Assessing the impact of adjusting the FDI Ownership threshold: From Circular 06/2019 to Circular 03/2025

One of the most pivotal regulatory changes introduced under Circular No. 03/2025/TT-NHNN (“Circular 03/2025”) is the adjustment in determining the foreign ownership threshold used to classify whether an enterprise qualifies as a “foreign direct investment enterprise” (FDI enterprise). Though the amendment involves only a few words, it effectively closes a long-standing legal loophole under Circular No. 06/2019/TT-NHNN (“Circular 06/2019”) and imposes a mandatory transition requirement for enterprises where foreign investors hold more than 50% but less than 51% of the charter capital. 

1. Legal Status Prior to Circular 03/2025

According to Article 23.1(a) of the 2020 Law on Investment, enterprises in which foreign investors hold more than 50% of the charter capital are treated as foreign investors and subject to relevant regulations. 

However, Point b, Clause 2, Article 3 of Circular 06/2019 provided that: 

“Foreign direct investment enterprises include those in which foreign investors hold 51% or more of the charter capital.” 

As a result, enterprises with foreign ownership ranging from 50.01% to below 51% were not classified as FDI enterprises, creating a legal vacuum in the regulatory framework for foreign exchange management. In practice, such enterprises were treated as indirectly foreign-invested entities and enjoyed more relaxed regulatory treatment—for instance, using Indirect Investment Capital Accounts (IICAs) instead of Direct Investment Capital Accounts (DICAs), and being exempt from strict foreign exchange control rules applicable to FDI enterprises. 

This inconsistency in implementation posed challenges for enterprises, commercial banks, and regulatory authorities in determining legal obligations and effectively monitoring cross-border capital flows. 

2. Circular 03/2025 – Eliminating the Legal Grey Zone and Restructuring Regulatory Framework

To address the aforementioned inconsistency, Circular 03/2025, effective from 16 June 2025, revises Circular 06/2019 by lowering the FDI ownership threshold from “51% or more” to
“more than 50%”. Accordingly, any enterprise with foreign ownership exceeding 50% (even 50.01%) is now classified as an FDI enterprise. 

In particular, the revised provision reads as follows: 

“2. Foreign direct investment enterprises include: 

a) Enterprises established through the form of economic organization establishment in which foreign investors are members or shareholders and which must obtain an Investment Registration Certificate in accordance with the Law on Investment;

b) Enterprises not falling under Point a of this Clause in which foreign investors hold 50% or more of the charter capital, including:

(i) Enterprises in which foreign investors contribute capital or purchase shares/capital contributions (regardless of whether the enterprise operates in sectors subject to investment conditions applicable to foreign investors), resulting in foreign ownership of 50% or more; 

(ii) Enterprises established following a split, merger, or consolidation resulting in foreign ownership of 50% or more; 

(iii) Enterprises newly established under specialized laws; 

c) Project enterprises established by foreign investors to implement PPP projects under the Law on Investment.”

Moreover, Clause 4, Article 11 of Circular 03/2025 introduces a 12-month transitional period (from 16 June 2025) for enterprises with foreign ownership exceeding 50% but less than 51% to complete the conversion from IICA to DICA. During the transitional period, such enterprises may continue using their current IICA, but DICA usage becomes mandatory thereafter. 

These provisions aim to establish a clearer legal framework and modernize the foreign exchange management structure applicable to FDI enterprises. Specifically: 

First, the harmonization of the definition of FDI enterprise with the Law on Investment eliminates discrepancies across legal instruments. This enables investors, banks, and regulatory bodies to determine foreign exchange obligations and the appropriate operational framework for each enterprise type. 

Second, enterprises newly classified as FDI entities (i.e., those with “more than 50%” foreign ownership) will face several new financial and legal obligations, including: 

• Opening a DICA with a licensed bank; 

• Conducting all capital contributions, profit remittances, capital transfers, and foreign borrowings via the DICA; 

• Complying with strict auditing, tax declaration, financial reporting, and tax obligations for outbound remittances; 

• Updating internal accounting processes, documentation, and reporting systems in line with DICA standards. 

This transition marks a shift from a “flexible management” model to a “comprehensive control” model, ensuring greater transparency and traceability in foreign capital flows. 

Third, the regulatory power of banks and state authorities will be enhanced. Through the mandated account conversion, the State Bank of Vietnam will gain greater visibility over foreign capital flows, while commercial banks will have a solid legal basis to require customers to follow proper procedures for opening and using investment accounts. 

3. Practical Recommendations for Enterprises

While the new regulation is rational and consistent, to ensure timely compliance and avoid regulatory risks—particularly for enterprises with foreign ownership ranging from 50.01% to under 51%—the following actions are recommended: 

1. Review Ownership Structure: Determine whether your enterprise is affected by the new threshold. 
2. Prepare Early for Transition: Engage with banks and legal advisors to plan for the proper opening and use of a DICA in compliance with the law. 
3. Update Internal Systems: Align internal accounting, documentation, and reporting processes with DICA requirements. 
4. Do Not Delay: Early transition minimizes legal risks and helps avoid operational bottlenecks toward the end of the grace period. 

The adjustment of the FDI ownership threshold from “51% or more” to “more than 50%” is not merely a semantic revision—it represents a major legal development. Circular 03/2025 not only resolves long-standing regulatory inconsistencies but also reshapes the governance of foreign capital in Vietnam toward a more transparent, professional, and consistent framework. 

Enterprises and investors should consider this a timely opportunity to restructure their financial and legal processes in line with new standards and to enhance their readiness to tap into future investment opportunities. 

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