Why FDI Companies in Vietnam Should Register More than Only One Business Activity

When foreign-invested enterprises (FIEs) establish a presence in Vietnam, they must declare their scope of business activities in the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC). While some foreign investors opt to register only a single activity, typically to minimize documentation or because of a narrow initial plan, this approach may lead to legal, tax, and operational challenges in practice.

From both a compliance and strategic perspective, FDI companies are strongly advised to register a broader set of activities rather than limit themselves to just one.

1. Legal Framework and Regulatory Requirements

Under the Law on Investment 2020 and the Law on Enterprises 2020, an FDI company is permitted to engage only in activities expressly recorded in its IRC and ERC. Any activities carried out outside this registered scope are deemed ultra vires (beyond authority) and may not be legally recognized.

This has practical implications:

• Contracts entered into for unregistered activities may not be enforceable in court.

• Tax authorities may disallow input VAT credits or corporate income tax deductions if the underlying activity is not aligned with the company’s registered business scope.

• Banks and licensing authorities may refuse to process transactions related to unregistered activities.

Thus, registering only one narrow activity can expose the enterprise to legal and commercial risks if it needs to expand or diversify operations.

2. Administrative Efficiency and Risk Management

Amending business activities requires updating both the IRC and ERC, a process that may involve:

• Preparing revised application dossiers,

• Obtaining approvals from the Department of Planning and Investment (DPI) or provincial People’s Committee,

• Updating tax registrations and possibly modifying existing contracts.

This procedure can take several weeks to months, particularly if the activity falls under conditional business sectors (such as education, logistics, pharmaceuticals, or financial services), which may require additional approvals or sub-licenses.

By registering multiple relevant activities from the outset, an FDI company avoids these administrative burdens and reduces the risk of operational disruption.

3. Compliance with Tax and Accounting Regulations

Vietnamese tax authorities increasingly scrutinize whether a company’s invoicing and accounting records are consistent with its registered activities. For example:

• A manufacturing company that also provides advisory services to their clients must ensure that they have registered activities to invoice the client. Otherwise VAT invoices for services may be challenged.

• A trading company that imports goods on behalf of a parent company must have “import-export activities” properly registered (Code 8299) to be full compliance.

Failure to register the correct scope could result in tax penalties, denial of deductions, or even administrative sanctions.

4. Strategic Flexibility in a Dynamic Market

Vietnam is a rapidly evolving market. The government frequently updates policies in line with global supply chain shifts, digital transformation, and sustainability commitments. Investors may initially come to Vietnam for manufacturing, but later expand into:

• R&D and design services,

• Logistics and distribution,

• E-commerce and digital platforms,

• Technical consultancy and after-sales service.

If these activities are not already part of the company’s registered business lines, it can take significant time to amend the IRC/ERC before operations can legally begin. Registering multiple activities at the outset ensures strategic flexibility and faster responsiveness to market opportunities.

5. Enhanced Credibility with Stakeholders

Local partners, government agencies, and even international clients in Vietnam often review a company’s ERC/IRC before entering into commercial agreements. Having only one activity listed may reduce credibility if it does not fully align with the scope of a proposed contract.

Conversely, a company with a broader range of registered activities demonstrates preparedness, long-term planning, and compliance awareness—qualities that build trust with stakeholders and authorities alike.

Conclusion and Recommendations

While registering a single business activity may seem simpler at the incorporation stage, it exposes FDI enterprises to legal risks, administrative burdens, and lost opportunities in the long run. Vietnam’s legal framework is clear: enterprises may only operate within the activities stated on their IRC and ERC.

Therefore, FDI investors should:

• Carefully assess both immediate and long-term operational needs,

• Register a comprehensive scope of activities covering core operations and potential expansions,

• Seek legal and professional advice when selecting activities, especially if they fall under conditional business sectors.

By doing so, foreign enterprises not only ensure compliance but also position themselves for strategic flexibility, operational efficiency, and stronger credibility in Vietnam’s fast-growing market.