Buying Vietnamese Companies in 2026: Common Risks for Foreign Investors

Key Risks When Foreign Investors Acquire Vietnamese Companies

Legal and Investment Policy Risks

One of the most significant risks for foreign investors lies in the application of Vietnam’s foreign investment regulations. Not all business sectors permit 100% foreign ownership, and many industries remain subject to foreign ownership caps or additional investment conditions.

In addition, M&A approval procedures involving foreign investors are often complex and time-consuming. These procedures may include registration of capital contribution or share acquisition, obtaining investment policy approval (in certain cases), and amending the enterprise registration certificate and related business licenses. Failure to properly address these requirements may result in delays, restructuring of the transaction, or regulatory non-compliance.

Read more: Schedule of Specific Commitments in Services

Financial and Accounting Risks

Differences between Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IFRS) present a major challenge for foreign investors. Many Vietnamese companies—particularly small and medium-sized enterprises—have not yet established transparent, standardized, and comprehensive financial and accounting systems.

Common financial risks include:

• Revenue and expenses not recorded in the correct accounting period
• Contingent liabilities not reflected in financial statements
• Related-party transactions that are not fully disclosed
• Actual cash flow that does not correspond with reported accounting profits

These issues can lead to inaccurate company valuation, causing investors to overpay or misjudge the target’s future profitability.

Tax Risks

In Vietnam M&A transactions, tax risks often surface only after the deal has been completed, when the investor assumes control and enters the post-M&A phase. Tax-related issues are also among the most financially damaging risks.

Common tax risks include:

• Corporate income tax not fully declared or underpaid
• Withholding tax arising from transactions with foreign contractors
• Transfer pricing and related-party transaction issues
• Historical tax liabilities from periods prior to the acquisition

Case Study: Post-M&A Tax Risks and the Role of Far East Legal

Background:

A Singapore-based investment fund acquired 100% of the charter capital of a Vietnamese company operating in the consumer goods manufacturing sector. Prior to the transaction, the target company had operated steadily for many years and reported consistent profit growth.

Issue Identified:

Following completion of the acquisition, the tax authorities conducted a routine tax inspection and discovered that the target company had under-declared corporate income tax and withholding tax related to service contracts with foreign partners over several previous years. These tax liabilities had not been fully identified during negotiations or reflected in the company valuation.

Consequences:

• Significant tax arrears and late payment penalties were imposed
• Cash flow was severely impacted, delaying post-acquisition restructuring plans
• The foreign investor bore the financial burden, despite the violations arising prior to the acquisition

Role of Far East Legal:

Far East Legal was engaged during the post-M&A phase to conduct a comprehensive review of the company’s tax obligations and advise on remedial measures. The advisory team:

• Reassessed all relevant tax filings and contractual arrangements
• Worked directly with the tax authorities to clarify the substance of the transactions
• Assisted the investor in enforcing warranty and indemnity provisions under the M&A agreement
• Proposed a restructured tax compliance framework for future operations

Thanks to timely intervention, the investor was able to mitigate most of the financial exposure and establish a more robust and sustainable tax governance system post-acquisition.

Human Resources and Corporate Governance Risks

Vietnamese companies often place insufficient emphasis on employee rights and compliance with labor regulations. In some cases, unlawful termination practices may occur. In addition, non-compliance with labor and social insurance regulations—such as employee declarations, labor usage reports, and occupational safety reporting—can result in administrative penalties after the acquisition.

Compliance and Business Licensing Risks

Many Vietnamese companies operate without fully completed sub-licenses, particularly in conditional business sectors. When ownership changes and foreign investors are involved, regulatory scrutiny becomes more stringent.

Typical risks include:

• Existing licenses becoming invalid under the new ownership structure
• Additional requirements to amend or reapply for licenses
• Exposure to administrative sanctions or business suspension