As Vietnam rises to become the new technology hub of Southeast Asia, the wave of investment from giants like Samsung, Intel, Google, AWS, and TikTok is growing stronger. However, alongside immense potential lies a complex legal system. Many foreign tech companies are facing significant barriers during their investment and operational processes.
This article provides a detailed analysis of the 7 biggest legal barriers that foreign investors in the technology sector must understand when entering the Vietnamese market.
7 Main Legal Barriers for Foreign Tech Companies
1. Market Access Restrictions & Foreign Ownership Limits
According to the Law on Investment 2020 and international commitments (WTO, CPTPP, EVFTA), many technology sectors are classified as conditional investment sectors or have restrictions on the foreign ownership ratio.
Telecommunication services with network infrastructure: A joint venture with a licensed Vietnamese partner is mandatory, and the foreign investor’s capital contribution cannot exceed 49%.
OTT (Over-the-top) services: Applications like Google Meet, Zalo, and Line may be classified as telecommunication services, requiring strict compliance with regulations on legal entity and ownership ratios.
Cybersecurity & Data Infrastructure: Activities related to cryptography, network security, and providing data infrastructure require licenses from competent authorities.
2. “Data Localization” Requirements under the 2018 Law on Cybersecurity
This is one of the biggest challenges. Article 26 of the Law on Cybersecurity 2018 requires foreign enterprises providing services on cyberspace in Vietnam (social networks, email, data storage, etc.) to:
This regulation creates several difficulties:
Increased operating costs: The expenses for building and maintaining data centers and offices are substantial.
Security concerns: It raises questions about the security and privacy of user data.
Conflict with global operating models: It contradicts the cloud-based and cross-border operational models of multinational corporations like Google, Meta, and AWS.
3. Complex Technology Transfer Procedures
The Law on Technology Transfer stipulates that all contracts for technology transfer from abroad into Vietnam must be registered with a state management agency. The registration and licensing process for restricted technologies is quite complex and time-consuming, which can cause significant delays in product launches, especially for SaaS models or those requiring frequent updates.
4. Risks in Intellectual Property (IP) Protection
The greatest assets of a tech company are its software, patents, and algorithms. Although it’s possible to register for protection with the Intellectual Property Office of Vietnam, the enforcement of IP rights remains challenging.
Businesses still face the risk of piracy and copyright infringement, especially for digital products. Establishing ownership rights and effectively resolving disputes for new technologies like AI, Big Data, and SaaS is not yet truly effective.
5. Tax Policies for Foreign Suppliers
To combat tax loss, the Ministry of Finance issued Circular 80/2021/TT-BTC, which requires foreign suppliers without a physical presence in Vietnam (like Google, Facebook) that generate revenue in the country to register, declare, and pay Foreign Contractor Tax (FCT). This increases compliance obligations and costs for advertising platforms and digital services.
6. The “Matrix” of Sub-licenses and Administrative Procedures
In addition to the Investment Registration Certificate, tech companies must obtain a series of specialized licenses (sub-licenses) depending on their field:
Telecommunication, Internet, VPN services: Require a Telecommunications Service License.
Websites, Social Networks, Online Games: Require an ICP License (License for providing information content services on the network).
Payment Intermediaries (E-wallets): Require a license from the State Bank of Vietnam.
Cybersecurity and encryption services: Require a license from the Ministry of Information and Communications.
Cumbersome, inconsistent, and time-consuming administrative procedures are a practical obstacle that directly affects project timelines.
7. The Legal Vacuum for New Technologies
Many disruptive technologies still exist in a “grey area” of Vietnamese law:
AI (Artificial Intelligence): There are no clear regulations on legal liability for decisions made by AI.
Blockchain: Its use for payments is restricted, and it is not yet recognized as a legal asset.
Cloud Computing: Lacks standards for security and the allocation of risk and responsibility.
This lack of a legal framework creates an uncertain and potentially risky investment environment.
Conclusion
Vietnam is undoubtedly a promising technology market, but its legal barriers are a challenge that cannot be underestimated. To succeed, foreign tech companies need to build a comprehensive, flexible, and proactive compliance strategy and work closely with regulatory authorities. A deep understanding of these regulations is the key to sustainable growth in the Vietnamese market.
Frequently Asked Questions (FAQ)
1. Are foreign tech companies required to store data in Vietnam? Yes, according to Article 26 of the Law on Cybersecurity 2018, enterprises providing services on cyberspace (telecom, social media, email, etc.) that collect Vietnamese user data must store that data and establish a branch or representative office in Vietnam.
2. What is the biggest barrier to investing in technology in Vietnam? The two biggest barriers currently are the data localization requirements of the Law on Cybersecurity and the complex, time-consuming administrative procedures and specialized licensing requirements.
3. How can I protect intellectual property for software in Vietnam? Enterprises should register their software for copyright protection and other relevant IP rights (patents, trademarks) at the Intellectual Property Office of Vietnam. Additionally, it’s crucial to have a proactive legal strategy to enforce these rights in case of infringement.
