We are a company incorporated in the United Kingdom and are planning to establish a company in Vietnam to operate a restaurant business. For the purpose of implementing the investment project, we entered into a lease agreement with Company A (a Vietnamese company) to use the premises as our head office and restaurant location.
After signing the lease agreement, during the process of applying for the Investment Registration Certificate (“IRC”), the investment authority required us to submit legal documents evidencing that the premises are permitted to be used for commercial/service purposes. However, we discovered that the documents provided by Company A only indicate that the premises are approved for office use. Company A confirmed that it is unable to provide any documents proving that the premises are permitted for restaurant business purposes.
As the location does not satisfy the legal conditions for implementing the investment project, our IRC application was rejected. We therefore requested termination of the lease agreement and a refund of the amounts paid. Company A argued that our failure to obtain the IRC is not their responsibility and that, under Vietnamese law, the lease agreement should only have been entered into after the IRC had been issued.
Accordingly, we seek legal advice on:
(i) The legal grounds for terminating the lease agreement; and
(ii) The allocation of responsibilities and risks between the parties in this case.
Answer:
1.Legal requirements for an IRC application
In the process of establishing a foreign-invested enterprise in Vietnam, one of the most common obstacles in obtaining an Investment Registration Certificate (IRC) is the legal status of the project location, particularly for projects in the commercial and service sectors such as restaurants and F&B.
Pursuant to the Law on Investment 2020 and Decree No. 239/2025/ND-CP, the application dossier for issuance of an IRC for a project involving the establishment of an economic organization in Vietnam must include: “A copy of documents evidencing land use rights or other documents determining the right to use the location for implementation of the investment project.”
In practice, the investment authority does not merely review the lease agreement, but also assesses:
- The approved functional use of the premises as reflected in the relevant legal documents issued by competent authorities; and
- The consistency between such functional use and the objectives and business lines of the investment project.
For a restaurant business project, the project location must have a commercial/service function. Where the legal documents of the building only specify office use, there is insufficient basis to determine that the location satisfies the conditions for implementing the project.
Accordingly, the investment authority’s request for additional documents proving appropriate functional use, or its refusal to grant the IRC where such documents cannot be provided, is consistent with applicable laws and administrative practice.
2.Whether a lease agreement constitutes a “document determining the right to use the project location”
Pursuant to Point d, Clause 1, Article 33 of the Law on Investment 2020 and the guidance provided in Official Letter No. 2541/CV-TCT dated 18 April 2022 issued by the Prime Minister’s Special Task Force, where an investment project does not request the State to allocate land, lease land, or permit a change of land use purpose, the investor may submit: “A copy of documents evidencing land use rights or other documents determining the right to use the location for implementation of the investment project.”
Under Article 189 of the Civil Code 2015, the right of use is the right to exploit the utility of an asset and may be transferred through lawful agreements. The right to use a project location may be established through, among others:
- Lease agreements for houses or premises for a specified purpose (Article 472 of the Civil Code);
- Loan-for-use agreements (Article 494 of the Civil Code);
- Agreements relating to land use rights (Article 500 of the Civil Code);
- and other lawful forms.
Accordingly, a lease agreement is considered an “other document determining the right to use the location for implementation of an investment project” under Vietnamese investment laws.
Therefore, Company A’s argument that “the investor must obtain the IRC first and only then enter into a lease agreement” is inconsistent with Vietnam’s investment procedures. In practice, an IRC cannot be issued unless the investor has already identified and secured a lawful project location through a lease or similar arrangement.
3.Lessor’s obligations regarding the intended use of the premises
Pursuant to Article 477 of the Civil Code 2015, the lessor is obliged to: “Ensure that the leased property can be used for the agreed purpose throughout the lease term.”
Where the lease agreement clearly states that the premises are to be used as a head office and for restaurant business purposes, but in reality:
- The premises do not have a commercial/service function; and
- The lessor is unable to provide legal documents evidencing such appropriate function,
there are reasonable grounds to conclude that the lessor has failed to ensure the conditions for using the leased property in accordance with the agreed purpose.
The risks arising in this case stem from the legal status of the leased premises, rather than from any fault on the part of the investor.
4. Right to cancel or terminate the lease agreement
Pursuant to Article 423 of the Civil Code 2015, a contract may be cancelled if one party commits a breach of obligation to such an extent that the other party cannot achieve the purpose of entering into the contract.
In this case:
- The purpose of the lease (i.e., establishment of the company and operation of a restaurant) cannot be achieved because the premises do not satisfy the applicable legal requirements; and
- The lessor is unable to remedy or legalize the functional use of the premises.
Accordingly, the investor has a legal basis to request cancellation of the lease agreement and to require the parties to return what they have received from each other, after deducting reasonable incurred costs, and subject to the agreed provisions on penalties, damages, and dispute resolution (if any).
Alternatively, if the parties wish to resolve the matter in a more amicable manner, mutual termination of the lease agreement pursuant to Clause 2, Article 433 of the Civil Code 2015 is also a feasible option.
Reference consultation: Foreign investment services
