Is the capital contribution ratio of foreign investors limited?

Article overview

The capital contribution ratio of foreign investors in Vietnam is an issue that foreign investors need to pay attention to before making investments. The capital contribution ratio of foreign investors may vary depending on each specific investment case. In the article below, we will provide detailed information to customers about the capital contribution ratio of foreign investors.

Capital contribution ratio of foreign investors
Capital contribution ratio of foreign investors

The importance of foreign investors to the Vietnamese economy

Foreign investors play a very important role in the Vietnamese economy, bringing great benefits and positive impacts in many aspects:

  • Capital contribution and economic growth: Foreign direct investments (FDI) provide an important source of capital, helping Vietnam strengthen production capacity, expand production scale and promote economic growth. Many large projects in the fields of industry, manufacturing, and energy have been implemented thanks to FDI capital.
  • Transfer of technology and skills: Foreign investors often bring modern, advanced technology and advanced management methods. This helps improve the technological level, management skills and competitiveness of businesses and the Vietnamese economy.
  • Create jobs and develop human resources: FDI enterprises not only create many direct jobs but also contribute to training and developing high-quality human resources. Employees have access to an international working environment and learn new skills and experiences.
  • Expanding export markets: Through international business relationships, foreign investors help expand export markets for Vietnamese products, facilitating connection with the global supply chain.
  • Attracting investment and improving the business environment: The presence of reputable foreign investors contributes to improving the investment environment, increasing the confidence of other international investors in Vietnam’s economic potential.
  • Budget contribution: FDI enterprises are an important source of revenue for the state budget through tax payments, contributing to increasing resources for development investment and social security programs.
  • Promoting competition and innovation: The appearance of foreign businesses creates competitive pressure, encouraging domestic businesses to improve capacity, innovate and improve product quality.

Investment forms of foreign investors in Vietnam

Pursuant to Article 21 of the Law on Investment 2020, regulations on investment forms include:

  • Investing in establishing economic organizations.
  • Invest capital, buy shares, buy capital contributions.
  • Implement investment projects.
  • Investment in the form of BCC contract.
  • New forms of investment and types of economic organizations according to Government regulations.

Thus, as a foreign investor you can invest in Vietnam by choosing the forms mentioned above.

Establishment of a new economic organization
Establishment of a new economic organization

Conditions for foreign investors to contribute capital to Vietnamese enterprises

Pursuant to Clause 2, Article 24 of the Law on Investment 2020, foreign investors contributing capital to Vietnamese enterprises need to meet the following conditions:

  • Market access conditions for foreign investors are specified in Article 9 of the Law on Investment 2020;
  • Ensure national defense and security according to the provisions of this Law;
  • Land law regulations on conditions for receiving land use rights, land use conditions in islands, communes, wards, border towns, coastal communes, wards and towns.

>>> See more: Transfer of capital contribution to foreigners: Details of procedures.

Regulation of capital contribution ratio of foreign investors

Clause 10, Article 17 of Decree 31/2020/ND-CP stipulating restrictions on the ownership ratio of foreign investors according to the provisions of international treaties on investment are applied as follows:

  • In case many foreign investors contribute capital, purchase shares, or purchase capital contributions in an economic organization and are subject to one or more international treaties on investment, the total ownership ratio of all foreign investors in that economic organization must not exceed the highest ratio prescribed by an international treaty with provisions on the ownership ratio of foreign investors in a specific industry or profession;
  • In case many foreign investors from the same country or territory contribute capital, purchase shares, or purchase capital contributions to an economic organization, the total ownership ratio of all such investors must not exceed exceeding the ownership ratio specified in international treaties on investment applicable to those investors;
  • For public companies, securities companies, securities investment fund management companies or securities investment funds, securities investment companies according to the provisions of the law on securities, in case the law on securities has other provisions on the ownership ratio of foreign investors, the provisions of the law on securities shall apply;
  • In case an economic organization has many business sectors and lines of business and international treaties on investment have different provisions on the ownership ratio of foreign investors, the ownership ratio of foreign investors in the organization will be different. That economic organization does not exceed the limit on foreign ownership ratio for the industries and occupations with the lowest foreign ownership limit.

Thus, the capital contribution ratio of foreign investors is based on international treaties on investment industries and professions.

 Regulations on capital contribution ratio
Regulations on capital contribution ratio

Consulting services on the form and capital contribution ratio of foreign investors at Long Phan

At Long Phan, we provide comprehensive consulting services on the capital contribution ratio of foreign investors in Vietnam. Our services include:

  • Consulting on forms of capital contribution and investment in Vietnam;
  • Support to accurately determine capital contribution conditions for each industry;
  • Consulting on the capital contribution ratio of foreign investors in each specific case;
  • Consulting and support in preparing investment-related documents and records;
  • Support in drafting investment documents and specialized papers;
  • Support in implementing investment procedures at competent agencies;
  • Consulting on solving problems that arise during the investment process.

Correct implementation of regulations on capital contribution ratio of foreign investors is extremely important, helping investors ensure transparency and avoid risks. We are committed to providing professional solutions, supporting the investment process to go smoothly and effectively. Please contact the hotline 0906735386 for detailed advice and best support from the Long Phan team of experts.