Vietnam is a magnet for foreign investors, thanks to its dynamic economy, favorable trade agreements, and young, ambitious workforce. However, investing in Vietnam requires careful preparation and understanding of local intricacies, as many investors face challenges and setbacks due to common pitfalls.
This article explores the top 10 mistakes investors typically make when setting up a business in Vietnam, helping new entrants steer clear of these obstacles for a smoother and more successful venture.
Insufficient Market Research
One of the most common mistakes when setting up a business in Vietnam is insufficient market research. Vietnam’s economy is rapidly evolving, and consumer behavior varies widely by region, age group, income level, and urban versus rural areas. Understanding these factors is essential for anyone investing in Vietnam, as the competitive landscape changes quickly with domestic companies and global brands actively competing in sectors like retail, fintech, and e-commerce.
Successful investors focus on detailed demographic and psychographic studies to understand customer preferences and cultural nuances, including the popularity of local social media platforms like Zalo and TikTok for digital marketing. Trend analysis on topics such as sustainability, digital consumption, and health awareness further enables businesses setting up in Vietnam to anticipate shifts in consumer demand and ensure long-term viability.
Underestimating Legal & Regulatory Complexities
Vietnam’s legal environment, while increasingly supportive of foreign investment, remains complex and often challenging due to frequent amendments and varying interpretations across regions. Common mistakes, such as failing to secure the correct permits or misunderstanding foreign ownership caps in sectors like real estate or education, can cause costly delays or force restructuring, making proper preparation essential for anyone investing in Vietnam.
Successful investors engage legal firms or business consultants specializing in Vietnam’s regulatory landscape before setting up a business in Vietnam. These experts guide clients through application processes, liaise with authorities on their behalf, and ensure ongoing compliance amid regulatory updates. Adopting this approach prevents unexpected legal obstacles and builds a foundation for sustainable business growth.
Choosing the Wrong Business Structure
Choosing the correct legal business structure is critical to the success and flexibility of investing in Vietnam. Common structures include Representative Offices, Branches, Limited Liability Companies (LLCs), and Joint Stock Companies (JSCs), each with distinct advantages and limitations.
For those setting up a business in Vietnam, understanding the pros and cons of each structure is essential. A few popular options are as follows:
- Representative: ideal for foreign companies wanting a low-cost presence for market research and liaison but cannot engage in profit-making activities or contracts in Vietnam.
- LLC: available as single-member or multi-member. It is the most popular structure, offering limited liability protection and relatively straightforward management, but requires compliance with capital contribution rules.
- JSC: suited for larger businesses aiming to raise capital through shareholders, but necessitates more complex governance and disclosure requirements.
Common mistakes include selecting an inappropriate business structure, which can constrain operations, create unnecessary liability, or cause tax inefficiencies. Understanding local nuances and future growth plans is essential before deciding.
Ignoring Local Partnerships & Networks
Vietnamese business culture deeply values relationships, which go beyond mere transactions. Investors who bypass building local partnerships or underestimate the importance of networks often encounter walls of bureaucratic resistance, difficulty accessing government officials, and higher operational risks. Understanding this is essential for anyone investing in Vietnam, as local partners – including distributors, suppliers, and consultants – bring critical market knowledge and facilitate smoother legal and regulatory navigation.
For those setting up a business in Vietnam, common mistakes include failing to build strong local relationships, which can hinder approval processes, disrupt supply chains, and weaken brand credibility. Neglecting these connections risks isolation and competitive disadvantage in a market where personal networks frequently influence business success.
Poor Understanding of Taxation & Incentives
Vietnam’s tax system has seen significant reforms in 2025, notably with the introduction of a new Corporate Income Tax (CIT) Law. The standard CIT rate remains at 20% for most enterprises, maintaining Vietnam’s competitive position in the region, but higher rates between 25% and 50% apply to specialized sectors like oil, gas, and rare minerals. The law introduces tiered tax rates favoring small and micro enterprises with revenues under specified thresholds, offering tax savings of 15-17%.
Investors often misunderstand these nuances, making common mistakes that cause them to miss opportunities for preferential rates, especially in strategic sectors such as high-tech, renewable energy, and digital services. Moreover, with the government refocusing tax incentives from location-based breaks (e.g., industrial parks) to promoting innovation, green investment, and social welfare projects, failing to plan properly for tax obligations or claim eligible incentives can lead to overspending or suboptimal investment structures.
Read More: Corporate Income Tax in Vietnam: Rates, Incentives, Deductions, and Filing Requirements
Overlooking Human Resource Challenges
Recruiting and retaining skilled labor in Vietnam is an increasing challenge due to rising competition, wage inflation, and tightening labor market conditions in key cities like Hanoi and Ho Chi Minh City. Many challenges arise for those investing in Vietnam, especially when underestimating the importance of compliance with Vietnamese labor laws, which regulate employment contracts, social insurance contributions, working hours, and employee benefits. Talent shortages in specialized fields often require investment in in-house training or partnerships with local educational institutions.
For anyone setting up a business in Vietnam, common mistakes include neglecting competitive compensation, social benefits, or a positive workplace culture, which can lead to underperformance and higher hiring costs. Successful businesses proactively plan workforce strategy, ensure legal compliance, and engage employees to build sustainable human resources in Vietnam.
Inadequate Financial Planning & Currency Risk Management
Currently, economic experts anticipate continued pressures on the VND due to global factors such as US monetary policy, inflation, and trade tariff uncertainties, potentially causing depreciation. Investors often make mistakes by underestimating currency risk, which can significantly impact revenues, costs, and capital repatriation when converting profits or funding operations across borders.
Without robust cash flow forecasting, budgeting that accounts for exchange rate volatility, and use of hedging instruments like forward contracts or currency swaps, businesses risk eroded profit margins and financial instability. Furthermore, Vietnam’s capital transfer restrictions require compliance with documentation and approvals when moving funds abroad, adding to financial complexity. Successful investors incorporate currency risk management into their investment strategy and maintain close communication with financial institutions for timely market insights.
Read Related: How to Effectively Transfer Money Abroad from Vietnam: A Guide to International Transfers
Insufficient Due Diligence on Suppliers & Distributors
Foreign investors sometimes underestimate the critical need for thorough due diligence on their Vietnamese suppliers, distributors, and other business partners. Common mistakes include neglecting this step, which can expose companies to risks such as inferior product quality, contract breaches, payment issues, or even fraud, making due diligence a key consideration for anyone investing in Vietnam.
When setting up a business in Vietnam, conducting verifiable background checks, on-site inspections, and assessing financial health and reputational standing before finalizing partnerships is essential. Clear, well-drafted contracts outlining roles, responsibilities, quality standards, delivery terms, and dispute resolution mechanisms help mitigate supply chain disruptions, foster long-term trust, and ensure operational efficiency.
Neglecting Intellectual Property Protection
Ignoring Vietnam’s intellectual property (IP) laws can lead to severe consequences such as counterfeiting, unauthorized use, and erosion of brand value. Vietnam has enacted comprehensive legislative reforms that strengthen IP enforcement, including stricter criminal and administrative penalties for counterfeit goods and trademark infringement. The government has also introduced specialized IP courts in Hanoi and Ho Chi Minh City to expedite IP disputes and ensure more effective judicial protection. Common mistakes when protecting intellectual property in Vietnam include delaying the registration of trademarks, patents, and industrial designs, which can allow others to exploit your IP. Additionally, failing to monitor the market and online platforms for infringements can undermine brand integrity and consumer trust.
Failing to Adapt to Local Business Practices & Consumer Preferences
Applying a standard global business model without customizing it to local tastes and cultural expectations frequently results in poor market penetration and inefficient operations for anyone setting up a business in Vietnam. Vietnamese consumers, influenced by regional customs, income levels, and digital habits, demand tailored products, marketing messages, and customer service experiences. Preferences for product features, payment methods (such as mobile wallets like ZaloPay), and social commerce platforms differ significantly from Western markets.
Businesses investing in Vietnam often make mistakes by failing to embrace local nuances, risking alienation of potential customers and missed opportunities for deeper engagement. Successfully adapting means localizing branding, leveraging popular communication channels, and adjusting supply chains to meet Vietnam’s unique market demands.
Conclusion
Vietnam offers immense opportunities for foreign investors, fueled by its dynamic economy, favorable trade agreements, and ambitious young workforce. However, success in investing in Vietnam requires more than enthusiasm – it demands preparation, cultural understanding, and strategic adaptation.
By avoiding common mistakes such as insufficient research, misaligned structures, or neglecting local partnerships, those setting up a business in Vietnam can safeguard their ventures and maximize growth potential in one of Asia’s fastest-growing markets. With the right guidance, careful planning, and respect for Vietnam’s unique business environment, new entrants can turn challenges into opportunities and build lasting success.
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