Table of Contents

Why Invest in Manufacturing in Vietnam?

Vietnam has emerged as one of Asia’s most attractive destinations for foreign direct investment (FDI) in the manufacturing sector. This Southeast Asian nation offers a compelling mix of economic, strategic, and structural advantages that make it an ideal location for setting up a manufacturing plant.

1. Political and Economic Stability

Vietnam maintains a stable political environment and consistent economic growth, with GDP expanding at an average of 6–7% annually over the past decade. The country’s clear direction in supporting industrialization and foreign investment has helped foster a predictable business climate—crucial for long-term manufacturing projects.

2. Competitive Labor Costs and Skilled Workforce

One of Vietnam’s biggest advantages is its low labor cost compared to neighboring countries like China, Thailand, and Malaysia. Despite the lower wages, Vietnam offers a young, dynamic, and increasingly skilled workforce. Over 55% of the population is under 35, and the government is actively investing in vocational training programs to meet the needs of high-tech and precision manufacturing industries.

3. Strategic Location and Global Trade Access

Located in the heart of Southeast Asia, Vietnam offers excellent connectivity to major markets such as China, Japan, South Korea, and ASEAN countries. Furthermore, Vietnam has signed more than 15 Free Trade Agreements (FTAs), including:

• The EU-Vietnam Free Trade Agreement (EVFTA)

• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

• Regional Comprehensive Economic Partnership (RCEP)

These agreements give manufacturers based in Vietnam preferential access to over 50 international markets, helping reduce tariffs and improve global supply chain competitiveness.

4. Government Incentives and FDI-Friendly Policies

The Vietnamese government actively encourages foreign investment in manufacturing through:

• Tax incentives (e.g., corporate income tax exemption/reduction for up to 15 years)

• Land lease discounts or exemptions in industrial zones

• Simplified business registration and licensing procedures

• Support policies for high-tech and environmentally friendly manufacturing

These incentives make it easier and more cost-effective for foreign investors to establish and grow their operations.

5. Expanding Industrial Infrastructure

Vietnam has significantly upgraded its infrastructure in recent years. The country boasts:

• Over 400 operational industrial parks (IPs) and economic zones

• Improved highways, ports, and airports supporting logistics

• Development of smart industrial zones with ready-built factories and utilities

These developments reduce setup time and facilitate efficient manufacturing and export operations.

Can Foreign Investors Establish 100% Foreign-Owned Manufacturing Companies in Vietnam?

Yes, foreign investors are allowed to establish 100% foreign-owned manufacturing companies in Vietnam, provided that the business activities are not listed in the sectors prohibited or restricted for foreign investment in accordance with the country’s Law on Investment (2020) and Law on Enterprises (2020). Vietnam continues to position itself as an open and attractive destination for foreign direct investment (FDI), especially in the manufacturing sector.

Legal Basis for Foreign Ownership

Vietnam does not impose general restrictions on foreign ownership in most manufacturing industries. According to the Vietnamese Government’s WTO Commitments and investment laws:

• Foreign investors can own up to 100% of the charter capital in manufacturing companies.

• Foreign investors have the same rights as domestic investors in most sectors not included on the “Negative List” (i.e., sectors restricted or conditional for foreign investment).

Common Legal Entities for Manufacturing in Vietnam

Foreign investors typically choose one of the following two business structures when establishing a manufacturing company:

1. Limited Liability Company (LLC) – Most Common Choice

Ideal for small to medium-sized manufacturing operations, an LLC offers a streamlined setup and operational flexibility.

• Ownership structure: One-member LLC (single investor) or multi-member LLC (up to 50 members)

• Capital requirements: There is no statutory minimum capital for most manufacturing businesses in Vietnam. However, the registered charter capital must be sufficient and realistic to cover the proposed investment scale, including:

  • Factory construction

  • Machinery and equipment

  • Initial staffing and operating costs
    The Department of Planning and Investment will assess capital adequacy during the licensing process.

• Management: Managed by a company owner or director

• Advantages:

  • Simple governance structure

  • Easier to register and operate compared to JSC

  • Full foreign ownership allowed in most manufacturing sectors

2. Joint Stock Company (JSC) – Suitable for Larger-Scale Projects

A Joint Stock Company is ideal for larger manufacturing ventures, especially those planning for future expansion or public listing (IPO).

• Ownership structure: Minimum of 3 shareholders, no cap on the maximum number

• Capital contribution: Divided into shares; flexible transfer of ownership

• Management: Requires a Board of Management and Supervisory Board

• Advantages:

  • Scalable structure

  • Suitable for joint ventures or partnerships

  • Easier access to funding through share issuance

Conditions to Open a Manufacturing Plant in Vietnam

To legally establish a manufacturing facility in Vietnam, foreign investors must meet a set of legal, technical, and operational requirements based on the type of manufacturing activity. While some conditions are general and apply across all industries, others are industry-specific and regulated by specialized authorities.

General Requirements to Set Up a Manufacturing Plant in Vietnam

Regardless of the industry, foreign investors must fulfill the following standard conditions when opening a manufacturing plant:

1. Legal Production Site

• The manufacturing facility must be located in a properly zoned area—typically an industrial park (IP), export processing zone (EPZ), or other FDI-friendly provinces like Binh Duong, Bac Ninh, or Long An.

• Investors must provide documentation proving land lease, factory ownership, or rental contracts compliant with local land laws.

2. Investment Registration Certificate (IRC)

• Foreign investors must obtain an IRC for any project involving foreign capital. The IRC outlines key details such as project objectives, investment capital, location, and duration..

• It includes key information such as project objectives, capital contribution, location, and duration.

3. Enterprise Registration Certificate (ERC)

• Issued by the Department of Planning and Investment (DPI), the ERC officially establishes the legal entity (LLC or JSC) to operate the business.

4. Sufficient Charter Capital

• Although Vietnam does not specify a minimum capital for all sectors, the investment capital must be reasonable and adequate to cover:

  • Construction of the factory

  • Machinery and equipment

  • Initial operational expenses (labor, materials, compliance)

5. Compliance with Safety and Environmental Laws

• The plant must meet all legal requirements regarding:

  • Environmental Impact Assessment (EIA) or Environmental Protection Plan (EPP)

  • Fire prevention and fighting certification

  • Construction permits, if building from the ground up

Industry-Specific Conditions for Manufacturing Plants in Vietnam

Some industries in Vietnam are regulated more strictly and may require additional conditions, licenses, or qualifications. Below are examples of sectors with special requirements:

Cosmetics Manufacturing Plant

• Must appoint a qualified Product Manager, who has a degree in pharmacy, chemistry, biology, or a related field.

• Must comply with ASEAN Cosmetic GMP guidelines.

• Required to register the factory with the Ministry of Health before commencing operations.

Pharmaceutical Manufacturing Facility

• Must meet Good Manufacturing Practice (GMP – WHO or EU) standards.

• Requires several sub-licenses, including:

  • License for drug manufacturing

  • License for drug storage and distribution

  • Appointment of a qualified pharmacist as technical director

• Subject to inspections by the Drug Administration of Vietnam (DAV).

Food and Beverage Manufacturing Plant

• Must obtain a Food Safety Certificate.

• May be required to pass HACCP or ISO 22000 certification depending on the production scale and export targets.

Step-by-Step Process to Set Up a Manufacturing Facility in Vietnam

Setting up a manufacturing facility in Vietnam involves a series of important steps to ensure compliance with local laws and regulations. Below is a detailed guide to help foreign investors navigate the process of establishing a factory in Vietnam.

Step 1: Secure a Suitable Production Site for Your Manufacturing Plant

Before starting operations, choosing the right production site is a critical first step. Foreign investors have several options for securing land or a facility in Vietnam:

Option 1: Rent a Ready-Built Factory

• Fastest setup option, especially for small and medium-sized enterprises (SMEs).

• Provides immediate occupancy and reduces construction time.

• Higher rental costs, but minimal upfront investment required.

• Ideal for foreign investors seeking a quick operational launch.

Option 2: Lease Land in an Industrial Zone

• A more cost-effective option compared to renting ready-built factories.

• Allows you to build your own manufacturing plant to suit specific business needs.

• Long-term lease agreements provide security for the long run (typically 30–50 years).

• Investors must comply with industrial zone regulations and building permits.

Option 3: Lease Land Directly from the Government

• Suitable for large-scale manufacturing projects with high capital investment.

• Involves a more complex approval process and may require government negotiations.

• Typically, offers more flexibility in site development compared to industrial zones.

• Often applicable for projects requiring substantial land areas.

Step 2: Apply for an Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC)

Once you have secured a production site, the next step is to register your manufacturing company. This involves applying for the following two certificates:

Investment Registration Certificate (IRC)

• Required for foreign investors before establishing a business in Vietnam.

• Submit an application to the Department of Planning and Investment (DPI) or the Industrial Zone Management Board (for industrial zone-based factories).

• Required documents include:

  • Lease contract or proof of land ownership

  • Proof of sufficient capital for operations

  • Proposed business plan or charter of the company

• The application review process may take 30–45 days or more.

Enterprise Registration Certificate (ERC)

• After obtaining the IRC, the ERC formally establishes your manufacturing company as a legal entity.

• The application for ERC can be submitted along with the IRC to streamline the process.

Step 3: File the Environmental Impact Assessment (EIA)

Certain manufacturing activities in Vietnam, particularly those that may have an environmental impact, require approval for their Environmental Impact Assessment (EIA).

Key Requirements:

• EIA approval is mandatory for industries that may cause environmental harm (e.g., heavy industries, chemicals, plastics).

• The EIA report outlines how the manufacturing facility will manage waste, emissions, and other environmental impacts.

• In some cases, the EIA must be approved before applying for the IRC or ERC.

• Submit the report to the Ministry of Natural Resources and Environment (MONRE) or local authorities, depending on the scale of the impact.

Step 4: Apply for Construction and Fire Safety Licenses

For manufacturing plants that need to be constructed or renovated, it is crucial to obtain the necessary construction and fire safety permits.

Construction Permit:

• If building a new facility or making major renovations to an existing factory, you must apply for a construction permit from local authorities.

• This process ensures the building complies with Vietnam’s construction standards.

Fire Safety Permit:

• Fire safety regulations are strictly enforced in Vietnam, especially for manufacturing plants.

• All facilities, whether new or renovated, must pass fire safety inspections.

• A fire safety certificate is required before starting operations.

• Fire safety measures must be implemented in compliance with Vietnam’s fire prevention laws.

Alternative Solution: Start with a Trading Company

If you’re not yet ready to set up a manufacturing plant in Vietnam, an alternative solution is to start with a trading company. This option allows you to enter the Vietnamese market quickly and lay the foundation for future manufacturing operations. You can later update your business registration when you’re ready to establish a factory.

Why Start with a Trading Company?

A trading company in Vietnam can serve as an excellent entry point for foreign investors who want to:

• Test the market before committing to a full-scale manufacturing facility.

• Establish a presence in Vietnam quickly by using a virtual office address.

• Import and distribute products or set up supply chain operations for your future manufacturing facility.

Starting with a trading company offers flexibility and reduced initial investment. It also allows you to build relationships with local partners, suppliers, and customers, making your transition to full manufacturing smoother when the time comes.

How to Set Up a Trading Company in Vietnam:

1. Register your business: Apply for an Enterprise Registration Certificate (ERC) and Investment Registration Certificate (IRC), just like a manufacturing company. The key difference is that the business activity will focus on trading rather than production.

2. Virtual office address: Many foreign investors choose to use a virtual office address for their trading company, which significantly reduces startup costs.

3. Import/export license: If your trading company will handle import/export activities, you will need to apply for the necessary customs and import/export licenses.

Transitioning from a Trading Company to a Manufacturing Facility:

Once you’re ready to expand into manufacturing, you can update your business license to reflect the new activity. This process involves submitting an application to the Department of Planning and Investment and updating your Investment Registration Certificate (IRC).

This strategy allows you to:

• Avoid delays in entering the market.

• Minimize costs while still establishing a foothold in the country.

• Scale up to full manufacturing operations when the time is right.

Investment Incentives for Manufacturing in Vietnam

Vietnam offers a range of investment incentives for foreign investors in the manufacturing sector, including:

• Corporate income tax (CIT) incentives: preferential tax rates, tax exemptions, and reductions.
• Import duty exemptions for goods imported to form fixed assets and raw materials for manufacturing
• Land rent and land use fee exemptions or reductions
• Accelerated depreciation and increased deductible expenses for taxable income calculation

These incentives are designed to encourage the establishment of factories, reduce operating costs, and foster growth in specific industries. Here’s a comprehensive guide to the key investment incentives available for manufacturing companies in Vietnam.

Preferential Sectors for Investment

In addition to location-based and project-scale incentives, Vietnam also provides preferential treatment to investments in specific priority sectors. These include:

• High-tech industries: such as software development, clean energy technology, and IT product manufacturing

• Recycling and environmental protection

• Public transportation infrastructure

• Microfinance services

• Education and healthcare

• Start-up and innovation-related projects

Investors operating in these sectors may benefit from lower corporate income tax rates, import duty exemptions, and reductions in land rental fees.

1. Corporate Income Tax Holidays and Reductions

Vietnam provides significant tax incentives for foreign-invested manufacturing businesses, especially those involved in high-tech, green, or supporting industries. The most common incentives include:

Corporate Income Tax (CIT) Incentives:
Vietnam grants CIT exemption for 2–4 years starting from the first year of taxable income, followed by a 50% reduction for up to 9 years, depending on the project location, industry, and scale.
Additionally, high-tech or environmentally friendly manufacturing projects may benefit from preferential CIT rates of 10% for up to 15 years.

Note: From 2024, Vietnam applies a Global Minimum Tax (GMT) of 15% under the OECD Pillar Two framework, applicable to multinational enterprises (MNEs) with global consolidated revenue of at least EUR 750 million. This may limit the net effect of preferential CIT for large MNEs.

These incentives significantly improve the return on investment (ROI) for foreign investors and enhance the overall profitability of manufacturing operations in Vietnam.

2. Import Duty Exemption on Machinery and Raw Materials

Vietnam provides import duty exemptions for machinery, equipment, and raw materials used in the production process. This is particularly beneficial for manufacturing companies in the early stages of development, where initial capital investment can be high.

Key Benefits:

• Exemption from import duties on machinery and equipment that are directly used for manufacturing operations.

• Exemption on raw materials for the production of export products, further lowering production costs for exporters.

This policy helps foreign manufacturers reduce capital expenditure (CAPEX) and boost cost-efficiency in their operations.

3. Support from Local Governments and Industrial Zones

The Vietnamese government, along with local authorities, offers various forms of support to encourage foreign direct investment (FDI) in manufacturing. This includes:

Land Lease Incentives:

• Reduced land lease fees or land lease exemptions for manufacturing projects located in industrial zones or economic zones.

Infrastructure Development:

• Support for construction of infrastructure, such as roads, utilities, and transport, making it easier for manufacturers to set up and operate in these zones.

Simplified Administrative Procedures:

• Local governments and industrial zone authorities often streamline registration and licensing procedures to make it easier for foreign investors to set up their manufacturing operations.

4. Incentives for High-Tech, Supporting Industries, and Green Sectors

Vietnam offers the most favorable investment incentives for companies engaged in the following sectors:

High-Tech Manufacturing:

• Manufacturing projects involving advanced technologies or research and development (R&D) often receive the highest tax incentives.

Supporting Industries:

• Companies involved in producing components and spare parts for large industries (e.g., automotive, electronics) are eligible for additional incentives.

Green Manufacturing:

• Eco-friendly manufacturing projects, especially those using sustainable resources or focusing on renewable energy, qualify for tax breaks and subsidies aimed at reducing environmental impact.

These incentives not only help lower production costs but also contribute to Vietnam’s industrial modernization and sustainability goals.

Conclusion

Establishing a manufacturing business in Vietnam is not only legally permitted for foreign investors, but it also offers a range of attractive investment incentives. With the right preparation, thorough understanding of local regulations, and compliance with legal procedures, you can set up and operate a successful manufacturing plant in Vietnam.

By leveraging Vietnam’s tax incentives, import duty exemptions, and government support, foreign investors can maximize their return on investment and achieve long-term success in this dynamic market.

At Green NRJ, we specialize in providing end-to-end consultation services for foreign investors seeking to start their manufacturing business in Vietnam. Our team offers comprehensive support, from initial business setup to licensing and navigating local regulations.

Green NRJ is ready to support your investment journey with end-to-end consultation, licensing, and local expertise.

Contact us today for a free consultation on how to start your manufacturing plant in Vietnam.

Related Articles:

• How to Start a Business in Vietnam: A Complete Guide for 2025
• Establishing a Representative Office in Vietnam: A Step-by-Step Guide for Foreign Companies
• How to Establish a Consulting Business in Vietnam – A Legal and Practical Guide (2025)
• How to Set Up a Construction Company in Vietnam (2025)
• How to Establish a Headhunting Company in Vietnam: A Complete Guide for Foreign Investors
• How to Establish a Foreign-Invested E-Commerce Company in Vietnam: A Complete Step-by-Step Guide for Foreign Investors