Interested in the agriculture business in Vietnam but troubled by questions like 'I don't really understand the foreign-investment rules' or 'what procedures do I need?'
This article explains how to set up an agricultural company in Vietnam, covering the investment law, incorporation procedures, licenses, capital, and costs.
The advantages of setting up an agricultural company in Vietnam
Vietnam is agricultural power About 40% of the national land is farmland, and agricultural export value in 2023 exceeded roughly US$53 billion. For Japanese food importers and agricultural businesses, setting up a local company brings a major advantage: lower sourcing costs.
With a local company, obtaining land-use rights and applying for government subsidies becomes far easier. You can also handle quality control for exports to Japan entirely in-house.
Labor costs in agriculture are also low, with wages running at a tenth of Japan's or less as a rough guide. The environment is in place to supply high-quality produce steadily while keeping production costs down.
Understand the basics of foreign-investment regulation (the Investment Law)
Vietnam's foreign-investment rules are governed by the '2020 Investment Law' as the basic law. In agriculture, entry with 100% foreign capital is possible in principle, but there are some conditions.
Limits on the foreign-ownership ratio in agriculture
Basic agricultural production activities (cultivation, aquaculture, and processing) are allowed with 100% foreign capital. Depending on the business content, however, restrictions may apply.
| Our Business | Upper limit on the foreign-ownership ratio |
|---|---|
| Cultivation and aquaculture of agricultural products | 100% |
| Food processing and manufacturing | 100% |
| Leasing farmland (specified areas) | Conditional |
| Domestic distribution and wholesale of agricultural products | Conditional (WTO standards) |
| Retail (including agricultural products) | 49 to 100% (depending on region and scale) |
If you combine retail or distribution, prior confirmation with the ministries is required.
What conditional investment sectors are
Vietnam's Investment Law designates certain sectors as 'conditional investment sectors.' In agriculture, these include aquaculture of fishery products and genetics-related research. You cannot operate in them without obtaining a license in advance.
To determine whether something falls under a conditional investment sector, be sure to check the Investment Law's annex list (Appendix IV).
Incorporation procedures and required documents for an agricultural company
When a foreign company sets up an agricultural company in Vietnam, it mainly obtains two certificates. Following the order matters.
Step 1: Obtaining the Investment Registration Certificate (IRC)
The IRC is applied for at the Ministry of Planning and Investment (MPI) or the provincial-level Department of Planning and Investment (DPI). For agricultural projects, a separate opinion letter from the Ministry of Agriculture and Rural Development (MARD) may be required.
The main documents required for the application are as follows.
- Investment project application form
- Business plan (feasibility study)
- Proof of the investor's financial capacity (such as a bank balance certificate)
- Articles of incorporation (for an existing company)
- A copy of the representative's passport
The review period is usually 15 to 35 business days. It varies by the scale and location of the project.
Step 2: Obtaining the Enterprise Registration Certificate (ERC)
Once you have the IRC, the next step is applying for the ERC. The ERC is applied for at the Business Registration Office (BRO).
The review is relatively smooth, usually 3 to 5 business days. After obtaining the ERC, you proceed with tax-office registration, notification to the social insurance agency, and opening a bank account.
License and capital requirements
Setting up an agricultural company requires licenses appropriate to the line of business. The level of capital also affects future business expansion, so consider it carefully.
Licenses needed for an agricultural business
| License | Covered line of business | Issuing authority |
|---|---|---|
| Agricultural production permit | Cultivation and aquaculture in general | Provincial Department of Agriculture |
| Pesticide use permit | Cultivation that uses pesticides | MARD |
| Food safety certificate | Food processing and sales | Ministry of Health |
| Export permit | Export of agricultural products | Ministry of Industry and Trade (MOIT) |
| Phytosanitary certificate | Movement of plants and seeds | MARD Plant Protection Department |
For an agricultural company that assumes exporting, obtaining GAP certification (VietGAP or GlobalGAP) is also strongly recommended. export to Japan because exports to that market must pass inspection by the plant quarantine station.
A guide to capital amounts
In Vietnam there is no statutory minimum capital for an agricultural company, but in practice the following serves as a guide.
| Business scale | Recommended capital |
|---|---|
| Small scale (5 ha or less) | Equivalent to about 50 million yen (approximately VND 10 billion) |
| Medium scale (5 to 50 ha) | Equivalent to about 100 to 300 million yen |
| Large scale (over 50 ha) | 300 million yen or more |
If the capital is too small, you will be at a disadvantage in obtaining land-use rights and in bank-loan reviews. It is wise to set an amount with some margin, anticipating future expansion plans.
A guide to incorporation and operating costs
The cost of setting up an agricultural company varies greatly by scale and line of business. Here is a general guide.
| Cost item | Approximate amount |
|---|---|
| Incorporation fee (government fee) | Equivalent to about 50,000 to 100,000 yen |
| Law firm and consulting fees | 500,000 to 1.5 million yen |
| Translation and notarization fees | 50,000 to 200,000 yen |
| Bank account opening and initial costs | 50,000 yen or less |
| Total (incorporation only) | About 700,000 to 2 million yen |
For annual operating costs after incorporation, accounting and tax support run about 20,000 to 50,000 yen a month, and local staff wages about 30,000 to 80,000 yen per person a month (depending on the role), as a guide.
As for land, rent for farmland varies widely by region, running about 100,000 to 300,000 yen per hectare a year in the rural north and tending to be somewhat higher around the Mekong Delta in the south.
Points to watch so you don't stumble
Even if the incorporation procedure itself is simple, there are points where you can stumble in practice. Get to know them in advance.
Choose your local partner carefully
Although an agricultural company can be 100% foreign-owned, local connections matter for land transactions and permits on the ground. The presence of a trustworthy local consultant or local partner greatly influences operations after incorporation.
Checking land-use rights (LURC)
In Vietnam, foreign companies cannot 'own' farmland. You lease land-use rights (commonly called the 'red book'). Be sure to check the contract term, renewal conditions, and restrictions on conversion of use.
Exchange-rate risk and remittance regulations
When remitting profits to Japan, check the regulations of the foreign-exchange authority (the SBV). Remittance is possible if you have handled taxes properly, but the procedures can become cumbersome.
Import regulations for pesticides and fertilizers
When importing pesticides or fertilizers from Japan, goods cannot clear customs unless they are products listed on MARD's registration list. Check the list in advance for the pesticides you plan to use.
Summary
Setting up an agricultural company in Vietnam basically comes down to three steps: understanding the Investment Law, obtaining the IRC and ERC, and acquiring sector-specific licenses. Agriculture, where entry with 100% foreign capital is allowed in principle, is a market with a relatively low barrier to entry for those in Japanese agriculture.
On the other hand, restrictions on land-use rights and the permit procedures tend to get complicated without a local expert. Finding a trustworthy partner early is the shortcut to a smooth incorporation.
Incorporation costs run about 700,000 to 2 million yen for a small operation as a guide, and local operating costs are also far lower than in Japan. Use this as a reference when drawing up a concrete plan.
At VN AGRI, we share the latest information on Vietnamese agriculture.
