A Chinese company seeking a commercial presence in Vietnam usually faces two options: opening a branch or establishing a subsidiary. The two models differ fundamentally in legal personality, scope of operations, and liability — choosing wrong can leave the company unable to do what it planned, or carrying more liability than expected.
What is a branch under Vietnamese law?
- No legal personality — a branch is a dependent unit of the parent company (Article 84, Civil Code 2015).
- Limited scope: a foreign trader’s branch may only supply services within its licensed scope and may not manufacture (Article 31, Decree 07/2016/ND-CP).
- Parent bears full liability: the Chinese parent is liable for all of the branch’s activities — unlimited, not capped at contributed capital.
- Term: the branch establishment license lasts 5 years, renewable.
- Condition: the parent must have operated for at least 5 years (Article 7, Decree 07/2016/ND-CP).
- Main procedure: apply for a branch establishment license at the Department of Industry and Trade.
Do not confuse a branch with a representative office
A representative office is also a dependent unit, but under Articles 17–19 of the Commercial Law 2005 it may not conduct profit-making activities or enter into contracts — it serves only liaison and trade promotion functions. A branch may do business (supply services, sign contracts); a representative office may not.
What is a subsidiary?
- Independent legal personality in Vietnam — a Vietnamese enterprise with foreign investment, established under Investment Law 143/2025/QH15 and the Enterprise Law.
- Broad scope: may operate in all sectors (except prohibited and conditional ones), including manufacturing.
- Limited liability: the parent is liable only up to its capital contribution to the subsidiary.
- Main procedures: obtain an Investment Registration Certificate (IRC) under Articles 36–38 of Investment Law 143/2025, then enterprise registration under Decree 168/2025/ND-CP.
- Term: not capped like a branch license.
Branch vs subsidiary comparison
| Criterion | Branch (Decree 07/2016) | Subsidiary (FDI) |
|---|---|---|
| Legal personality | None — dependent unit (Art. 84, Civil Code) | Yes — independent Vietnamese legal entity |
| Scope of operations | Services only (Article 31) | All sectors (except prohibited/conditional), including manufacturing |
| Term | 5 years, renewable | Unlimited |
| Liability | Parent bears full, unlimited liability | Limited to contributed capital |
| Conditions | Parent operating for 5+ years | Investment project under Law 143/2025 |
| Main procedure | Branch establishment license (Dept. of Industry and Trade) | IRC + Enterprise Registration Certificate |
| Accounting | Dependent on parent | Independent |
Which model, when?
- Want to manufacture in Vietnam → set up a subsidiary. Branches are barred from manufacturing; only a subsidiary can open a factory.
- Services only (consulting, trading, technical services) → consider a branch. Faster, simpler, lower cost.
- Want to ring-fence the parent’s liability → set up a subsidiary. With a branch, all Vietnamese legal exposure flows back to the Chinese parent.
- Parent younger than 5 years → ineligible for a branch; must choose a subsidiary or a representative office.
FAQ
Q: Can a branch sign contracts with Vietnamese customers?
A: Yes — a branch may enter into contracts within its licensed service scope. This is the key difference from a representative office.
Q: Is a branch taxable in Vietnam?
A: Yes. Despite dependent accounting, a branch is taxable in Vietnam on income arising from its activities.
Q: Can the Chinese parent later convert the branch into a subsidiary?
A: There is no direct conversion procedure. In practice, you establish a new subsidiary and terminate the branch — plan for tax and outstanding obligations when closing the branch.
Legal sources
- Decree 07/2016/ND-CP — establishment of branches of foreign traders in Vietnam — thuvienphapluat.vn
- Commercial Law 2005, Articles 16–19 — thuvienphapluat.vn
- Investment Law 143/2025/QH15, Articles 21, 36–38 — thuvienphapluat.vn
- Decree 168/2025/ND-CP — enterprise registration — thuvienphapluat.vn
- Civil Code 2015, Article 84 — thuvienphapluat.vn
This article provides general legal information and is not legal advice for any specific case. Content has been reviewed by the AI Legal Council before publication, not by a human lawyer.
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