The Impact of the Abolition of the Business License Fee on FDI Enterprises

The impact of abolition of business license fee on FDI enterprises is a key compliance issue that must be properly understood following the issuance of Decree No. 362/2025/ND-CP, which officially takes effect on 1 January 2026. Under this Decree, the Government has formally abolished the entire legal framework governing the business license fee, including both declaration and payment obligations.

In a context where many foreign investors remain accustomed to the traditional “declare – exempt – pay” approach under previous regulations, a correct understanding of the legal nature of the abolition is essential. Misinterpretation may lead to unnecessary compliance risks and delays in adjusting legal and tax procedures applicable to business operations in Vietnam.

Business License Fee for FDI Enterprises Prior to 2026

Prior to 1 January 2026, FDI enterprises in Vietnam, regardless of capital size or operational duration, were subject to Decree No. 139/2016/ND-CP on the business license fee. In practice, the business license fee was typically one of the first compliance obligations arising immediately after an enterprise was granted its Enterprise Registration Certificate or Investment Registration Certificate.

Even in cases where an exemption applied, such as during the first year of establishment, FDI enterprises were still required to submit a declaration to establish the legal basis for the exemption. This regulatory approach gradually formed a formalistic compliance habit, which nevertheless entailed potential risks if misunderstood or improperly implemented by enterprises or their internal accounting teams.

Direct Legal Impact of Abolition of Business License Fee on FDI Enterprises

The impact of the abolition of the business license fee on FDI enterprises extends beyond the mere removal of a financial obligation. It requires enterprises to comprehensively review their legal and tax compliance approach in Vietnam.

From 1 January 2026, following the full repeal of Decree No. 139/2016/ND-CP and Decree No. 22/2020/ND-CP, the business license fee no longer constitutes a lawful charge under Vietnam’s legal system. This represents a legally significant change for FDI enterprises.

First, FDI enterprises are no longer required to pay the business license fee, regardless of investment capital or the number of dependent units such as branches, representative offices, or business locations. This is not a conditional incentive or exemption policy, but rather the complete elimination of a financial obligation.

More importantly in practical compliance terms, FDI enterprises are also no longer required to declare the business license fee. Declaration obligations only exist where a legally recognized fee or charge remains in force. Once the fee itself has been abolished, there is no longer any legal basis for requiring enterprises to submit related declarations.

For multinational groups or FDI enterprises with strict internal control systems, this change necessitates a review and adjustment of legal and tax compliance checklists in Vietnam to avoid maintaining procedures that no longer have legal validity.

Impact on the Establishment of FDI Enterprises from 2026

Previously, the business license fee was commonly regarded as a default obligation immediately following the establishment of an FDI enterprise. From 2026 onwards, the abolition of the business license fee significantly simplifies the post-establishment compliance phase.

Specifically, after the issuance of the Investment Registration Certificate and Enterprise Registration Certificate, FDI enterprises will no longer be required to declare the business license fee in the first month of operation or during the first financial year. This reduces initial compliance pressure, particularly for foreign investors entering the Vietnamese market for the first time.

However, FDI enterprises should note that the abolition of the business license fee does not affect other tax and reporting obligations, including tax registration, value-added tax declarations, corporate income tax compliance, periodic investment reporting, and accounting obligations under applicable regulations.

Practical Risks Arising from Misinterpretation of “Abolition”

A common risk during transitional policy periods is the continued application of an “exemption” mindset to a fee that has been fully abolished. In the case of the business license fee, such misinterpretation may result in FDI enterprises continuing to submit zero-value declarations despite the absence of any legal requirement.

Although this practice does not cause direct financial loss, from a compliance governance perspective it may distort internal control systems, create confusion during audits or due diligence processes, and lead to inconsistencies in legal advisory practices across different jurisdictions where the enterprise operates.

Accordingly, understanding the distinction between “abolition” and “exemption” is a key consideration for FDI enterprises and their legal and accounting teams.

Policy Perspective and Recommendations for FDI Enterprises

From a policy perspective, the abolition of the business license fee reflects the Vietnamese Government’s broader efforts to reduce compliance costs and simplify the investment environment through substantive administrative reform, rather than relying solely on conditional tax incentives.

Although the financial value of the business license fee was relatively modest, the complete removal of a formalistic administrative obligation contributes to improving the overall investment experience, particularly during the market entry phase when FDI enterprises are required to address multiple legal procedures simultaneously.

From 2026 onwards, while the business license fee will no longer constitute a legal obligation, FDI enterprises are advised to proactively review their legal and tax compliance framework in Vietnam. This includes updating internal compliance checklists, providing guidance to accounting and finance teams, and ensuring that external advisors apply the current legal framework accurately.

Green NRJ recommends that FDI enterprises view this regulatory change not merely as a minor cost reduction, but as part of a broader compliance optimization strategy for business operations in Vietnam from 2026 onwards.