Vietnam Set for Major Legal Overhaul Affecting Businesses, SMEs from July 1, 2025
If you're already a Foreign Entrepreneur in Vietnam, or even just starting to consider the different Vietnamese corporate structures available for you, you might want to sit down and read through this. From 2025 Jul 01, Vietnam will roll out several major legal and administrative changes - many of which will directly affect business. These changes, approved by the National Assembly and various government bodies in recent weeks, aim to cut delays, promote digital services, and support private businesses in Vietnam—especially small and medium-sized ones (SMEs).
Here’s what’s coming and what it means for your business.
Key Vietnam Legal and Regulatory Changes that directly affect Business in Vietnam
I. Government Restructuring and Administrative Reform
A fundamental administrative reform will take effect on July 1, 2025, with Vietnam transitioning to a two-tier local government system, eliminating the district-level administration.
This reform, based on amendments to the Constitution and the Law on Organization of Local Government, establishes provincial-level and commune-level governments as the primary administrative tiers.
The two-tier administrative Levels include:
- Tier 1: Provincial (Cấp tỉnh): Includes provinces and centrally‑controlled municipalities. These provincial governments now assume responsibilities previously handled by district authorities.
- Tier 2: Commune (Cấp xã): Encompasses communes, wards, towns, and newly introduced “special administrative‑economic zones” (“đặc khu”) as defined under the new law.
The goal is to create a leaner, more effective, and modern administration, promoting greater decentralization and accountability at the local level.
The Prime Minister has emphasized ensuring that all administrative procedures are synchronized on online systems and that public services for citizens and businesses remain continuous and uninterrupted during this transition.
This includes the transfer of work, documents, finances, and assets from former district-level bodies to the new structure.
II. Amendments to the Enterprise Law of Vietnam
The National Assembly approved revisions to the Enterprise Law on June 17, with certain provisions taking effect on July 1, 2025.
- Beneficial Ownership Disclosure: New enterprises established from July 1, 2025, will be required to collect, update, and store beneficial ownership information, and provide it to state agencies upon request.
- For businesses established before this date, there is no specific deadline for this update; rather, they must provide this information concurrently when undertaking any changes to their enterprise registration content. This aims to increase transparency regarding who ultimately owns and controls a company.
- Restrictions on Enterprise Establishment and Management: The amended Vietnam's law clarifies that civil servants and public employees are generally prohibited from establishing, contributing capital to, or managing enterprises.
- important exceptions are made for activities related to science, technology, innovation, and national digital transformation, allowing individuals in these fields to participate.
- Stricter Rules for Private Bond Issuance: The Vietnam law introduces more stringent conditions for non-public joint-stock companies seeking to issue private bonds, specifically including a requirement to meet a defined debt-to-equity ratio.
III. Expanded E-Invoicing Requirements (Decree 70/2025/NĐ-CP)
Decree 70/2025/NĐ-CP, which became effective on June 1, 2025, introduces significant changes to e-invoicing and document management.
- Mandatory E-Invoices from POS Systems: E-invoicing generated from point-of-sale (POS) machines, connected to tax authorities, is now mandatory for business households and individuals with annual revenues of VND 1 billion or more, as well as businesses in various sectors including retail, food and beverage, hotels, and passenger transport. Previously, this was not compulsory.
- Foreign E-commerce Suppliers: Foreign suppliers operating e-commerce or digital platform businesses in Vietnam, even without a permanent establishment, are now subject to e-invoicing requirements.
- Detailed Regulations: The decree provides comprehensive new rules for the timing of invoice issuance (e.g., for exports, services to foreign entities, large transactions, and specific industries like insurance, lottery, and casino operations). It also mandates revised content for e-invoices, requiring personal identification numbers for buyers or specific details for services like Food and Beverage, and transportation.
- Adjustments and Replacements of incorrect e-invoice: The process for adjusting or replacing incorrect e-invoices is clarified, requiring a written agreement for business-to-business transactions.
- New E-Documents: The decree introduces new types of electronic documents, such as tax withholding certificates for e-commerce activities.
- Increased Responsibilities: There are new responsibilities for e-invoice service providers and a clear obligation for buyers to retrieve and use e-invoices for business activities, accounting, and tax declarations.
- Enforcement and Support: Ministries and local authorities are tasked with implementing these changes, with potential penalties for non-compliance for businesses failing to adopt e-invoices from POS systems after receiving support and notification from tax authorities.
IV. Value Added Tax (VAT) Reduction
Effective from July 1, 2025, until December 31, 2026, the National Assembly has approved a 2% reduction in the VAT rate for many goods and services that are subject to the 10% VAT rate as stipulated under Clause 3, Article 9 of the Law on Value Added Tax No. 48/2024/QH15, bringing the rate from 10% to 8%.
This reduction now extends to additional sectors, including transport, logistics, and information technology goods and services.
Certain sectors (such as finance, banking, telecommunications, securities, insurance, real estate, and specific mining products) remain exempt from this reduction.
This measure aims to stimulate economic activity and alleviate burdens on businesses and consumers.
Need a quick guide on other Taxes for Foreign Entrepreneurs in Vietnam? We discuss this extensively in our post about Taxation and Accounting.
V. Mandatory Biometric Updates for Corporate Accounts
From July 1, 2025, corporate accounts will face temporary suspension of electronic transactions, including money transfers and withdrawals, if the biometric information of their legal representatives has not been updated.
This new requirement, stipulated in Circular 17/2024/TT-NHNN by the State Bank of Vietnam, mandates that legal representatives of organizations must complete biometric updates before this deadline to avoid service disruption and enhance security. Banks have already issued notifications urging clients to comply via banking apps or at physical branches.
These sweeping changes represent a concerted effort by the Vietnamese government to foster a more transparent, efficient, and supportive business environment, aiming to significantly boost the competitiveness and development of its private sector and digital economy.
Changes to Vietnam Law: Implications for SMEs and Foreign Entrepreneurs
The Vietnam legal overhaul presents both promising opportunities and operational challenges for SMEs and foreign investors doing business in Vietnam.
So what does this actually all mean for you?
Positive Implications
- Easier Access and Efficiency: The shift to a two-tier local government system may streamline administrative procedures, reducing red tape bureaucracy at the local level.
- VAT Reduction: The 2% VAT reduction across a broader range of goods and services help reduce operational costs and stimulate demand for SMEs and consumer-facing businesses.
- Digital Transformation Support: Expanded e-invoicing requirements and clearer rules around document management may help standardize and modernize operations, particularly benefiting tech-savvy startups and digitally-oriented enterprises.
- Greater Transparency: The emphasis on beneficial ownership disclosure and stricter corporate governance can improve investor confidence and contribute to a more predictable, compliant business environment.
Negative Implications
- Increased Compliance Burden: SMEs and foreign entrepreneurs may struggle to keep pace with new administrative requirements—especially related to biometric updates, e-invoice systems, and beneficial ownership reporting.
- Cost of Transition: Businesses must invest in digital infrastructure and staff training to meet expanded e-invoicing and data handling obligations. For smaller players, these upfront costs could be significant.
- Uncertainty During Structural Change: The transition to the two-tier administrative system may initially lead to confusion or temporary disruptions in licensing, inspections, and public services as responsibilities are reallocated from district-level authorities.
What should SMEs and foreign investors in Vietnam do?
Whether you already run a business in Vietnam or plan to invest in Vietnam, staying proactive is key—review legal obligations, consult with local experts, update compliance processes, and take advantage of the VAT reduction and digital modernization incentives. This reform period may offer first-mover advantages for those who adapt quickly.
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Disclaimer:
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or investment advice. While every effort has been made to ensure accuracy at the time of publication, laws and regulations may change. Readers are encouraged to consult with qualified legal or financial advisors before making decisions related to foreign investment or share transfers in Vietnam. United Consulting is not liable for any actions taken based on this content.
Vietnam’s Big Legal Changes Start July 1, 2025: What Businesses Must Know