Foreign investors routinely ask their Vietnamese counsel to “set up a holding company.” The request sounds simple, but it rests on a misconception: Vietnamese law recognises no such thing as a holding company. There is no special enterprise type, no holding-company licence, and no dedicated tax regime for one. What investors actually build — and what works perfectly well — is a parent-subsidiary structure under the Enterprise Law: a Vietnamese company, typically 100% foreign-owned, that holds controlling stakes in one or more operating subsidiaries. Everything that follows in this article describes that structure, because that is the only structure the law provides.
Getting this framing right matters. Investors who believe they are buying into a recognised “holding” status sometimes expect preferential tax treatment or lighter governance duties that simply do not exist — and structure their affairs around benefits nobody will ever grant them.
The legal reality: parent and subsidiary, nothing more
The Enterprise Law 2020 devotes an entire chapter to groups of companies, built on three provisions:
Article 194 establishes that an economic group or corporation is not an enterprise type, has no legal personality, and is not subject to establishment registration. A “group” is merely a label for affiliated companies — each member remains an independent legal person bearing its own rights and obligations.
Article 195 defines when a company counts as the parent of another, through any of three tests: (a) owning more than 50% of the charter capital or ordinary shares; (b) holding the direct or indirect right to appoint a majority or all of the board members, director or general director; or (c) holding the right to amend the subsidiary’s charter. Note the threshold is more than 50% — a company holding exactly 50% of capital but controlling management appointments can still qualify as a parent under test (b).
Article 195 also imposes two absolute prohibitions: a subsidiary may not invest in or contribute capital to its parent, and sister subsidiaries of the same parent may not simultaneously contribute capital to or buy shares in each other for cross-ownership purposes.
Article 196 governs the parent’s rights, obligations and liability. The parent exercises its rights in whatever capacity fits the subsidiary’s legal form — member, owner or shareholder — and all contracts and transactions between parent and subsidiary must be established and performed independently, on arm’s-length terms, as between separate legal persons. Critically, if the parent intervenes beyond its authority as owner, member or shareholder and forces the subsidiary into business contrary to normal practice or into loss-making activity without reasonable compensation in the relevant fiscal year, causing damage to the subsidiary, the parent is liable for that damage — and the parent’s managers who carried out the intervention are jointly liable.
What foreign investors actually use the structure for
Indirect ownership of multiple subsidiaries. Rather than the foreign investor appearing directly on the shareholder registers of three or four Vietnamese companies, a single Vietnamese parent — itself 100% foreign-owned — holds the stakes. Capital decisions, senior appointments and strategy sit with the parent, while each subsidiary operates independently in its own sector.
Cash-flow consolidation and treaty-aware tax planning. Dividends that a Vietnamese subsidiary pays to a parent that is an organisation (including a foreign organisation) are not subject to corporate income tax in Vietnam, because the underlying profits were taxed before distribution. When the parent then moves profits offshore, the investor’s home-country tax position may be shaped by the double taxation agreement Vietnam has signed with that country. This is why many groups place an intermediate parent in Vietnam instead of letting each subsidiary remit directly abroad: cash is consolidated at one point before leaving the country.
M&A readiness and clean exits. A parent holding all shares of its subsidiaries is a tidy package for acquisitions: the buyer acquires the parent (or a stake in it) rather than negotiating separately with each operating company. Symmetrically, divesting one business line means transferring the corresponding subsidiary while the rest of the structure is untouched.
Ring-fencing risk across business lines. Each subsidiary is an independent legal person liable with its own assets. Legal or financial trouble in the manufacturing arm does not spill into the logistics or trading arm — a principle Article 194 reinforces by insisting that every group member carries the rights and obligations of an independent enterprise.
Centralised financing and internal capital allocation. The parent can raise funding centrally — bank borrowing or, where eligible, bond issuance — and deploy it to subsidiaries as needed, instead of each subsidiary borrowing on its own weaker terms.
Offshore SPV or onshore parent?
Multinational groups are accustomed to holding their Vietnamese investments through special-purpose vehicles in Singapore, Hong Kong or the Netherlands. An offshore SPV and a Vietnamese parent serve different purposes and often coexist:
- The offshore SPV typically serves the global parent’s agenda: treaty benefits, cross-border M&A convenience, insulation from single-market legal risk.
- The Vietnamese parent serves operational reality: fast decision-making for domestic subsidiaries, consolidated cash flow before offshore remittance, and a single counterparty for Vietnamese regulators.
There is no universally correct answer; the choice turns on investment scale, the number of subsidiaries, the ultimate parent’s tax strategy, and the group’s M&A horizon over the next five to ten years.
Four warnings investors commonly miss
No tax consolidation. Vietnam has no group-relief or fiscal-unity regime. Parent and subsidiaries are separate taxpayers, each filing and paying corporate income tax on its own. Tax incentives, where available, attach to a specific entity and investment project — they do not travel across the group. One subsidiary’s losses cannot offset another’s profits.
Parent-subsidiary dealings fall under transfer-pricing rules. From 1 July 2026, Decree No. 255/2026/ND-CP — which replaced Decree No. 132/2020/ND-CP and Decree No. 20/2025/ND-CP — governs the pricing of related-party transactions, applicable from the 2026 corporate income tax year. Intra-group loans, management fees and cost allocations between parent and subsidiaries must satisfy the arm’s-length principle and the applicable documentation and disclosure obligations.
Share acquisitions sometimes need prior approval. A foreign investor contributing capital or buying shares in a Vietnamese enterprise (including to create a parent-subsidiary relationship) must obtain the investment registration authority’s approval in certain cases — for example, in sectors with market-access conditions or touching national defence and security. This is an investment-law procedure under the Law on Investment No. 143/2025/QH15 (effective 1 March 2026), separate from enterprise registration.
Heavy-handed parent intervention creates liability. Article 196 grants power but draws a line: a parent that forces its subsidiary into loss-making business for the group’s benefit without reasonable compensation must compensate the subsidiary for the resulting damage. In practice, decisions such as compelling a subsidiary to sell below cost to a sister company, or draining a subsidiary’s cash flow, sit squarely in this risk zone.
A worked illustration
A European private-equity fund is acquiring three Vietnamese targets: a food-processing plant near Hanoi, a cold-chain logistics operator, and a distribution company in Ho Chi Minh City. Rather than holding the three stakes directly from its Luxembourg vehicle, the fund establishes a single-member LLC in Vietnam — 100% foreign-owned — as the parent, which in turn holds controlling stakes in all three operating companies. The parent performs no production or transport itself; its role is governance: appointing management at the three subsidiaries, approving financial plans, receiving dividends from three sources, and consolidating cash before upstreaming it. When the fund later sells the logistics business to a strategic buyer, the transaction happens at the subsidiary level and the food and distribution holdings are unaffected.
Procedurally, a parent newly established in Vietnam by a foreign investor must complete the investment procedures under the Law on Investment — obtaining an Investment Registration Certificate before enterprise registration where the law requires it — and then register the enterprise under the Enterprise Law.
Frequently asked questions
1. Can I register a “holding company” as an enterprise type with the business registration authority?
No. Vietnam’s enterprise registration system has no “holding company” category. You register an ordinary LLC or joint-stock company with suitable business lines (for example, head-office activities or management consultancy, depending on what the parent actually does), then create the parent-subsidiary relationship through capital ownership under Article 195 of the Enterprise Law.
2. May a subsidiary invest back into its parent?
No. Article 195(2) of the Enterprise Law 2020 prohibits a subsidiary from buying shares in or contributing capital to its parent. Sister subsidiaries of the same parent are likewise barred from cross-shareholding. These are absolute prohibitions, not matters for contractual opt-out.
3. What Vietnamese tax applies to dividends a Vietnamese subsidiary pays to a foreign corporate parent?
An organisation receiving dividends (including a foreign organisation) pays no corporate income tax in Vietnam on those dividends, since the profits were taxed before distribution. Note the contrast: dividends paid to individuals are subject to 5% personal income tax. The investor’s tax position in its home country when receiving the cash depends on that country’s law and any applicable double taxation agreement.
4. Can a Vietnamese parent file a consolidated tax return for the group?
No. Each group company is an independent taxpayer filing separately. There is no mechanism in Vietnam for offsetting one company’s losses against another’s profits. Group tax planning must therefore be modelled entity by entity.
5. Is it better to hold Vietnamese subsidiaries through a Singapore SPV than through a Vietnamese parent?
It depends on the objective. An offshore SPV generally suits the ultimate parent’s global tax strategy and cross-border M&A; a Vietnamese parent suits real operational management and provides a single domestic regulatory counterparty. Many groups use both layers. The decision requires specific tax and legal advice — not imitation of another group’s structure.
This article provides general reference information and does not replace legal advice for any specific case. Regulations may change; investors should consult the original legal texts or a qualified lawyer before making decisions.
This article has been quality-reviewed by the FLAW AI Legal Council
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