The rollout of the IFC is set to begin this year, with the goal of becoming a regional financial center by 2035 and a global one by 2045. Grounded in principles of international common practice, the initiative offers unprecedented opportunities for both domestic and international investors, financial institutions and service providers. This alert summarizes the key mechanisms and policies introduced by the Resolution.
The IFC’s legal framework
The Resolution will take effect on September 1, 2025 and its impact is subject to the issuance of further implementing regulations. The IFC is apparently based on the “one center, two destinations” model where Ho Chi Minh City and Da Nang will share unified management and are encouraged to focus on development of separate products to avoid internal competition. Notably, the Resolution is guided by a commitment to following international common practice, even where this may diverge from existing Vietnamese law.
In line with this principle, the Resolution sets out several policies that may go beyond or contradict other Vietnamese laws. However, the Vietnamese authorities are prepared to accept this and have allowed the Resolution to prevail in cases of conflict with the aim of providing enhanced incentives to the IFC.
Furthermore, Vietnam is mainly a civil law country with a civil code and it was quite challenging for the authorities to accept the application of common law principles in Vietnam. Following extensive consultation with international experts and site visits to international financial centers outside Vietnam, Vietnamese authorities were persuaded that investors would expect the application of common law principles. This is the main reason the Resolution expressly allows the IFC to be administered and monitored in accordance with international common practice.
Initially proposed to be in effect for only 10 years, the Resolution now states that there will be a review to consider converting it into a new law specifically governing the IFC by 2034.
Administration of the IFC
The IFC will primarily be managed and monitored through two government agencies comprising an executive agency (Executive Agency) and a supervisory agency (Supervisory Agency). The Executive Agency is mandated with managing the IFC as well as issuing regulations to specifically govern the management and operation of the IFC on the condition that any such regulations must be compliant with the Constitution and international treaties to which Vietnam is a party. The Supervisory Agency will monitor overall compliance to safeguard systemic stability in the IFC. The Resolution also allows those agencies to apply special administrative procedures to meet investors’ demands consistent with international common practice, a term repeatedly noted in the Resolution to give comfort to foreign investors doing business in the IFC. Additionally, the Resolution provides for the establishment of a specialized court (IFC Court) and an international arbitration center (IFC Arbitration Center) for dispute settlement at the IFC.
IFC members and unprecedented benefits
Certain benefits introduced by the Resolution are exclusive to IFC members. A company may become an IFC member either through registration or recognition. Membership is open to a wide range of entities: banks, securities companies, asset managers, insurers, digital and financial technology companies, consulting and supporting service providers and other entities as stipulated by the Government. Commercial presence in the IFC is a prerequisite for granting membership status.
Companies that can apply for recognition as an IFC member without registration are (a) financial institutions, investment funds or enterprises on the Fortune Global 500 list published by Fortune Magazine, and (b) financial institutions belonging to the group of top ten domestic enterprises in terms of charter capital in each respective field, excluding in both cases organizations in banking, securities and insurance. Such entities have specific establishment requirements under the Resolution.
Being an IFC member brings substantial benefits that are unprecedented for corporates in Vietnam, including the following.
Business and investment
An IFC member can freely conduct investments with offshore investors or non-residents. While more detailed guidance on this investment right is expected, it is reasonable to expect that an IFC member would not need to obtain the otherwise required offshore investment approval for its overseas investments. An IFC member (other than a commercial bank) can also form a holding company for capital mobilization from offshore investors and equity holding. Potentially, this would allow companies to do offshore capital raising without going through a complex offshore holding structure as in the past.
Obtaining financing
Obtaining financing from offshore creditors by an IFC member will no longer be subject to State Bank of Vietnam (SBV) approval and indeed, the Resolution provides that offshore debts incurred by IFC members are not counted toward the country’s total offshore leverage. Therefore, it is reasonable to expect that restrictions typically applied to offshore borrowings, such as limitations on the use of proceeds, will not apply to IFC members. Furthermore, foreign currency financing within the IFC is also permitted if both the borrower and lender are IFC members and the lender is a credit institution.
Foreign exchange and capital flows
Transactions among IFC members, or between an IFC member and another offshore entity, may be conducted in foreign currency. Wholly foreign-owned IFC members are generally free to remit funds offshore without being subject to foreign exchange control requirements. However, this policy may not be applicable to other types of IFC members.
Offshore investments to the IFC
In line with reducing the bureaucratic burden, foreign investors can generally form a company in the IFC without needing to obtain any investment approval, making the process similar to that for local investors. Additionally, unlike the requirements outside the IFC, foreign investors will not need to seek M&A approval to acquire equity in an IFC member, and there is no foreign ownership limit in IFC members.
IFC members may not be subject to any limitations on raising funds from offshore investors for use within the IFC or for making offshore investments. Nevertheless, they will remain subject to restrictions under Vietnamese law regarding the remittance of such funds for onshore transactions, as discussed below.
Onshore transactions between IFC members and other onshore entities
Vietnam takes a more conservative approach to protect its domestic market compared to its approach to the IFC. The Government will issue further guidance governing the transactions between IFC members and other onshore entities but the general guiding principle is that doing business with IFC members is more akin to doing business with offshore companies. In particular:
Transactions in foreign currency
Transactions between an IFC member and a non-member located elsewhere in Vietnam must comply with applicable foreign exchange restrictions. As a result, a foreign currency loan from an IFC Member to a Vietnamese borrower outside the IFC needs SBV registration. Transactions between IFC members and onshore entities are still required to be conducted in VND, except in limited circumstances.
Investments
Investment from IFC members into Vietnam or vice versa shall be subject to regulations and limitations such as foreign ownership limits. However, the Government will issue further guidance for an exception mechanism in relation to the licensing process and market access conditions. This exception is expected to apply to priority business sectors where the government seeks to attract foreign investment.
Other key policies
Land, infrastructure and tax incentives
Investors may be allocated or leased clear land in the IFC and, unlike outside the IFC, land held by companies in the IFC may be mortgaged to offshore creditors. Certain incentives are also granted for developing infrastructure facilities in the IFC and the Resolution allows the Executive Agency to negotiate an agreement with investors in accordance with international practices.
Investors implementing new projects in the IFC may enjoy corporate income tax rates as low as 10% for up to 30 years for priority sectors, with significant tax holidays and reductions. People holding management positions, experts and highly skilled workers may enjoy a personal income tax exemption until the end of 2030.
Labor, immigration & residency
Companies in the IFC may recruit foreign employees as needed without being subject to any quota or labor need test which would otherwise apply to a non-IFC company. Long-term residency and 10-year visas will also be available to certain groups of foreign employees or individual investors.
Dispute resolution
Disputes among IFC members or between IFC members and non-members in relation to business in the IFC may be settled in court or through arbitration, at the parties’ discretion. The parties could also waive their right to request a Vietnamese court to set aside an arbitral award issued by the new IFC Arbitration Center. This waiver may increase the appeal of using the new domestic arbitration body for resolving disputes.
A single legislative charter and English language
Business activities in the IFC are subject to the Resolution and its implementing regulations, which take priority over other domestic laws in the event of any conflict. Foreign law can be applied in cross-border transactions if its application is not contrary to Vietnam’s fundamental legal principles.
English will be the official language in the IFC. By extension, one could expect a dispute before the IFC Court or IFC Arbitration Center to be conducted entirely in English.
Fintech and start-up sandbox
The Resolution empowers the Executive Agency to regulate a fintech sandbox or new business that is otherwise yet to be regulated under domestic regulations. This would open doors for startups to venture into unconventional business activities in the IFC, which may include a pilot scheme for establishing an exchange for trading digital assets in Vietnam.
Incentivized sectors
The Resolution empowers the Executive Agency to issue incentive programs for green finance, digital assets, fintech, commodities and derivatives markets and others as approved from time to time.
Implications for investors and financial institutions
The Resolution offers unprecedented opportunities for both domestic and international investors, financial institutions, and service providers. Entities considering participation in Vietnam’s IFC should closely monitor forthcoming implementing regulations and begin preparing to take advantage of the new incentives and operational flexibilities.
