This article outlines key considerations for foreign investors wishing to engage in Vietnam’s education sector.
Exploring investment options
Foreign investors eyeing Vietnam’s education sector have two main investment pathways: starting a new project or acquiring shares in an existing enterprise. Each option entails its own regulatory requirements and strategic considerations.
Starting a new project
Starting a new project requires obtaining several key investment, corporate and education regulatory approvals:
- Investment - In the first instance, the investor must obtain an “investment registration certificate” (IRC) which allows the foreign investor to invest in Vietnam.
- Corporate - Thereafter, an “enterprise registration certificate” (ERC) would evidence legal establishment of an enterprise in Vietnam.
- Education - Education projects require the education authorities to issue an establishment license and grant an operation licence. The establishment license is required to establish an educational institution in Vietnam and an operating license authorises established institutions to begin and continue their educational activities.
Depending on the investment specifics, additional approvals like merger clearance from the Vietnam Competition Commission, in-principle approval from investment authorities, and certain facilities-related licenses may also be necessary.
Acquiring shares in an existing enterprise operating the target educational establishment
This option is often quicker, typically requiring M&A approval (i.e., approval for share purchase by foreign investors issued by investment authorities) and possibly merger clearance (evaluated on a case-by-case basis) as the target educational institution is expected to have necessary licenses. The recent trend has favored acquisitions over organic growth, reflecting the more efficient and lower regulatory burden of this approach.
Obtaining land use rights and facilities for education projects
Private land ownership is not permitted in Vietnam. However, individuals and entities can obtain “land use rights” (LURs) and are considered land users. A certificate of land use rights, house ownership, and other assets attached to land, commonly known as a “land use rights certificate” (LURC), serves as proof of these rights and outlines, among other items, the term and purpose of land use.
Enterprises invested by foreign investors have several options to obtain LURs and facilities for educational establishments, including: (i) leasing land from the State (typically up to a term of 50 years), (ii) leasing land in industrial zones, clusters, and high-tech parks (typically up to a term of 50 years), (iii) leasing properties from property owners, or (iv) entering “business cooperation contracts” (BCC) with property developers.
In practice, investors often face challenges with LURs and facilities, which may involve master planning approval, payment of land use fees or rentals, designated land use purposes, as well as availability of LURCs and BCCs. For example, if an educational establishment’s location uses residential properties for educational purposes, which location does not comply with relevant authorities’ educational planning / zoning, there is a practical risk that proposals to establish or relocate an educational institution or to renew its educational licenses might not be approved by State authorities.
Of note, the current legal framework does not provide a specific procedure for formally recognizing school owners within licenses. Establishment and operating licenses may or may not include owner information. Therefore, legal due diligence should encompass alternative documents to verify the title for the school, preventing future disputes and safeguarding the investment. This should be considered in conjunction with the historical background of how the owners obtained LURs and facilities.
Domestic vs. Foreign Invested Educational Establishments (FIEEs)
Vietnam allows foreign investment in its education sector with no ownership limits. However, FIEEs must meet stricter requirements than those with domestic status. These include a maximum investment term of 50 years, higher standards for teacher qualifications, specific student-to-lecturer ratios and student enrolment caps.
The primary legislation for foreign investment in education is Decree 86/2018 (as amended). It defines an FIEE as an establishment invested in by a “foreign-invested enterprise”. However, the term "foreign-invested enterprise" is not clearly defined in the Decree, in turn, creating some nuances in the interpretation of FIEE. Minimum investment capital requirements are also a key consideration, varying by the type of educational institution as set out below.
- Preschools - VND30 million (approximately USD1,200) per child if constructing new facilities, or 70% of such amount if using leased or existing facilities.
- Primary, secondary, and high schools - VND50m (approximately USD2,000) per student if constructing new facilities, or 70% of such amount if using leased or existing facilities.
- Universities - VND1,000 billion (approximately USD40m), with at least VND500bn (approximately USD20m) at the time of assessment by State authorities for establishment approval.
- University branches - VND250bn (approximately USD10m), with at least VND150bn (approximately USD6m) at the time of assessment by State authorities for establishment approval.
These minimum investment requirements have been applicable to FIEEs under Decree 86/2018 (as amended) and are now imposed on newly established domestic educational establishments for equal treatment under Decree 125/2024. However, they do not apply to existing domestic educational establishments, except in the case of relocation.
Implications of changing an education establishment’s status from domestic to FIEE
When transitioning an existing domestic educational establishment to an FIEE, the Vietnamese government allows a grace period for satisfying investment licensing until November 20, 2025, and for education licensing until November 20, 2029, providing investors time to align with Decree 124/2024 regulatory requirements.
While foreign investors can benefit from incentives available to educational establishments, such as exemptions from land rent and corporate income tax, it is important to evaluate any potential changes to existing projects that may arise with foreign investment.
Among other things, transitioning to FIEE status may have implications on the curriculum and student caps. For example, while there are currently no express regulations addressing FIEEs teaching the integrated curriculum – which combines the Ministry of Education and Training (MOET) curriculum with international modules, enriching the core curriculum without duplicating content – this leaves room for interpretation and potential future clarification by State authorities. Additionally, at an FIEE, less than 50% of students enrolled in an international curriculum can be Vietnamese.
Financial returns and considerations
Educational establishments in Vietnam primarily rely on tuition fees, which are subject to annual increase caps. Private educational establishments can set their tuition rates but cannot hike their fees by more than 15% a year for university education or 10% a year for K-12. They must also announce their tuition and training costs (such as expenses for salaries, direct costs, management costs, and depreciation costs of fixed assets that directly and indirectly serve educational activities according to the educational program) before the beginning of each academic year.
Donations may be received, but must be used for specific statutory purposes, such as purchasing educational and research equipment, facility maintenance, and supporting educational and research activities. Financial returns can also be influenced by whether an entity is a registered "social enterprise" or "not-for-profit educational establishment", each subject to its own financial reinvestment requirements:
- “Social enterprises” must reinvest at least 51% of their annual after-tax profit back into their mission.
- “Not-for-profit educational establishments” must reinvest all profits into their development.
A "social enterprise" can convert to a standard enterprise, but a "not-for-profit educational establishment" cannot switch to a for-profit model. Additionally, not-for-profit higher education establishments must comply with regulations regarding the use of assets, where certain assets cannot be privatized.
Vietnam's strategic roadmap for educational reform
On March 18, 2025, the Government of Vietnam issued Resolution No. 51/NQ-CP, which outlines a comprehensive action plan aimed at reforming the education sector with a focus on digitalization and international integration. This ambitious roadmap includes a series of legislative proposals and strategic initiatives designed to modernize and enhance the educational landscape.
Key legislative efforts include the preparation of a draft law on teachers by May 2025, alongside new draft laws governing higher and vocational education expected by October 2025. Amendments to the existing education law are also anticipated within the same timeframe.
Additionally, a draft higher education strategy framework is slated for November 2025, and a draft general education program development plan for 2026 to 2030 is expected by October 2026.
The government also plans to introduce a draft decision on IT application and digital transformation in education for the period from 2026 to 2030 by October 2026, and a draft decision on enhancing research and innovation in higher education by June 2027.
Specialized educational strategies are also a priority, with initiatives such as a draft national plan for English as a second language (2025-2035) by June 2025. Furthermore, a draft law on lifelong learning is scheduled for October 2029.
The program emphasizes educational infrastructure and human resource development, with draft resolutions to enhance educational infrastructure from 2026 to 2035 expected by September 2025, and a public investment program for modernizing higher education to be finalized by December 2025. Additionally, a strategic plan for training the workforce in high-tech industries is set for May 2025, and a draft policy to attract foreign experts and overseas Vietnamese is outlined for August 2026.
Conclusion
As Vietnam continues to welcome foreign investment in its growing education sector, investors have a unique opportunity to participate in this dynamic market. Although not without challenges, by dedicating sufficient time, evaluating deal structure and resulting regulatory and operating implications, as well as conducting thorough due diligence, investors can successfully navigate the complexities to unlock the potential in Vietnam's education sector. Foreign investors should engage with their lawyers for comprehensive guidance on the sector’s legal and regulatory framework and how it may impact their investments.
