The representative office vs subsidiary Vietnam question is the first structural decision every foreign investor faces, and the one most often decided on cost alone. Cost is the wrong primary test. The right test is whether the business will invoice customers in Vietnam within the first eighteen months.
This guide sets out the seven decision points we apply when advising manufacturers, trading groups, funds and technology companies on market entry, and explains the consequences of getting the representative office vs subsidiary Vietnam choice wrong.
Representative Office vs Subsidiary Vietnam: Legal Personality
A representative office is a dependent unit of the foreign trader. It has no legal personality, no charter capital and cannot own assets in its own name. Every obligation it incurs is an obligation of the foreign head office, which means the parent carries unlimited direct exposure for staff claims, lease disputes and tax assessments.
A subsidiary is a Vietnamese company, normally a single-member limited liability company. It has its own legal personality and its own balance sheet, and the parent’s exposure is limited to its committed capital contribution. For groups with meaningful downside risk in Vietnam, this alone settles the representative office vs subsidiary Vietnam analysis.
Representative Office vs Subsidiary Vietnam: Permitted Activities
A representative office may conduct market research, liaison, promotion of the head office business and supervision of contract performance. It may not sell, invoice, collect revenue or conclude commercial contracts in its own name. Governed by Decree 07/2016/ND-CP, the office is licensed by the provincial Department of Industry and Trade, or by the management board where it sits inside an industrial park or economic zone.
A subsidiary may do anything within its registered business lines, subject to market access conditions for foreign investors. It signs contracts, issues VAT invoices, imports and exports under its own customs code, bids for public and private tenders, and can hold land use rights. Our guide to market access conditions in Vietnam explains which lines are actually restricted.
Representative Office vs Subsidiary Vietnam: Tax Treatment
A representative office earns no revenue and therefore pays no corporate income tax. It still registers a tax code, withholds personal income tax on staff remuneration, and contributes to compulsory social, health and unemployment insurance. There is no statutory audit of the office itself.
A subsidiary pays corporate income tax at the standard rate, subject to any available incentives by sector or location, files quarterly provisional and annual finalisation returns, is subject to statutory audit, and must maintain transfer pricing documentation for related party transactions under Decree 132/2020/ND-CP as amended by Decree 20/2025/ND-CP. The compliance burden is materially higher, and it should be priced into the entry decision.
Representative Office vs Subsidiary Vietnam: Capital and Cash Flow
A representative office requires no charter capital. The head office simply remits operating funds to cover rent, salaries and running costs, and those remittances are not treated as investment capital.
A subsidiary must register total investment capital and charter capital, open a direct investment capital account, and contribute charter capital within the deadline stated in the enterprise registration certificate. Capital cannot be freely withdrawn once contributed; reducing charter capital is a regulated procedure. Profit remittance abroad is permitted only after annual finalisation and notification to the tax authority.
Representative Office vs Subsidiary Vietnam: Timeline and Cost
A representative office is normally licensed within seven working days of a complete dossier, with two to three weeks realistic end to end. The main delay is consular legalisation of corporate documents abroad, since Vietnam is not party to the Apostille Convention.
A subsidiary requires an investment registration certificate and an enterprise registration certificate. Under Decree 96/2026/ND-CP the investment registration certificate issues within ten working days where the conditions are met, but conditional business lines, investment policy approval or a leasehold in an industrial zone extend this to six to twelve weeks. See our guide on the investment registration certificate.
Representative Office vs Subsidiary Vietnam: Permanent Establishment Risk
The most expensive mistake we remediate is a representative 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 and assess corporate income tax on attributed profit, with penalties and late payment interest.
Double taxation agreements narrow but do not remove this exposure, because the preparatory and auxiliary carve-out does not cover habitual conclusion of contracts. Any group whose Vietnamese team has grown beyond liaison work should revisit the representative office vs subsidiary Vietnam position before an audit forces the issue.
Representative Office vs Subsidiary Vietnam: Conversion and Exit
There is no conversion mechanism. Moving from an office to a company means incorporating a new entity and closing the office, and the two are best run in parallel so the group keeps an uninterrupted presence and its expatriate work permits stay valid.
Closing an office requires tax clearance, settlement of employee entitlements and surrender of the licence, and realistically takes three to six months. Closing a subsidiary takes longer, often nine to eighteen months, because dissolution requires tax audit, customs clearance and creditor notification. Exit cost is a legitimate input into the entry decision and is regularly overlooked.
15 Things to Prepare Before Setting Up an FDI Company in Vietnam
A four-page pre-filing checklist covering structure and market access, capital and the DICA account, licensing and legalisation, work permits, and tax. Current to July 2026, including Decree 96/2026/ND-CP, Decree 219/2025/ND-CP and Decree 236/2025/ND-CP.
Frequently Asked Questions
Which is cheaper to run?
The representative office, by a wide margin. It has no capital requirement, no audit and no corporate tax filings. The saving disappears the moment revenue is needed in Vietnam.
Can a subsidiary be 100% foreign owned?
In most business lines, yes. Restrictions apply in a defined list of conditional sectors. See our note on foreign ownership limits.
Can one group hold both?
Yes, and many do, using the office for supplier liaison in one province and the company for trading in another. The chief representative and the company legal representative should be different individuals.
Which structure supports work permits?
Both. Under Decree 219/2025/ND-CP work permits are issued by the provincial People’s Committee for staff of either vehicle.
Discuss Your Entry Structure
IVLF Advisors runs the representative office vs subsidiary Vietnam analysis as a short structuring memorandum covering scope, tax, capital, timeline and exit, then licenses the chosen vehicle. See our representative office guide and company incorporation service, or the official procedures of the Ministry of Industry and Trade. Contact our team.
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.
