Representative Office vs Subsidiary in Vietnam: Which Setup Should You Choose?

One of the most common early mistakes foreign companies make in Vietnam is choosing the wrong legal presence.

Many companies register a Representative Office (RO) believing it is a “lighter” version of a company—only to discover later that it cannot legally conduct business. Others rush into a subsidiary before they are operationally ready, increasing compliance cost and risk.

This guide explains the difference between a Representative Office and a subsidiary in Vietnam, what each structure can and cannot do, and how to choose the right one for your market entry stage.

What Is a Representative Office (RO) in Vietnam?

A Representative Office (RO) is a non-commercial presence of a foreign company in Vietnam.

It is designed for market research and liaison activities only, not for revenue-generating operations.

What a Representative Office CAN Do

• Conduct market research
• Promote the parent company
• Liaise with partners and customers
• Monitor contracts signed overseas
• Employ a limited number of staff

What a Representative Office CANNOT Do

• Generate revenue
• Issue invoices
• Sign commercial contracts
• Import or sell goods
• Provide paid services

📌 An RO is not a legal business entity.

What Is a Subsidiary in Vietnam?

A subsidiary is a Vietnamese legal entity, usually structured as a wholly foreign-owned company.

It is a fully operational business that can engage in commercial activities.

What a Subsidiary CAN Do

• Sign contracts in Vietnam
• Issue invoices
• Generate revenue
• Hire staff directly
• Open bank accounts
• Apply for business licenses
• Import/export goods

📌 A subsidiary is required for any revenue-generating activity in Vietnam.

Key Differences: RO vs Subsidiary

Licensing & Setup Timeline

Representative Office

• Fewer documents
• Faster approval
• Typical timeline: 3–5 weeks
• License validity usually limited (renewals required)

Subsidiary

• Investment and enterprise registration required
• More documentation and approvals
• Typical timeline: 4–8 weeks
• Permanent operating structure

📌 ROs are easier to set up—but also much more limited.

Cost & Compliance Comparison

Representative Office

• Lower setup cost
• No corporate income tax
• Limited accounting obligations
• Annual reporting still required

Subsidiary

• Higher setup cost
• Full tax compliance (VAT, CIT, PIT)
• Mandatory accounting and audit
• Payroll and labor law obligations

📌 While ROs are cheaper initially, they cannot support growth.

Common Misuse of Representative Offices

Many foreign companies misuse ROs by:
❌ Using them to sign contracts
❌ Paying commissions through ROs
❌ Delivering services locally
❌ Acting as a de facto sales office

These actions expose the company to:

• Back taxes
• Fines and penalties
• Forced conversion to a subsidiary

📌 Authorities look at actual activities, not the license name.

When a Representative Office Makes Sense

An RO may be appropriate if you:
✔ Are conducting early-stage market research
✔ Need a local liaison presence
✔ Do not plan to generate revenue in Vietnam
✔ Want minimal compliance overhead
✔ Have contracts executed overseas

ROs are often used by large multinational companies for monitoring or sourcing purposes.

When a Subsidiary Is the Right Choice

A subsidiary is required if you:
✔ Sell products or services
✔ Sign contracts locally
✔ Hire operational teams
✔ Invoice customers in Vietnam
✔ Plan long-term expansion

📌 For most SMEs and growth companies, a subsidiary is the correct structure.

Alternative: Start Without Either (EOR Model)

If you want to:

• Hire staff
• Test the market
• Build sales or technical teams
• Avoid immediate entity setup

👉 An Employer of Record (EOR) may be a better first step.

Many companies follow this path:
EOR → Subsidiary → Expansion

This avoids RO limitations while delaying full incorporation.

Common Decision Mistakes

❌ Choosing RO to “save cost”
❌ Running commercial activities under RO
❌ Delaying subsidiary setup too long
❌ Ignoring compliance obligations of RO
❌ Assuming RO can be upgraded easily

📌 Converting an RO into a subsidiary often requires closing and re-applying, not upgrading.

How BusinessPartner.vn Helps You Choose the Right Structure

BusinessPartner.vn supports foreign companies with:

• Market entry structure assessment
• Representative Office setup
• Subsidiary incorporation
• Employer of Record hiring
• Compliance planning
• Phased entry strategies

👉 Talk to our Vietnam market entry advisors to select the right setup for your business goals.

Recommended Reading

How to Enter the Vietnam Market as a Foreign Company

Step-by-Step Guide to Company Incorporation in Vietnam

Foreign-Owned Company vs Joint Venture in Vietnam

Vietnam Market Entry & Company Setup Services