Subsidiary, branch, representative office or no entity at all: the tax consequences of each way into Vietnam

A foreign company can do business with Vietnam in four common ways: through a subsidiary (a Vietnamese company it owns), a branch of the foreign company itself, a representative office, or with no local entity, contracting directly with Vietnamese customers from abroad. Each route has a different tax profile. A subsidiary is a full Vietnamese taxpayer. A representative office may not trade at all. A foreign company with no entity is usually taxed through foreign contractor tax withheld by its Vietnamese customers.

The choice is often made on legal and commercial grounds and revisited only when something goes wrong — a representative office that has quietly started selling, a contractor whose staff now spend most of the year on site. This guide compares the four routes from a tax point of view, so that the structure can be chosen, and changed, before the tax authority draws its own conclusions.

The four routes at a glance

The corporate income tax framework for companies and branches is Law 67/2025/QH15, applied from the 2025 tax year, with a standard rate of 20%. VAT follows Law 48/2024/QH15, in force since 1 July 2025.

Subsidiary: the full taxpayer

Most foreign investors that intend to manufacture, sell or provide services in Vietnam over time set up a subsidiary. It has its own tax code, files its own returns, issues its own e-invoices and pays CIT on its profits. It can hold incentives tied to its investment project, and it can own assets, employ staff and sign contracts in its own name.

The costs of this route are compliance and the rules that follow from being part of a group: related-party transactions disclosed every year, foreign contractor tax on fees paid to the parent, audit of annual financial statements, and procedures for remitting profits. None is unusual, but a foreign company that only needs a small sales presence may find them heavy.

A subsidiary also separates the group's other business from Vietnamese tax. The Vietnamese tax authority taxes the subsidiary's profits; it does not, in the normal case, tax the parent's worldwide business. That separation holds only if transactions between them are priced and documented properly.

Branch: possible in fewer sectors than people expect

A branch is part of the foreign company, not a separate legal person. Vietnamese law allows foreign companies to set up branches only in certain sectors and under Vietnam's international commitments — typically regulated services such as banking, insurance and some professional services. A foreign manufacturer or trading company generally cannot choose a branch instead of a subsidiary.

Where a branch is allowed, it is registered and taxed in Vietnam on its business there, keeps accounts and files returns. The practical tax questions are allocation — which income and costs belong to the branch rather than head office — and payments between the branch and head office, which need a clear basis to be deductible. Check the sector-specific rules; banks and insurers in particular have their own regulations alongside the general tax rules.

Representative office: no trading, and why that matters for tax

A representative office (RO) is the lightest presence. It may act as a liaison office, conduct market research and promote the parent's business, but it may not directly carry out profit-generating activities: it cannot sign sales contracts in its own name, issue invoices or collect revenue.

For tax, the RO usually has a tax code for withholding PIT from its staff and filing withholding returns. It does not pay CIT or charge VAT, because it does not trade. Its costs are funded by the parent.

The risk sits in the gap between the licence and the reality. When RO staff negotiate prices, agree terms, take orders or follow up payments for the parent, the RO is doing more than liaison. Two consequences can follow:

• the RO may be operating outside its licence, which is a regulatory problem; and
• the parent may be treated as carrying on business in Vietnam, with income taxable here — the concept that tax treaties call a permanent establishment.

If the Vietnamese business has grown to the point where local staff are effectively selling, that is the signal to set up a subsidiary rather than stretch the RO.

No entity: contracting directly and foreign contractor tax

Many foreign companies sell to Vietnamese customers without any presence: they supply software, equipment with installation, consulting, licences or engineering services under contracts signed abroad. The Vietnamese customer then usually declares and pays foreign contractor tax on the payment, covering the VAT and CIT elements, and deducts it from what it pays or grosses up the price, depending on the contract.

Points to settle in the contract:

• Who bears the tax — net or gross pricing — stated explicitly, not left to the customer's accounts department.
• What is being supplied — goods only, goods with services in Vietnam, services only, royalties — because the tax treatment differs by type of income.
• Treaty relief — whether a double taxation agreement may reduce the CIT element, and who handles the procedure to claim it.

Some foreign contractors, typically on large projects with the ability to keep Vietnamese accounts, can register and pay tax themselves rather than through the customer. And a contractor whose staff spend long periods in Vietnam, or who has a fixed site there, should consider the permanent establishment question and the staff's own PIT position. See our guides on foreign contractor tax for the mechanics.

Two other situations: cooperation contracts and digital sales to consumers

Two arrangements do not fit neatly into the four routes but come up often enough to mention.

Business cooperation contracts. A foreign investor can cooperate with a Vietnamese partner under a contract, without forming a new company, to share revenue, products or profit from a project. It is an investment form in its own right, with registration requirements. The tax treatment depends on how the contract allocates income and who operates the project — the parties may be taxed separately on their shares, or the operating party may declare for the arrangement. Settle the tax mechanics in the contract, with an adviser, before signing; ambiguity here usually ends with both parties arguing that the other should have paid.

Digital services sold to individuals. A foreign supplier selling online services — subscriptions, apps, digital content, advertising — to consumers in Vietnam, without a presence here, has its own compliance route. Under the Law on Tax Administration and Circular 80/2021/TT-BTC, foreign suppliers of this kind can register, declare and pay tax directly through the tax authority's portal for foreign suppliers, rather than rely on Vietnamese customers to withhold. Where the customers are Vietnamese companies rather than individuals, the ordinary contractor tax route through the customer usually applies instead.

Changing route as the business grows, and where to check

A common path is: direct contracts first, then a representative office to support customers, then a subsidiary once revenue justifies it. Each step has tax points worth planning:

1. Contracts in progress when a subsidiary is set up — decide whether they stay with the foreign company or move to the subsidiary, and document it.
2. RO staff moving to the subsidiary — PIT withholding moves with them; make sure the RO's final withholding return and the subsidiary's first are consistent.
3. Closing the RO — the RO's tax code must be closed properly, with final returns filed, rather than simply left inactive.

Check the status of any Vietnamese entity — subsidiary, branch or RO — on the taxpayer information lookup, and filed returns and payments in its e-tax account. The managing tax office is shown on the lookup; since 1 July 2025 tax administration works in three tiers, down to grassroots tax offices. Keep contracts, correspondence and tax documents for at least 10 years under the Law on Accounting.