A foreign group opening a subsidiary in Vietnam is not just “setting up another company” — it is inserting a new link into a global ownership chain, with three consequences to price in advance: investment procedures for the subsidiary, the illusion of “automatic” tax incentives, and intra-group transactions under transfer-pricing scrutiny.
1. The subsidiary still needs its own investment project and IRC
Under Investment Law 143/2025/QH15 (effective 1 March 2026), a foreign investor establishing an economic organization in Vietnam must have an investment project and obtain an Investment Registration Certificate (IRC). The overseas parent — even with other subsidiaries already in Vietnam — must prepare a separate IRC dossier for the new subsidiary, with that project’s own objectives, scale, location and timeline.
In other words: each subsidiary is a procedurally independent investment project; there is no “group-wide IRC”. The subsidiary’s IRC dossier needs documents proving the investor’s financial capacity (here, the parent or the investing entity), and foreign-entity documents generally require consular legalization (or Apostille certification for Hague Convention members — see our article on consular legalization) plus notarized Vietnamese translation.
2. The illusion to kill: a parent–subsidiary model creates no automatic tax incentive
This is the most common misunderstanding: “big groups get incentives.” In reality, corporate income tax incentives attach to specific projects, locations and sectors — e.g. high-tech projects, or projects in areas with difficult socio-economic conditions — not to being “the child of group X”. A multinational’s subsidiary in downtown Ho Chi Minh City in a non-incentivized sector gets nothing; a small independent company investing in the right high-tech park still qualifies.
Assess incentives per project at the IRC stage, because incentive commitments usually attach to the recorded project contents. Do not let the group structure make you skip this step.
3. Intra-group transactions: transfer pricing is watching
Once the Vietnamese subsidiary starts transacting with its parent or sister companies — buying inputs, paying royalties, management fees, intra-group loans — those dealings fall under transfer-pricing tax administration. The current framework is Decree 255/2026/ND-CP (replacing Decree 132/2020/ND-CP from 1 July 2026, applicable to the 2026 CIT period).
Tax-authority practice: group management fees and intra-group royalties are the two most challenged items — you must prove the services were actually rendered and priced at arm’s length. Lesson from handling audits: prepare transfer-pricing documentation from the first year of operation; do not wait for an audit decision to reconstruct three years of data.
4. Designing the ownership chain: direct or via an intermediary?
The parent may own the Vietnamese subsidiary directly at 100%, or through an intermediary (e.g. a holding company in Singapore or Hong Kong). The choice affects: tax on dividend flows (depending on the double-tax treaty between Vietnam and the intermediary jurisdiction — verify the treaty actually exists; never assert one), outbound-investment approvals in the home country, and flexibility for future restructurings.
There is no universal answer: an intermediary adds a layer of compliance cost but can optimize tax and ring-fence legal risk per market. This decision needs a concrete international tax model — do not copy another group’s structure.
FAQs
Can the parent reuse an old subsidiary’s IRC to open a new subsidiary?
No. Each investment project has its own IRC tied to specific objectives, scale and location. Opening a new subsidiary — even within the same group — is a new investment project requiring a new IRC under Investment Law 143/2025/QH15.
Is the Vietnamese subsidiary a “branch” of the parent?
No. A subsidiary is an independent legal entity under Enterprise Law 59/2020/QH14, liable with its own assets; the parent’s liability is limited to its capital contribution. A branch has no legal personality and keeps dependent accounting — entirely different models for liability and tax.
Does a parent-to-subsidiary loan need registration?
Medium- and long-term foreign loans must be registered with the State Bank of Vietnam under foreign-exchange rules, and interest must satisfy arm’s-length principles under the related-party transaction rules (Decree 255/2026/ND-CP). An intra-group loan is not legally “free”.
Should I put an intermediate holding company between the parent and the Vietnamese subsidiary?
It depends on the goal: if the aim is optimizing tax on dividend flows and restructuring flexibility, an intermediary holding in a jurisdiction with a good tax treaty with Vietnam may be worth it — but verify the double-tax treaty genuinely exists and is in force. With a single Vietnamese subsidiary and no regional expansion plans, direct ownership is usually leaner and cheaper.
Contact us
FLAT Law Firm advises foreign investors on investment structuring, IRC/ERC procedures, ownership design and compliance in Vietnam. Contact us for advice on your specific case.
For reference only; not a substitute for legal advice on your specific case.
This article is pending review by the FLAW AI Legal Council.
