Representative office staff often believe their labour contracts “automatically move over” when the subsidiary is born — the legal reality is entirely different. There is no borrowed answer for converting a representative office into a subsidiary: the decision must be taken from the specific project file; it cannot be transplanted from a similar deal in another country, and converting a representative office into a subsidiary is no exception.
1. The current legal framework
reorganisation for converting a representative office into a subsidiary is regulated in Articles 198 (division), 199 (separation), 200 (consolidation), 201 (merger) and 202-205 (conversion) of the Enterprise Law 59/2020/QH14. Unlike a domestic company, turning a representative office into a subsidiary at an FDI company always raises the Investment Registration Certificate question: capital, investors and project organisation form are all contents recorded on that certificate. The labour consequences of turning a representative office into a subsidiary are locked in Article 44 of the Labour Code 2019, while money splits into two distinct regimes: severance (Article 46) and job loss (Article 47). on tax administration, the current framework for converting a representative office into a subsidiary is the Law on Tax Administration 108/2025/QH15 (replacing Law 38/2019/QH14); the tax-code part of converting a representative office into a subsidiary on reorganisation follows Circular 90/2026/TT-BTC, which replaced Circular 86/2024/TT-BTC from 1 July 2026.
2. Analysis on the facts
No automatic succession because the two presences are independent. The employee-succession mechanism in Article 44 of the Labour Code 2019 applies only to enterprise conversion, division, separation, consolidation and merger. A representative office is not an enterprise and the subsidiary is a new entity, so office employment must end by agreement or by law while staff sign new labour contracts with the subsidiary. Seniority and accrued benefits should be expressly recognised in the new contracts to avoid later allowance disputes.
The premises lease and service contracts. A lease in the representative office’s name does not pass automatically to the subsidiary: it must be terminated and re-signed, or assigned with the lessor’s written consent. The same goes for service contracts, the office’s bank account and tax registration — everything closes at the old presence and opens fresh at the subsidiary, unless the investor keeps the office alive in parallel.
A no-gap handover sequence. The practical order: form the subsidiary first and make it operationally ready; sign new labour contracts whose start date matches the office contracts’ end date; migrate customers and files progressively; only then wind up the office (if not retained), covering tax finalisation, account closure and licence return. Reversing this order — closing the office first — is the mistake that drops many teams into a legal vacuum.
3. Implementation sequence
Through practical handling, the converting a representative office into a subsidiary file usually stands on the following five steps:
- converting a representative office into a subsidiary opens with a reorganisation resolution or decision adopted by the owner, the Members’ Council or the General Meeting of Shareholders.
- Under Article 44 of the Labour Code 45/2019/QH14, converting a representative office into a subsidiary must come with a labour-use plan and the employee-notification step in the proper sequence.
- File the enterprise registration dossier for converting a representative office into a subsidiary with the Business Registration Office where the head office is located.
- When converting a representative office into a subsidiary touches capital, investors or the project’s organisational form, the IRC must be amended accordingly.
- converting a representative office into a subsidiary triggers an obligation to update the tax code, invoices, the ICA bank account and the sub-licences tied to the legal entity.
4. Risks and practical notes
The costliest mistake in turning a representative office into a subsidiary is locking the form by home-country habit and only then discovering the sector is restricted in Vietnam. A correction made after the IRC is already on the table always costs more than a pre-filing check: changing the form forces adjustments to both the project and the enterprise registration, and that applies to converting a representative office into a subsidiary as well. For converting a representative office into a subsidiary, the exit route is part of the form decision itself: easy in does not mean easy out, and the veto of the Vietnamese partner in the joint venture is usually the deciding detail.
5. Conclusion for the investor
Practical conclusion: turning a representative office into a subsidiary has no universal answer — the right answer is the one matching the sector, the ownership ratio and the exit plan of that specific project. Every signature in converting a representative office into a subsidiary should come only after three variables are locked: sector, capital ratio and who controls the vote; those three decide almost everything else in turning a representative office into a subsidiary.
Frequently Asked Questions
How are staff and contracts inherited when a representative office becomes a subsidiary?
There is no automatic inheritance: staff end their office contracts and sign new ones with the subsidiary, while leases and service contracts are re-signed or assigned with counterparty consent. Seniority should be recognised by agreement in the new contracts to preserve employees’ accrued entitlements.
Must office staff sign new labour contracts?
Yes. Article 44 of the Labour Code 2019 on labour succession does not apply here because a representative office is not an enterprise being reorganised. The correct technique is back-to-back contracts in time, plus an agreement recognising seniority and accrued benefits.
Can the office lease pass to the new company?
Yes, in one of two ways: terminate the old lease and sign a new one with the subsidiary, or execute an assignment with the lessor’s written consent. There is no automatic assignment mechanism, so this belongs on the handover checklist from day one.
This article has been quality-reviewed by the FLAW AI Legal Council