Branch or Subsidiary in Vietnam: Which Should You Choose?

When a group wants to do real business in Vietnam, a question regional CFOs often ask is: open a branch of a foreign trader or set up a subsidiary? Both models can record revenue, but they differ in legal liability, permitted business scope and how they account with the parent company. This article compares them against specific criteria, with practical scenarios, prepared by the FDI accounting team at ACCA Consulting Vietnam.

1. The core difference: independent legal entity or dependent unit

A subsidiary is a Vietnamese legal entity with its own charter capital, seal and assets, and it is liable within the limit of its own capital. The parent company's risk is limited to the capital it has contributed.

A branch of a foreign trader (chi nhánh thương nhân nước ngoài) is a dependent unit. It has no independent legal personality; obligations arising in Vietnam ultimately rest with the parent company. In return, the branch is closely tied to the parent company's brand and track record, which some large customers and specialized projects value highly.

2. Comparison table: foreign trader's branch vs. subsidiary

3. Tax and accounting: points for CFOs

For a subsidiary, the tax picture is fairly clear: the standard corporate income tax (CIT/TNDN) rate is 20%; under the 2025 CIT Law (67/2025/QH15), companies with total annual revenue of no more than VND 3 billion apply 15%, and those above VND 3 billion up to VND 50 billion apply 17%. A subsidiary makes provisional CIT payments quarterly, due on the 30th of the first month of the following quarter, and the four quarterly payments combined must be at least 80% of the tax payable under the annual finalization.

For a branch, determining revenue, costs allocated from the parent company, group management fees and the tax calculation is more complex. Costs the parent company allocates to the branch need a clear basis and supporting documents before they can be considered deductible. Transactions between a subsidiary and its parent, meanwhile, fall within the scope of related-party transactions and require appropriate transfer pricing documentation.

Under both models, purchase invoices of VND 5 million or more (VAT inclusive) must be paid by non-cash means for input value-added tax (VAT/GTGT) to be deductible, and documents must be kept for at least 10 years.

4. When to choose each model

Consider a branch when

• The business line allows branches to operate and customers require contracts with the foreign trader itself.
• Activities in Vietnam are a short-term extension of a contract or project undertaken by the parent company.
• The parent company accepts direct liability for obligations arising in Vietnam.

Choose a subsidiary when

• You have a long-term business plan with staff, assets and customers in Vietnam.
• You want to separate legal and tax risks from the parent company's balance sheet.
• You need project-based investment incentives or want to bring in additional capital or partners in Vietnam.

5. Ongoing accounting costs after licensing

A subsidiary must have its annual financial statements audited by an independent audit firm and file its financial statements and CIT finalization no later than the last day of the third month after the financial year-end. This is a fixed cost to include in the first-year budget. At ACCA, monthly accounting fees for an FDI entity start at VND 640,000 (≈ USD 25, approximate, at a reference rate of VND 25,500/USD) with no documents yet, VND 1,280,000 for 1–15 documents and VND 1,920,000 for 16–30 documents (fewer than 5 employees).

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