One of the longstanding challenges faced by Vietnamese startups, particularly in the technology sector, has been accessing capital from venture funds, most of which are international.

To receive funding from foreign venture capital firms, startups in Vietnam have had to navigate complex and time-consuming procedures.

In many cases, completing these processes could take several months to a year, by which time resources were often depleted.

As a result, many Vietnamese startups chose to “relocate” to Singapore - effectively transferring ownership to a parent company there - where procedures for receiving investment are significantly simpler.

However, according to Hoang Duc Trung, acting executive of the Ho Chi Minh City Venture Capital Fund, the official launch of the fund (HCM VIF JSC) on April 17, with an initial scale of VND500 billion (US$20 million), along with mechanisms under Resolution 98, marks a breakthrough for tech startups operating domestically.

A key change lies in the introduction of a “liability exemption” mechanism, which removes psychological barriers associated with state capital. Previously, it was difficult for public funds to invest in startups due to strict capital preservation requirements.

Startups inherently carry high risks, and failures could expose fund managers to legal consequences.

Now, under Resolution 98, Ho Chi Minh City has, for the first time, allowed a risk acceptance mechanism and exemptions from civil and criminal liability for fund managers, provided that investment procedures are properly followed even if projects fail.

This shift enables the fund to confidently invest in emerging technologies such as artificial intelligence, semiconductors, and green technology.

Operating under a public-private partnership model, the fund also avoids excessive localization concerns. Structured as a joint-stock company, it comprises approximately 40% state capital, with the remainder from private investors.

Hoang Duc Trung noted that previous state-backed funds were often burdened by cumbersome administrative procedures. In contrast, the new fund operates under the Enterprise Law, ensuring autonomy and allowing investment decisions to be based on data and market potential rather than administrative targets.

He added that the fund’s establishment will help Vietnamese startups avoid the need to relocate to Singapore simply to improve their investment appeal.

By acting as “anchor capital,” the fund can support startups in refining products, expanding markets, and scaling operations.

With backing from the state and major domestic financial institutions, international investors are expected to feel more confident investing directly in companies headquartered in Vietnam, reducing the need for “flip” structures that shift ownership to Singapore.

Another notable development is the introduction of significant tax incentives for both startups and investors in Ho Chi Minh City.

Startups will benefit from corporate income tax exemptions for a certain period, typically up to five years, applicable to innovative startup enterprises.

For investors, the city plans to exempt personal and corporate income taxes on earnings from the transfer of capital contributions or rights to invest in innovative startups within the city. This is seen as a major incentive for both domestic “Sharks” and foreign funds to invest directly in Vietnamese entities.

“With these incentives, Vietnamese startups no longer need to establish headquarters in Singapore to access tax benefits, but can instead base their operations in Vietnam,” Trung said.

Le My