Foreign-trader dependency test
Vietnam Company Formation vs a Branch Office
A branch can trade only within a licensed extension of its foreign parent; a company creates a separate Vietnamese enterprise platform with its own capital and governance.
Test branch eligibility before comparing convenience. A foreign-trader branch is a dependent commercial presence whose permitted activities, liability and lifespan remain tied to the foreign parent. It is not broadly available for every industry. A Vietnamese company is usually the more adaptable route when the business needs local ownership options, ring-fenced governance, new activities, investor entry or an operating life independent of one foreign trader.
Key takeaways
- Prove treaty or sector access and the foreign trader’s operating history before treating a branch as an available option.
- A branch can conduct licensed commercial activity, but the foreign parent remains directly connected to its rights and obligations.
- A subsidiary company has its own charter, capital, members or shareholders and corporate approvals under Vietnamese law.
- Both routes create tax, accounting, employment and licensing work; the legal owner of the business and records differs.
- Choose the branch only if parent dependency remains an advantage after testing liability, scope, funding, change and exit.
Pass the branch eligibility gate
Under the general Decree 07 framework, a branch applicant must be a qualifying foreign trader established or recognised under applicable treaty and legal conditions. It normally must have operated for at least five years. If the parent’s home registration is time-limited, enough validity must remain to support the Vietnamese licence.
The intended branch activity must fit Vietnam’s market-opening commitments and the foreign trader’s existing business scope. Some sectors follow specialist legislation. This makes the branch question narrower than “can a foreign company do business in Vietnam?” The applicant must prove that this foreign trader may conduct this activity through this dependent form.
Build an eligibility evidence file before obtaining legalised documents. Match the parent’s registry record, audited financial evidence, charter or equivalent instrument, activity history and branch-head appointment to the precise condition each item proves. Record expiry, translation and authentication status. If a document cannot show the relevant five-year period or present authority, ordering more copies of it will not cure the gap.
- Match the exact activity to the applicable commitment or specialist rule.
- Prove the parent’s current existence, five-year operating history and remaining duration.
- Confirm the parent’s registered scope and the proposed branch head’s eligibility.
- Verify the competent provincial authority and current form set before filing.
If any eligibility element is uncertain, compare the company route before spending on a branch dossier. Company formation has its own market-access analysis, but it does not rely on the same five-year parent-history gate.
Parent extension or subsidiary
A branch of a foreign trader is a dependent unit, not an independent Vietnamese legal person. Its contracts and conduct connect directly to the foreign trader, which remains responsible for the branch’s activities. That can simplify a global contracting identity, but it also gives the parent less structural separation from Vietnamese operational liabilities.
A Vietnamese subsidiary is a separate enterprise. Its members or shareholders contribute capital, approve governance and own their interests in the company. Limited liability still depends on lawful contribution and conduct, but the operating entity has its own rights, obligations, records and corporate lifecycle.
Ask who should bear a customer claim, employ the team, own local assets, obtain finance, admit a new investor and survive a parent reorganisation. Parent identity is an operating dependency in a branch, not merely a shareholder fact.
The branch head’s authority needs two layers of review: Vietnamese restrictions applicable to that role and a clear delegation from the foreign trader. Set monetary, contract, hiring and dispute thresholds, plus a method for parent approval. Customer-facing documents should identify whether the head signs for the branch or for the foreign trader and should align with the licence and internal power.
Compare operating scope
A licensed branch may conduct commercial activity within the permitted branch scope. It can enter relevant contracts, maintain premises, employ staff and operate accounts subject to law and the licence. Its activity cannot be treated as an unrestricted copy of everything the global group does; the parent’s business and Vietnam’s branch commitments constrain the perimeter.
A company defines its own registered activities and pursues them under foreign-investor market access and sector conditions. It can add investors, change its charter and structure local governance. Amendments and approvals may still be required, but the design starts with the Vietnamese enterprise rather than a mirror of one foreign trader.
The current consolidated administration of representative offices and branches places provincial authorities at the centre of branch licensing and lifecycle processing, as summarised by the Ministry of Industry and Trade’s 2026 consolidated licensing update . Confirm the current authority, specialist ministry input and forms for the proposed sector.
Funding, tax and records
A branch is funded and owned as part of the foreign trader rather than through a Vietnamese charter-capital structure. A company receives capital from members or shareholders under its enterprise and investment records. Both routes need a documented banking path, budget and authority matrix; the labels and evidence are different.
Commercial branch activity creates Vietnamese tax, accounting, invoicing, employment and reporting obligations. A company has comparable operating disciplines plus its corporate approvals, capital records and ownership reporting. Do not select a branch on the assumption that dependent legal status removes local financial compliance.
| Control point | Branch evidence | Company evidence | Failure signal |
|---|---|---|---|
| Funding | Parent funding record | Capital and finance records | Unexplained transfer |
| Authority | Parent delegation | Charter and resolutions | Signer exceeds power |
| Revenue | Branch books and invoices | Company books and invoices | Contract-record mismatch |
| Lifecycle | Licence and parent validity | Enterprise and investment status | Missed amendment or expiry |
Build the reporting calendar from actual transactions. Imported services, cross-border charges, employee payments, asset transfers and profit remittance can require different evidence. Dependent status does not make the branch financially invisible .
Before launch, map every recurring flow to the contracting party, invoice, bank account, ledger, tax treatment and approving person. Reconcile the branch books with parent intercompany records and document how shared costs are allocated. For a company, perform the same exercise through capital, loans and service arrangements. The structure changes the legal owner of the record; it does not remove the need for traceability.
Test continuity scenarios
Model changes that are plausible within five years. If the parent sells the business line, changes name, merges, loses a home-country registration, narrows its activities or reorganises regional ownership, identify what happens to the branch licence, contracts, employees and accounts. The branch cannot be evaluated only under today’s group chart.
For a company, test share transfers, new investment, capital changes, representative replacement and activity expansion. Those events can require registrations and approvals, but they occur through the company’s own governance and records. A company can often accommodate investor change without replacing the operating legal person.
Also model exit. Branch termination returns obligations to the parent and requires closure work across tax, employees, contracts, accounts, assets and the licence. Company exit may involve a share sale or enterprise dissolution. The preferable route is the one whose likely change events have an executable legal and operational path.
Run the separability test
Score the operating plan against five questions. A strong need for separation points toward a company; a deliberate need for direct parent continuity may support a branch, if eligible.
- Should Vietnam liabilities remain structurally separate from the foreign trader?
- Must local operations admit another investor or management rights holder?
- Will activities diverge from the parent’s current registered scope?
- Should contracts survive a sale or reorganisation of the foreign parent?
- Does the business need a locally capitalised platform with its own governance?
Where the company route wins, prepare the Vietnam company setup pathway around the intended activity, capital, investors and first operating transaction.
Then extend the setup plan through a post-registration tax and accounting build , because the entity decision is incomplete until invoices, books, filings and bank evidence match the operating model.
Choose a Vietnam company or branch office
Choose a branch only after proving that the sector and foreign trader qualify, the licensed activity covers the full operating model, and direct parent responsibility is acceptable. Confirm that parent changes, renewal and exit can be managed without undermining customers or employees.
Choose a company when the operation needs local separability, its own governance, investor flexibility, a broader development path or a lifecycle not tied to one foreign trader. Still test foreign-investor access and sector conditions before committing.
The decision is complete only when eligibility, liability, scope, funding and change scenarios all support the same route. A cheaper or shorter filing cannot cure a model that fails one of those five tests.
Frequently asked questions
Can every foreign company open a branch in Vietnam?
No. The foreign trader, operating history, activity and sector must meet the applicable Decree 07, treaty and specialist-law conditions.
Can a branch earn revenue?
A licensed branch may conduct commercial activity within its permitted scope, unlike a representative office. The precise activity, invoicing and sector permissions must be confirmed.
Does a branch protect the parent from liability?
A branch is a dependent unit, so the foreign trader remains responsible for its activities. A subsidiary provides a separate enterprise structure, subject to law and lawful conduct.
Is a branch simpler for tax and accounting?
Not necessarily. Commercial activity still creates local books, invoices, tax, payroll and reporting work. Compare the exact transactions and group reporting needs.
How long can a branch licence last?
Under the general framework it is capped at five years and cannot outlast a time-limited parent registration. Renewal and sector rules must be checked before reliance.
