Beyond the sandbox? Vietnam's international financial center takes shape

I. Commercial benefits of the IFC

a. Who may become a member?

Membership in the IFC is achieved through registration, recognition and, or in certain cases, receipt of an establishment and operational license.¹ Members may include, amongst others, international and  Vietnamese companies, such as commercial banks, foreign bank branches, securities companies, insurance companies, investment and asset management funds, and other entities specified by the Government.² 

Members must meet standards of financial capacity, reputation, and operate in fields consistent with IFC's development orientation.³ In particular, for entities operating in the finance and banking sectors, a new establishment and operation license at the IFC serves as the membership registration certificate.⁴ Fortune Global 500 companies or direct parent companies of those companies and top 10 domestic enterprises in terms of charter capital in each respective sector (except banking, securities, and insurance sectors), can apply for membership recognition without carrying out registration procedures.⁵ The Executive Agency of the IFC manages membership, processing registration and recognition applications within 5-7 days of receipt.⁶

b. Can foreign currencies be used within the IFC?

Yes, foreign currency is exceptionally permitted for transactions between IFC members and between an IFC member and foreign individuals and organizations. These include transfers, payments, listing, advertising, quoting, and pricing.⁷ 

c. Are there more liberalized registration requirements for investment in the IFC?

Foreign investors contributing capital or purchasing shares or capital in member entities in IFC zones, except in the banking sector, are exempt from procedures for registration under investment laws (but are still required to conduct procedures to notify enterprise registration contents).⁸ Members in IFC zones borrowing from lenders offshore and non-residents are exempt from registration with the State Bank of Vietnam.⁹ Debts incurred by IFC members to foreign entities are not included in the country's foreign debts.¹⁰ 

Foreign investors may own shares in IFC member entities (up to 100% of ownership).¹¹ An IFC member that is entirely foreign owned that lends capital to entities abroad or transfers money related to outbound investment does not need to comply with foreign exchange registration procedures but it is still subject to account opening, information reporting and declaration requirements.¹²

d. What are the applicable accounting standards of the IFC?

IFC members may elect to use International Financial Reporting Standards (IAS/IFRS) as their accounting reporting standards or generally accepted accounting principles of other specified countries.¹³ In the banking context, a single-member limited liability commercial bank or a foreign bank branch that is a Member can choose either the financial regime according to the policy of the owner/parent bank or the traditional financial regime as prescribed in Decree 135/2025/ND-CP.¹⁴

e. What are the corporate and personal tax benefits of the IFC?

New investment projects in the IFC in sectors prioritized for development are subject to a 10% corporate income tax rate for 30 years, 4-year corporate income tax exemption, and a 50% payable tax amount reduction for no more than 9 years. New investment projects in the IFC that are not in priority sectors are subject to a 15% corporate income tax rate for 15 years, 2-year corporate income tax exemption, and a 50% payable tax amount reduction for no more than 4 years.¹⁵

Personal tax exemptions are provided for certain IFC workers until 2030. Individuals earning income from transferring shares, capital contributions, and rights to IFC members are also exempt until 2030.¹⁶

f. What is the official language of the IFC?

English is the official language used for transactions and operations at the IFC.  The designation of the English language applies to contracts, regulations and policies in the IFC, arbitration, dispute resolution, and regulatory filings.¹⁷ English is the language used for specialized court proceedings while judgments are issued in English with or without Vietnamese translations.¹⁸

II. Legal Benefits of the IFC

a. May IFC members mortgage immovable property to offshore lenders?

Yes, one of the landmark provisions of the IFC is enabling offshore lenders to take mortgages over immovable property in Vietnam, provided that the collateral is located within the IFC.

Foreign invested entities can mortgage land use rights and assets attached to the land to borrow investment capital for projects within the IFC at foreign credit institutions. However, land that may be mortgaged must be allocated land or leased land with one-off land rental payments. If a default occurs, the mortgagee or foreign credit institution can only transfer the assets to entities permitted to acquire the land use rights and land-attached assets in accordance with Vietnamese law.¹⁹ This represents a significant practical limitation on the benefits of this mortgage right.

The operating agency of the IFC receives and processes applications to carry out land-related procedures on behalf of IFC members. The operating agency performs other land use and lease related procedures such as returning certificates of land use rights, decisions on land allocation, extensions of land use, and other documents to IFC members.²⁰

The key limitations, however, are that the land itself subject to the mortgage must be located within the IFCs and the transferees upon the mortgage enforcement must still be entities permitted to acquire the land use rights and land-attached assets in accordance with Vietnamese law.

b. How are disputes settled in the IFC framework?

The IFC will feature a specialized court within the People's Court system located in Ho Chi Minh City.²¹ The specialized court has a First Instance Court and a Court of Appeal.²² The statute of limitations for filing a lawsuit is six (6) years from the date of the event leading to litigation which therefore follows more closely common law models.²³ IFC specialized courts have jurisdiction to resolve cases with at least one party being a IFC member, except for cases related to public or state interests.²⁴ 

In addition, IFC is implementing an international arbitration center for dispute resolution located in Ho Chi Minh City.²⁵ The IFC's international arbitration center has the jurisdiction to resolve disputes based on agreements between parties involved in investment and business activities at the IFC.²⁶ If the parties agree to settle their dispute(s) at the IFC's international arbitration center, they may reach an agreement to waive their right of requesting the Court to annul valid arbitral award or decision on recognition of the successful mediation result of the arbitration council of IFC's international arbitration center.²⁷

c. Are there particular provisions on governing law?

In this regard, the IFC position is consistent with the existing Vietnamese civil and commercial laws regarding use of foreign laws to govern contracts. Where at least one party is a foreign individual or organization, the parties involved may agree to choose foreign law to govern the contract. In the cases of transactions related to ownership rights, other rights over real estate, lease of real estate, or use of real estate as collateral, the applicable law of the country where the real estate is located shall apply.  Foreign laws may be applied unless their application is contrary to the public order of Vietnam or contradict Vietnam's legal fundamental principles.²⁸

III. Conclusion

The IFC framework represents a significant step forward in Vietnam looking to transform itself into a global financial hub.

However, there are certain limitations both from a legal and practical standpoint.  In particular, the IFC framework does not address how the IFC zones will interact with the broader domestic market. Ultimately, the IFC across Ho Chi Minh City and Danang constitutes a mere 1,200 hectares in aggregate out of Vietnamese territory of over 330,000 square kilometers! Whilst a number of the progressive concepts of the IFC – land mortgageability, specialized courts, and more streamlined regulatory procedures-are welcome news to foreign investors, the immediate impact may be limited. The real value in the IFC may be that it serves as a laboratory to develop and hone these novel legal and commercial concepts for broader applicability throughout Vietnam.

Authored by David Harrison and Tu Nguyen.