Establishing a Company in an Export Processing Zone: Legal Framework, Incentives, and Obligations for Foreign Investors

Vietnam remains a strategic destination in the global supply chain, particularly with its Export Processing Zone (EPZ) model—zones specifically designated for export-oriented manufacturing activities, governed by distinct legal regulations and offering a range of incentives for foreign investors. However, behind these incentives lies a relatively complex legal framework, requiring investors to be thoroughly prepared right from the stage of establishing a legal entity.

Setting up a company within an EPZ is not simply a choice of manufacturing location; it also entails compliance obligations related to customs, taxation, specialized inspections, as well as restrictions on domestic commercial activities. The differences between export processing enterprises and ordinary enterprises are evident in the mechanisms for goods control, investment classification, labor utilization, and foreign exchange management.

This article aims to provide foreign investors with a comprehensive overview of the legal framework governing operations in export processing zones, analyzing the unique incentives and legal obligations that should be noted when establishing an enterprise or factory in these zones.

1. Application Dossier, Process, and Procedures for Establishing an Enterprise in an Export Processing Zone

The establishment of an Export Processing Enterprise (EPE) in Vietnam is governed by the legal framework on Investment, Customs, and the management of non-tariff zones. The procedures for establishing an EPE may vary depending on the form in which the investment project is implemented. Below are 03 common scenarios that investors should be aware of:

Simultaneous application for EPE establishment and issuance of Investment Registration Certificate (IRC)

If the investor wishes to establish an EPE while simultaneously applying for the Investment Registration Certificate (IRC), the application dossier must include a commitment regarding the ability to meet customs inspection and supervision conditions as prescribed by the laws on export and import taxes. This commitment demonstrates that the investor is capable of operating within the non-tariff zone and subject to customs supervision.
Upon receiving and appraising the application, the investment registration authority will issue the IRC, which specifies the investment objective as the establishment of an export processing enterprise.

Application without simultaneous issuance of Investment Registration Certificate

If the investor already holds an IRC but now wishes to convert or supplement the objective to establish an EPE, one set of application documents must be submitted to the investment registration authority where the enterprise is headquartered. The application dossier includes:

• Documents related to the investment project as prescribed by the Law on Investment;
• A commitment on the ability to satisfy customs inspection and supervision conditions.

Within three working days from the date of receipt of a valid application, the investment registration authority will issue a Certificate of EPE Registration if the project does not require re-issuance of the IRC.

Projects subject to investment policy approval

For large-scale investment projects or those in conditional business sectors, the investor must obtain investment policy approval. When submitting the application for approval, the investor must also include a commitment regarding compliance with customs inspection and supervision requirements.

After obtaining the investment policy approval document, if the project does not require the issuance of an IRC, the investor will be issued a Certificate of EPE Registration within three working days. In other cases, the objective of “export processing enterprise” will be recorded directly in the IRC.

Note: The commitment on the ability to satisfy customs inspection and supervision conditions only applies to EPEs operating within non-tariff zones. The form of this commitment is provided in Appendix VII of Decree No. 18/2021/ND-CP and is a mandatory document in many cases of establishment or conversion of investment objectives.

2. Customs Control Mechanism and Preferential Policies for Export Processing Enterprises

Physical Separation and Management as a Non-Tariff Zone

An Export Processing Enterprise (EPE) operates under a special model within non-tariff zones, subject to separate regulations on customs, taxation, and goods circulation. Accordingly, export processing zones, EPEs, or industrial subzones dedicated to EPEs must be physically separated from the customs territory outside by a complete system of fences, gates, and entry points. The purpose of this separation is to ensure the conditions for customs inspection and supervision, as well as the regular presence of relevant state management authorities.

Timing of Preferential Treatment and Conditions for Implementation

EPEs are entitled to tax and investment incentives applicable to non-tariff zones from the time the objective of “export processing enterprise” is recorded in one of the following legal documents:

• Investment Registration Certificate;
• Amended Investment Registration Certificate;
• Certificate of EPE Registration issued by the competent authority.

However, to officially benefit from preferential tax policies, the enterprise must complete the construction of its infrastructure and obtain confirmation from the customs authority that all conditions for customs inspection and supervision have been fully met, as prescribed by the laws on export and import taxes. Without this confirmation, the enterprise will not be entitled to tax incentives, even if the EPE objective has been recorded in the IRC.

Goods Exchange and Customs Exceptions

Transactions and exchanges of goods between an EPE and the rest of Vietnam’s territory are considered domestic export-import activities, with some exceptions. The types of goods that do not require customs procedures include:

• Construction materials;
• Office supplies;
• Foodstuffs and provisions;
• Consumer goods serving the daily needs of employees within the EPE.

Additionally, EPEs are allowed to liquidate assets and sell used or remaining goods in stock into the domestic market, provided that all relevant specialized management and tax regulations are complied with.

Financial Controls and Other Activities

Other notable legal aspects include:

• Employees working in EPEs are not required to declare customs when bringing foreign currency in and out of these areas..
• EPEs may conduct other business activities but must keep goods storage areas, revenue and expense accounting, and business operations separate, and must not use tax-exempt machinery and equipment for purposes other than export processing. If such equipment is used for other purposes, the enterprise must fully refund all previously received tax incentives.

Branches and Warehousing Outside the Export Processing Zone

EPEs may establish branches if those branches also operate within an export processing zone, industrial zone, or economic zone and meet customs control conditions. In special cases where on-site space is insufficient, EPEs may rent warehouses outside the export processing zone for goods storage, provided they obtain confirmation from the customs authority that the relevant conditions are met.

3. Compliance Obligations and Legal Requirements in Export Processing Operations

Alongside special incentive policies, Export Processing Enterprises (EPEs) must also strictly comply with a range of specific legal regulations throughout their operations. These are systematic obligations, closely linked to the control of goods flows, assets, cash flows, and operational infrastructure within non-tariff zones. Full compliance is not only a legal requirement but also a prerequisite for maintaining incentives and avoiding serious legal consequences.

Separation of Storage Areas and Business Activities

EPEs must clearly distinguish between storage areas used for export processing operations and those used for other purposes. This requirement is designed to prevent the misuse of tax-incentivized assets and to facilitate inspections and supervision by the authorities.

Separate Accounting

EPEs are required to separately account for revenue and expenses related to export processing activities and any other business activities they may have. Failure to clearly separate revenue streams can result in serious legal consequences, including retrospective tax collection and administrative penalties.

Limitations on the Use of Tax-Exempt Assets

Assets, machinery, and equipment granted tax exemption under incentive schemes for EPEs must not be used for business activities other than export processing. In cases of misuse, the enterprise is required to repay all exempted or reduced taxes and may be subject to tax and customs penalties in accordance with current regulations.

Asset Liquidation and Domestic Sales

The liquidation of used assets or the sale of goods into the domestic market must still comply fully with regulations on investment, import-export taxes, and specialized management. Although policies permit EPEs to carry out these activities, at the time of sale or liquidation, the goods may be subject to tax and specialized inspection, especially if the initial import procedures were not previously completed.

Human Resources and Cash Flow Management

Employees in EPEs are exempt from customs declaration requirements when bringing foreign currency in and out of export processing zones. However, enterprises must still comply with regulations regarding foreign workers, labor contracts, occupational safety and hygiene, and social insurance policies under Vietnamese law. In addition, all cross-border payment activities must comply with the foreign exchange management regulations of the State Bank of Vietnam.

Project Adjustments and Timely Notifications

When there are changes related to investment objectives or business models (such as warehouse expansion or leasing warehouses outside the export processing zone), enterprises are required to adjust the investment project in accordance with the Law on Investment. At the same time, they must notify the investment registration authority in writing within the statutory time frame to ensure legality and to continue enjoying the special mechanisms available to EPEs.

The establishment and operation of an EPE in Vietnam offer many attractive investment opportunities, particularly from the perspectives of tariff incentives, access to global supply chains, and special policy regimes. However, these advantages are accompanied by a rigorous legal system and a number of specialized regulations, requiring investors to be thoroughly prepared and to possess in-depth understanding of the local legal environment.

From the stage of entity establishment and customs confirmation to ongoing obligations related to accounting, warehouse management, asset liquidation, and domestic import-export activities, EPEs cannot operate effectively without a strong legal foundation and the support of experts who understand the Vietnamese legal ecosystem.

With extensive practical experience supporting FDI enterprises and foreign investors in the industrial and export processing sectors, CDLAF is committed to providing a comprehensive legal perspective aligned with real-world implementation and international standards. A sustainable, transparent, and compliant investment strategy will not only serve as a competitive advantage but also lay the foundation for long-term development in Vietnam.

Time of writing: 28/05/2025

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer  at  info@cdlaf.vn

You can refer for more information:

• • Compliance Obligations in Taxation and Accounting for Foreign-Invested Enterprises Operating in Vietnam
  • Legal Regulations on the Trading of Functional Foods in Vietnam
  • Beneficial owners in the Draft amendment to the Law on Enterprises (2025): Opportunities for transparency and challenges for businesses