Short answer
A branch is not a legal entity, keeps dependent accounts, and the parent bears unlimited liability; it may only operate in service sectors and requires a parent trader operating for at least 5 years. A subsidiary is an independent legal entity in Vietnam with limited liability, eligible for project-based investment incentives. The choice depends on acceptable risk, sector, and long-term strategy.
Legal bases
- Law on Commerce 2005 No. 36/2005/QH11 (in force; consolidated document 113/VBHN-VPQH dated 28/8/2025).
- Decree 07/2016/ND-CP (effective 10/3/2016, in force): Article 8 (branch conditions), Chapter III (operations, rights, obligations); branch establishment license valid 5 years.
- Law on Investment 2025 No. 143/2025/QH15 (effective 01/3/2026): Articles 19, 20 — a subsidiary is a foreign-invested economic organization.
- Law on Enterprises 59/2020/QH14 (amended by Law 76/2025/QH15): a subsidiary is an independent legal entity.
Comprehensive comparison
| Criterion | Branch (Decree 07/2016) | Subsidiary (Enterprise Law + Investment Law 2025) |
|---|---|---|
| Legal status | Not a legal entity; dependent accounting under the parent | Independent legal entity in Vietnam |
| Establishment conditions | Foreign trader operating for at least 5 years; 5-year license (renewable); one trader may not open more than one same-named branch per province/city | IRC + enterprise registration; no parent seniority required |
| Scope of operations | Service provision within the parent trader’s lines, consistent with Vietnam’s market-opening commitments; may sign contracts and issue invoices | Any permitted lines under the IRC/enterprise registration certificate |
| Liability | Parent bears unlimited liability for branch obligations | Limited to charter capital |
| Tax | Declares and pays tax in Vietnam on Vietnam-sourced income | Full CIT; may repatriate profits after fulfilling fiscal obligations (Article 11, Law on Investment 2025) |
| Investment incentives | Not an “investment project”, so no incentives under the Investment Law | Incentives per project (sector, location, scale) |
| Personnel | Branch head; foreign labor under labor law | Legal representative (must include a Vietnam resident) |
| Termination | License revocation/termination; parent jointly liable | Dissolution under the Law on Enterprises; independent liquidation |
Which to choose?
- Choose a branch when: operating in services; wanting tight brand linkage with the parent; no need for independent fundraising; accepting the parent’s joint liability; the parent has operated for over 5 years.
- Choose a subsidiary when: manufacturing or long-term business; needing to cap risk at contributed capital; seeking investment incentives; needing independent fundraising, transfers, or expansion; the parent is under 5 years old.
Key notes
- A branch may only operate in service sectors under Decree 07/2016 — not for manufacturing projects.
- Branches still have tax obligations in Vietnam (there is no “tax-free branch”).
- Do not confuse the 5-year condition (branch) with the 1-year condition (representative office).
Prepared by the FLAW AI Legal Council. This article is pending QA review by the Council and owner approval before publication.
