystem.

VIAC Dispute Surge: Risk Indicators for Foreign Investors

The Vietnam International Arbitration Centre (VIAC) data presents a compelling case for heightened legal vigilance. A sharp escalation in legal disputes—particularly those involving foreign stakeholders—underscores the importance of contractual discipline and compliance.

Chart 1: VIAC Case Trend (2020–2023)

Year	Total Cases	YoY Change	Foreign-Involved Disputes	Top Dispute Types
2020	>200	N/A	20.8% foreign nationality	Not disclosed
2021	270	+21%	39.2% FDI-related	Not disclosed
2022	292	+8.15%	60.01% cumulative	Sale of Goods, Construction, Banking
2023	424	+46.2%	Not disclosed	Surge in Real Estate disputes

Source: Vietnam International Arbitration Centre (VIAC), compiled data

Key Takeaways

Sale of Goods remains the dominant cause of arbitration, followed by Construction.
The Real Estate sector experienced a significant spike in disputes in 2023.
Foreign parties, particularly from China, Singapore, and Japan, dominate the caseload.
Over 60% of all VIAC cases since 1993 involve foreign elements, indicating systemic friction in cross-border deals.

Strategic Legal Due Diligence Recommendations for Foreign Investors

A well-defined, sector-sensitive legal due diligence strategy is critical for mitigating legal, operational, and regulatory risks in Vietnam’s evolving landscape.

1. Implement Continuous, Dynamic Legal Monitoring

Due diligence must evolve from a transactional process to a continuous risk management function.
Regularly track new legislation (e.g., Labor Law, Environmental Law updates).
Monitor compliance deadlines under transitional decrees and implementation circulars.

2. Conduct Industry-Specific Legal Reviews

Map sector-specific risks across licensing, foreign ownership, and operational compliance.
Example: Real estate due diligence must cover land-use rights, zoning compliance, and red book authenticity.
For finance, scrutinize capital adequacy and cross-border lending limits.

3. Audit UBO & Corporate Structure Transparency

Confirm full alignment with the 2025 UBO disclosure mandates.
Investigate offshore parent structures and shareholder arrangements.
Review nominee agreements, which may now trigger regulatory scrutiny.

4. Reinforce Contractual Robustness

Review all material contracts for:
- Clear dispute resolution clauses (preferably arbitration at VIAC or SIAC).
- Well-defined payment obligations and penalty clauses.
- Validity under 2025’s revised Commercial Law provisions.

5. Conduct Employment Compliance Assessments

Verify employment contracts are compliant with:
- 2025 Labor Law amendments.
- Regulations for foreign employees, local recruitment quotas, and social insurance.
Assess vulnerability to union disputes and collective bargaining risks.

6. Analyze Environmental Exposure and Sustainability Risks

Evaluate EIA approvals, public consultation compliance, and licensing integrity.
Review exposure under the EPR framework: extended producer responsibility for waste management.
Cross-reference environmental liabilities in past operational audits.

7. Strengthen Dispute Resolution Preparedness

Assess company’s internal capacity for conflict resolution and regulatory response.
Ensure enforceable arbitration clauses are embedded in all vendor and JV contracts.
Evaluate historical disputes and legal team capacity.

8. Engage Reputable Local Counsel

Partner with law firms that possess:
- Proven experience in cross-border M&A and sector-specific compliance.
- Knowledge of local implementation gaps between legislation and practice.
Local counsel should also assist in:
- Contract localization.
- Licensing and approvals.
- Dispute resolution representation.

Conclusion: Legal Due Diligence as a Strategic Imperative

The 2025 legal landscape in Vietnam represents both unprecedented opportunity and tangible regulatory risk for foreign investors. While the government actively facilitates strategic investment through mechanisms like the SIP and digital transformation initiatives, legal friction remains a growing concern—especially in real estate, manufacturing, and finance.

Legal due diligence must evolve into a multi-layered strategy that incorporates:

Sector-based compliance diagnostics
Contractual foresight
Labor and environmental audits
Continuous legislative monitoring
Dispute readiness planning

The sophistication and regulatory scope of Vietnam’s legal reforms in 2025 require foreign investors to go beyond basic risk assessment. Instead, dynamic legal integration and local legal insight are key to sustaining competitive, compliant, and successful operations in the Vietnamese market.

Conclusion

As Vietnam emerges in 2025 as one of Southeast Asia’s most dynamic and sought-after investment destinations, the complexity and breadth of its evolving legal framework demand a more refined and strategic approach to legal due diligence. The nation’s progressive legislative developments—ranging from high-impact administrative reforms and sector-specific regulations to new transparency mandates and dispute resolution mechanisms—signal not only opportunity but also caution for foreign investors.

Foreign direct investment inflows, growing at a double-digit pace and surpassing USD 21.5 billion in the first half of 2025, affirm Vietnam’s economic resilience and investor appeal. Yet, the regulatory environment has matured in tandem with these capital inflows. The Vietnamese government is no longer simply encouraging foreign investment; it is shaping the quality and accountability of that investment through laws that prioritize corporate transparency, sustainability, digital compliance, and equitable labor standards. For foreign investors, this marks a new era—one in which understanding the law is not merely advisable but essential for long-term viability and success.

The Legal Due Diligence Imperative in 2025

Legal due diligence in 2025 is no longer a passive, pre-transaction formality. It has evolved into a core strategic process that must be aligned with the shifting regulatory environment. Investors can no longer rely solely on traditional compliance checklists. Instead, they must deploy multi-dimensional due diligence protocols that proactively identify hidden liabilities, assess sector-specific legal risks, and evaluate a company’s structural compliance with Vietnam’s legal reforms.

From confirming beneficial ownership disclosures and compliance with the e-ID/VNeID system, to addressing potential labor and environmental liabilities under the revised Labor Code and Environmental Protection Law, legal due diligence has become deeply integrated into the broader investment strategy.

Key Risk Areas That Demand Focus

Corporate Governance and Transparency: The enforcement of Ultimate Beneficial Ownership (UBO) disclosures demands that investors thoroughly investigate ownership structures and verify compliance with transparency requirements.
Labor Compliance and Union Engagement: With a more assertive labor law framework, companies must be assessed for compliance with employment contracts, trade union recognition, and protections for foreign workers.
Environmental Responsibilities: Due diligence must incorporate scrutiny of the target’s historical and ongoing environmental obligations, especially concerning Extended Producer Responsibility (EPR) and public consultation requirements under the revised EIA regime.
Contractual Validity and Dispute Readiness: Legal due diligence must test the enforceability and resilience of existing contracts under changing laws, particularly in sectors prone to legal disputes such as real estate and construction.
Sector-Specific Legal Requirements: Given the regulatory asymmetry across industries, investors must adopt a bespoke due diligence approach tailored to each target sector—whether it be real estate, financial services, technology, or manufacturing.

Why Local Expertise Matters More Than Ever

One of the most consistent themes across successful foreign investment cases in Vietnam is the early and ongoing engagement of local legal counsel. As Vietnam’s legal reforms introduce more nuanced interpretation and local enforcement variances, international investors require guidance that is not only technically sound but also contextually informed. Experienced Vietnamese legal advisors serve as essential partners in bridging the gap between formal legislation and regulatory reality, helping to navigate licensing regimes, interpret compliance obligations, and mediate emerging legal disputes before they escalate.

Preparing for the Future: Due Diligence as a Continuous Investment Strategy

Ultimately, legal due diligence should not be seen as a one-time activity tied to M&A or market entry. In the Vietnamese investment landscape of 2025, it should be treated as an ongoing strategic tool that evolves with the business. Whether through regular compliance audits, updated risk assessments, or proactive contract reviews, continuous legal due diligence empowers investors to anticipate regulatory change, reduce liability exposure, and operate with confidence in a fast-changing market.

Investors who prioritize dynamic, sector-specific, and forward-looking legal due diligence will position themselves not only to avoid pitfalls, but to maximize value creation, regulatory alignment, and sustainable growth in Vietnam’s expanding economy.

Final Thoughts

The 2025 legal environment in Vietnam reflects a government that is ambitious, reform-oriented, and committed to international best practices. For foreign investors, this presents both a challenge and an opportunity. The challenge lies in navigating increasing complexity; the opportunity lies in aligning with a system that rewards transparency, compliance, and long-term commitment.

By embracing a robust and adaptive legal due diligence strategy, foreign investors will be better equipped to make informed decisions, mitigate risk, and achieve regulatory harmony within one of Asia’s most promising investment frontiers.

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