Investing in Vietnam via an SCI: Benefits and Pitfalls

Published on October 1, 2025 and written by Cyril Jarnias

Investing in Vietnam through a Real Estate Civil Company (SCI) has become an increasingly attractive option for investors looking to leverage a dynamic and rapidly growing real estate market. With a booming economy and a favorable legislative framework, Vietnam is attracting numerous players in the real estate sector.

However, although opportunities are plentiful, it is essential to navigate carefully, as there are potential pitfalls to avoid in order to maximize returns.

This article provides an in-depth exploration of the unique advantages of investing via an SCI in Vietnam while highlighting the necessary precautions to minimize the risks associated with this promising initiative.

Optimizing the Legal Structure for Investing in Vietnam

The main legal forms available to foreigners wishing to invest in Vietnam are:

• Limited Liability Company (LLC): the most common form for foreign investors, offering limited liability and relatively flexible capital requirements. It can be owned by one or more partners, individuals or legal entities.
• Joint Stock Company (JSC): suitable for large-scale projects, allows the issuance of shares and public fundraising.
• Joint Venture: a company formed with a Vietnamese partner, often necessary in restricted or regulated sectors.
• Branch: primarily for foreign companies already established that wish to operate directly without a separate local entity.
• Other specific forms such as the Business Cooperation Contract (BCC) or participation in Public-Private Partnerships (PPP).

Legal Form	Foreign Access	Liability	Main Advantages	Main Disadvantages
LLC	Yes	Limited	Flexibility, full control	Sometimes conditional sectors
JSC	Yes	Limited	Easier fundraising	More complex governance
Joint-Venture	Yes	Limited	Easier access to certain markets	Risk of conflict between partners
Branch	Limited	Not separate	Direct operation	Significant sectoral restrictions
BCC / PPP	Conditional	According to agreement	Risk sharing	Contractual and regulatory complexity

Impact on Investment via an SCI

The Real Estate Civil Company (SCI) is a very common structure in France for holding real estate assets but has no direct equivalent in Vietnamese law. In Vietnam, real estate ownership by foreigners is strictly regulated:

• Only certain locally recognized legal forms (mainly LLC/JSC) allow the acquisition of certain types of real estate assets under specific conditions.
• The French SCI does not benefit from local recognition in Vietnam; therefore, it is generally not possible to invest directly via a classic SCI.

Potential Advantages Linked to the Local Equivalent Structure

A typical corporate structure like an LLC/JSC still offers some advantages similar to those sought with an SCI:

• Separation of personal and professional assets
• Facilitated transfer via sale of company shares
• Possibility to optimize tax management according to applicable tax treaties
• Administrative flexibility regarding the management of the held asset

List of Possible Tax and Administrative Benefits

• Possibility to deduct certain expenses from generated income
• Facilitated progressive transfer (partial sale)
• Protection against personal asset risk

Potential Disadvantages

However, several major disadvantages must be noted:

• Legal restrictions on direct access to land ownership by foreigners persist – they can only purchase certain types of properties (residential housing under long-term lease) and only in certain authorized areas.
• The absence of formal recognition of the “SCI” vehicle requires either:
  • To go through an ad-hoc Vietnamese company whose purpose must strictly comply with the local Civil Code,
  • To possibly resort to indirect holding via a reliable local partner (increased risk)
• Strict reporting obligations apply both at creation and throughout the company’s life
• Local tax regimes differ significantly from the French regime applied to SCIs.

Synthetic List of Specific Constraints

• Mandatory obtaining of the investment registration certificate + business registration certificate before any operation
• Increased monitoring on fund origin/identity of the ultimate beneficial owner
• Submission to strengthened Vietnamese anti-money laundering controls

Practical Issues & Local Compliance

To optimize your strategy:

1. Precisely verify if your project falls under sectors open or conditional to Foreign Direct Investment according to the Investment Law/Enterprise Law 2020;
2. Systematically prepare a solid file respecting all local documentary requirements;
3. Plan from the start a clear structure including partnership agreement/articles of association adapted to the Vietnamese context;
4. Imperatively surround yourself with:
   • A local specialized legal counsel,
   • An accountant expert in both Franco-Vietnamese tax law and local banking practice;
5. Anticipate all post-creation obligations: annual reporting/tax declarations/payments of local taxes.

Important:
Any attempt at “direct importation” of the French model (like that of the SCI) without adaptation strongly exposes to local legal risks and even contractual nullities.

In summary: always favor a locally recognized structure such as an LLC/JSC specifically adapted to the envisaged real estate project while ensuring beforehand full compliance with the Vietnamese regulatory framework to guarantee legal/tax security sustainably around your international real estate investment.

The Advantages of Investing via an SCI

Flexibility in Real Estate Asset Management

The SCI allows for simplified and personalized management of real estate investments. Each partner holds shares proportional to their contribution, which facilitates collective decision-making and the adaptation of management rules according to the group’s needs. Property management is no longer tied to a classic co-ownership, often a source of deadlock, but to a statutory operation adapted to the partners’ objectives.

• Possibility to appoint a manager to represent the SCI and make routine decisions.
• Customizable articles of association precisely defining management methods and profit distribution.
• Easy adaptation to changes in partner composition (entry or exit).

Ease of Asset Transfer

The SCI simplifies the transfer of real estate assets, as it involves transferring company shares and not physical properties, thus avoiding succession co-ownership and its constraints.

• Progressive transfer possible through donation of shares, limiting transfer duties at each stage.
• Facilitated valuation: company shares can include a discount for co-ownership or lack of control, reducing the taxable base.
• Centralized asset management, even with multiple heirs.

Transfer Method	Direct Holding	Via SCI
Transfer by inheritance	Indivisible properties	Company shares
Potential blockage	Yes	No
Division of ownership rights	Complex	Simplified

Tax Advantages

Real estate taxation in Vietnam presents certain advantages for holders via an SCI, although it must be adapted to local legislation.

• Possibility to choose between income tax or corporate tax based on optimization strategy.
• Accounting depreciation of real estate assets, allowing reduction of the taxable base on rental income.
• Transfer via company shares can benefit from advantageous tax regimes, particularly regarding inheritance taxes.
• Possibility to repay current account contributions without immediate taxation, as it is a debt of the company to the partner.

Resource Pooling

The SCI is an ideal tool for bringing together several investors and acquiring assets of a larger scale than an individual investor could target.

• Pooling of funds from several partners.
• Easier access to bank credit thanks to better overall borrowing capacity.
• Diversification of the real estate portfolio.

Advantage	Individual Investor	SCI (Multiple Partners)
Investment Amount	Limited	Higher
Diversification	Low	High
Access to Credit	Difficult	Easier

Protection of Personal Assets

The SCI allows for the separation of personal assets from those held through the company. In case of debts or disputes related to the real estate investment, only the assets held by the SCI are engaged (except in cases of management fault or personal guarantees given).

• Liability limited to the proportion of shares held.
• Personal assets of partners protected against creditors of the SCI, except for personal guarantees.

Legal Specificities in Vietnam

The Vietnamese legal framework presents certain particularities for foreign investors and the use of corporate structures.

• Foreigners cannot directly own land, but can acquire long-term lease rights (up to 50 years, renewable).
• SCI-type structures allow for collective management and facilitate compliance with local rules regarding acquisition and holding.
• The SCI can serve as a vehicle to centralize the management of real estate rights, especially when multiple foreign investors are involved.

Key takeaway: The SCI, even adapted to the Vietnamese context, requires precise statutory drafting and legal monitoring to guarantee its compliance with local requirements and maximize its advantages.

Pitfalls to Avoid When Buying Real Estate in Vietnam

Pitfalls to Avoid When Buying Real Estate in Vietnam:

• Purchasing a property without verifying the legality of the ownership titles (e.g., absence of the “pink book”).
• Relying on unrecognized developers or offers that are too attractive.
• Neglecting the translation and understanding of contracts, often drafted only in Vietnamese.
• Ignoring additional fees (taxes, commissions, renewal of usage rights).
• Underestimating cultural differences in negotiations and contract signing.

Legal and Administrative Complexities for Foreign Investors:

Aspect	Detail
Land Ownership	Foreigners cannot own the land, only the buildings. The land is leased from the state for a limited period (often 50 years).
Holding Period	Usage right renewable after 50 years. Renewal is not automatic; it depends on state policy.
Quantitative Restrictions	Foreigners cannot own more than 30% of the units in a building.
Property Location	Certain strategic sectors or areas near borders are prohibited for purchase by foreigners.
Financing	Vietnamese banks generally do not grant real estate loans to foreigners without a long-term visa or residence.
Documentation	Obligation to verify the seller’s possession of the “pink book” (official ownership title).
Taxation	VAT (5 to 10%), registration tax (0.5%), income tax on resale (2% of sale price), annual land tax.

Risks Related to Construction Quality and Developer Choice:

• Some developers do not comply with local construction standards.
• Risk of project delays or abandonment.
• Absence of ten-year guarantees or reliable after-sales service.
• Imperative verification of the developer’s reputation, track record, and financial solidity.

Importance of Surrounding Yourself with Reliable Local Advisors:

• Engage a lawyer or notary specialized in real estate and familiar with the specifics of purchases by foreigners.
• Rely on recognized and transparent real estate agencies.
• Use professional translators for all contractual documents.
• Seek the support of a local tax expert to anticipate tax obligations and avoid surprises.

Cultural Differences and Local Business Practices to Know:

• Negotiations are often lengthy and may include implicit expectations of gifts or tips.
• Administrative delays can be longer than expected.
• Business practices may differ: importance of network, use of local intermediaries, preference for verbal agreements.
• Transparency on fees and commissions is not systematic, hence the importance of putting everything in writing.

Key Takeaway:

Ensuring the legality of the transaction, carefully choosing local partners, understanding legal and administrative limitations, and respecting cultural practices are essential to securing a real estate purchase in Vietnam.

Understanding Corporate Law for an SCI in Vietnam

Legal Framework Governing the SCI in Vietnam

In Vietnam, the concept of a “real estate civil company” (SCI), as known in French law, does not strictly exist. The equivalent legal structures for real estate investment are generally limited liability companies (LLCs), joint stock companies, or joint ventures. The sector is primarily regulated by three major laws:

• Land Law (amended 2024, effective January 1, 2025)
• Law on Real Estate Business
• Housing Law

These texts aim to strengthen market transparency, streamline investments, and ensure rigorous management of real estate projects.

Tax Obligations

The main tax obligations for an entity investing in real estate include:

• Payment of corporate income tax
• VAT on real estate transactions
• Specific land taxes based on the nature of the property and intended use

It is essential to comply with the periodic declarations required by the Vietnamese tax administration to avoid any disputes or penalties.

Specific Regulations for Foreign Investments

For foreign investors:

• It is not possible to directly acquire land in Vietnam, as all land belongs to the state.
• Foreigners can obtain a land use right via leasehold agreements that can go up to 50 years renewable.
• The law now provides for better openness for certain profiles like the Vietnamese diaspora.

Comparative Table: Land Law – Foreigners vs Nationals

Criterion	Nationals	Foreigners
Direct Ownership	Yes	No
Usage Right (“LUR”)	Yes	Yes (under conditions)
Maximum Duration	Unlimited/Long term	Up to 50 years (+renew.)

Note: Since January 2025, some procedures have been relaxed to attract more foreign capital.

Necessary Registration Process

General steps to create a structure dedicated to a real estate project:

1. Choice of the appropriate corporate form (generally LLC or joint venture).
2. Registration with the local Department of Planning and Investment.
3. Obtaining the business registration certificate.
4. Possible application for a specific certificate authorizing the real estate project.
5. Compliance with increased documentary requirements since August 2024 concerning financial transparency and technical documentation.

List of key required documents:

• Officially translated articles of association
• Financial proof demonstrating the required minimum capital
• Preliminary contracts or commitments with potential local partners
• Environmental permits depending on the size/project

Major Differences with Incorporation Elsewhere

Compared to France where an SCI can be simply formed between individuals without minimum capital or prior approval, in Vietnam:

• Any acquisition must go through a legally recognized commercial structure;
• The minimum charter capital is strictly controlled;
• The business purpose must precisely match the type of envisaged real estate operations;
• Administrative procedures are longer and often require a local partner to secure certain rights.

Synthetic Table: SCI France vs Equivalent Structure Vietnam

Aspect	SCI France	VN Structure
Minimum Capital	None	Mandatory
Direct Land Access	Yes	No
Creation Procedure	Simple	Complex
Foreign Partnership	Free	Restricted/Regulated

Legal Compliance Tips / Common Pitfalls

• Meticulously verify all authorizations before final signature
• Ensure all contracts are validated in the local language AND translated
• Scrupulously respect all tax obligations from incorporation
• Anticipate any recent regulatory changes (especially post August 2024/January 2025)

Special Attention: The total absence of direct foreign private ownership exposes to risks if the legal structure is inadequate; it is imperative to rely on specialized local advice.

Land Ownership Implications & Foreign Restrictions

Since January 2025, the rules concerning foreign access to real property rights have been clarified, but remain restrictive: formal impossibility to acquire the land itself; mandatory recourse to leasehold; frequent necessity of partnerships with approved Vietnamese actors, especially in certain sensitive or strategic areas.

Frequent pitfalls:

• Misinterpretation of lease duration/attached rights
• Absence of clear clause in case of resale/transfer of company shares

Recourse in Case of Commercial Disputes

In case of conflict related to a real estate investment:

• Favor as much as possible alternative methods such as mediation/international commercial arbitration recognized locally
• Possible referral to specialized Vietnamese economic courts
• Possibility to limit risks via arbitration clauses inserted from the initial drafting of articles/contracts

Key takeaway: Any operation requires rigorous anticipation both legally and operationally given persistent local particularities despite recent reforms favorable to structured investors.

Important text: In Vietnam, there is formally no “SCI” as in France. Any real estate investment must obligatorily transit through a duly registered commercial entity under strict state control – even when it is only about “associating several individuals around a property”.