Choosing between a Vietnam rep office, a branch and a subsidiary is the first structural decision a foreign trader makes on entry, and the most expensive one to reverse. Each vehicle carries a different licensing route, tax profile, liability exposure and permitted scope. This guide compares the three so the choice can be made on facts rather than assumption.
We advise foreign manufacturers, trading houses, funds and professional firms on this decision every month. The right answer depends on whether the business will invoice customers in Vietnam, how much capital the group is prepared to commit, and how quickly presence is needed.
What a Vietnam Rep Office Can and Cannot Do
A Vietnam rep office is a dependent unit of the foreign trader with no legal personality and no charter capital. It may conduct market research, act as liaison, promote the trader’s business and supervise contract performance. It may lease premises, employ staff and open bank accounts.
It may not sell, invoice, collect revenue or carry out any profit-generating activity. Because it earns nothing, it pays no corporate income tax, but it must withhold personal income tax and pay compulsory insurance for its staff. Licensing is governed by Decree 07/2016/ND-CP, with a statutory decision period of seven working days from a complete dossier.
How a Branch Differs From a Vietnam Rep Office
A branch of a foreign trader may conduct commercial activity and generate revenue, unlike a Vietnam rep office. That advantage comes at a cost: branches are permitted only in a narrow set of sectors under Vietnam’s treaty commitments, principally banking, insurance, securities, legal services and certain professional services.
Branch licensing is materially slower, the foreign trader is directly liable for branch obligations, and the branch pays corporate income tax on its Vietnamese profit. For most trading and manufacturing groups a branch is simply not available, which is why the practical comparison is between a Vietnam rep office and a subsidiary.
How a Subsidiary Compares With a Vietnam Rep Office
A subsidiary is a Vietnamese company, usually a single-member limited liability company, incorporated under the Law on Investment and the Law on Enterprises. It has its own legal personality, limits the parent’s liability to its capital contribution, may sign contracts and invoice freely, and may own assets and land use rights.
It requires an investment registration certificate and an enterprise registration certificate, must satisfy market access conditions for its business lines, and pays corporate income tax at the standard rate subject to available incentives. Setup takes longer and costs more than a Vietnam rep office, but it is the only structure that supports real trading. Our company incorporation guide sets out the procedure.
Cost and Timeline Comparison
A Vietnam rep office is typically licensed within two to three weeks of filing, with consular legalisation abroad the longest single step. Running costs are limited to rent, salaries, insurance and reporting; there is no capital to inject and no audit requirement for the office itself.
A subsidiary generally takes six to twelve weeks depending on the business lines and whether investment policy approval is required, and carries statutory audit, corporate tax filings and transfer pricing documentation obligations. Where the group expects revenue within the first year, the subsidiary’s higher setup cost is recovered quickly; where the first year is exploratory, the Vietnam rep office is the efficient choice.
Permanent Establishment Risk
The most common problem we remediate is a Vietnam rep office that has drifted into commercial activity. Where staff negotiate prices, conclude contracts or manage a sales pipeline, the tax authority may treat the foreign trader as having a permanent establishment in Vietnam and assess corporate income tax on attributed profit, plus penalties and late payment interest.
Applicable double taxation agreements narrow but do not eliminate this exposure, because preparatory and auxiliary carve-outs do not cover habitual conclusion of contracts. Groups whose Vietnamese activity has grown should convert to a subsidiary before the exposure crystallises.
Making the Right Choice
Choose a Vietnam rep office where the objective is sourcing, quality control, liaison, brand building or supplier supervision, and no Vietnamese entity will invoice customers. Choose a subsidiary where the business will sell in Vietnam, hold assets, bid for contracts, or employ a substantial local team.
Choose a branch only where the sector expressly allows it and the group accepts direct liability. In many cases the sequence is deliberate: license an office first, prove the market, then incorporate and close the office. See our guides on representative office in Vietnam, Vietnam market entry and foreign investment in Vietnam.
Frequently Asked Questions
Can a Vietnam rep office issue invoices?
No. Issuing invoices or collecting revenue exceeds the licence and creates permanent establishment exposure for the foreign trader.
Can a Vietnam rep office be converted into a subsidiary?
Not by conversion. A new company is incorporated and the office is then closed, usually run in parallel to avoid a gap in presence.
Which structure allows land use rights?
Only a subsidiary. A Vietnam rep office may lease premises for its own use but cannot hold land use rights or own real property.
How many staff can a rep office employ?
There is no statutory headcount cap, but a large team performing commercial functions attracts scrutiny and increases permanent establishment risk.
Discuss Your Entry Structure
IVLF Advisors advises on entry structuring, licences the chosen vehicle, and manages later conversions from a Vietnam rep office to an operating company, including tax clearance and staff transfer. Official procedures are published by the Ministry of Industry and Trade. Contact our team for a structuring memorandum.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
