Branches and Business Locations of Vietnamese Local Companies
NEXORA LAWFIRM has supported numerous procedures for establishing, amending, and closing branches and business locations across Vietnam. Our Vietnamese attorneys, well versed in both the practical and legal aspects of these structures, clarify the legal differences between branches and business locations, their establishment requirements, ongoing management obligations, and tax implications, and help clients choose the optimal structure for their business strategy. This article organizes the practical points, benefits, constraints, and things to watch for when setting up such structures.
After establishing a local entity in Vietnam, if the company wishes to conduct business activities (using a physical address) at a location other than its head office, it must register a branch or a business location for that entity. In other words, a company can headquarter itself in Hanoi and, by registering a branch or business location (including a warehouse) in another province — such as Da Nang or Ho Chi Minh City — expand its operations there. This article explains the difference between a branch and a business location, and the criteria for choosing between them.
01 - The Concepts of "Branch" and "Business Location"
A "branch" is a dependent unit of a company that performs some or all of the company's functions, including acting as its agent under a delegation of authority (Article 44(1) of the Enterprise Law).
A "business location" is a dependent unit of a company established at a specific place to carry out particular business activities, and may only operate for the limited purposes tied to the company's main line of business (Article 44(3)). A business location can be registered in a province other than that of the head office.
02 - Comparing Branches and Business Locations
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Comparison of Branches and Business Locations
Category
Branch
Business Location
Business Activities
Can carry out all business activities of the company (head office)
Can carry out only certain business activities
Seal and Certificate
Has its own seal and its own certificate
No seal; does have its own certificate
Naming Rule
Uses company name + "Branch" + location
Uses company name + "Business Location"
Contracts and Red Invoices
Can contract in the branch's own name; can issue red invoices
Cannot transact in its own name; cannot issue red invoices
Tax Code
Has its own tax code (13-digit number)
Files and pays tax under this own tax code.
No separate tax code
Tax Treatment Form
Can choose to be treated as either an independent branch or a dependent branch
Dependent
Tax Obligations
Business license tax
VAT
Branch corporate income tax
Personal income tax
Business license tax only
Establishment/Amendment Procedure
More complex, but retains full functionality
If the address changes, tax matters must be settled accordingly.
Simple procedure, but limited to activity within the registered area
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Selection Criteria
03 - About Branches
Branches fall into two categories: (i) independent branches and (ii) dependent branches. The differences between them are as follows.
Item
Independent Branch
Dependent Branch
Legal Personality
Does not have legal personality, but can operate its business and carry out various transactions as its own accounting unit
Does not have legal personality and, being subordinate to the head office, has limited independence.
Financial Reporting
Prepares its own financial statements and closes its own accounts
Reports revenue and expense data to the head office, which consolidates and closes the accounts
Tax Filing
Files its own tax returns with the tax office where the branch is located
Files tax returns with the tax office where the head office is located (※some tax obligations are handled at the branch's location, where this differs from the head office's province)
Seal
Has its own seal and can execute its own contracts
Either uses the parent company's seal or has its own seal — both options exist.
In most cases, it is not delegated authority by the head office to execute contracts.
Bank Account
Must open its own bank account
Not mandatory, though opening one is sometimes recommended for convenience
Management Autonomy
High degree of independence
Must follow the head office's instructions
Accounting System
Has an independent accounting department and manages its own books and supporting documents
Incorporated into the head office's accounting
Tax Payment
Independently pays corporate income tax, VAT, personal income tax, etc.
Pays only certain taxes directly; the rest is paid by the head office on a consolidated basis
※See Note ①
Cost
Higher operating cost (in terms of accounting/tax compliance)
Lower operating cost (in terms of accounting/tax compliance)
Ease of Management
Management is more complex and requires independence
Easier for the head office to manage centrally
Advantages
High financial transparency; the branch's profit or loss can be tracked independently
Simple procedures and easy operation
Disadvantages
Heavier accounting and tax reporting burden
Lower independence, making it difficult to evaluate the branch's performance in detail
Note ①: For a dependent branch in the same province/city as the head office: the head office prepares the year-end financial statements and handles quarterly and annual tax filings, paying tax to the tax office where the head office is located.
For a dependent branch located in a different province/city: it has its own seal and must pay business license tax, VAT, and personal income tax at its own location. Corporate income tax and the year-end financial statement closing are filed and paid by the head office, at the tax office where the head office is located.
04 - Legal Issues Concerning Branches
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The Conflict Between the Civil Code (2015) and the Enterprise Law (2020) Regarding the Scope of a Branch's Activities
Under the Civil Code (2015, Article 84(2)):
· A company's branch may perform all or part of the company's functions.
· However, a branch cannot act as the company's agent. The reasoning is as follows:
o Only individuals or legal entities may enter into contracts in their own name.
o A legal entity may only delegate agency authority to another individual or legal entity — not to a branch.
Under the Enterprise Law (2020, Article 44(1)):
· A branch may perform all or part of the functions of the company (head office), including acting under a delegation of agency authority.
4‐2
Interpreting the Civil Code (2015) and Enterprise Law (2020) Provisions on the Scope of a Branch's Activities
Two competing interpretations arise regarding the provisions above:
Interpretation 1: A branch can act as an agent of the company (head office).
Interpretation 2: A branch performs the company's functions, but acts in its own name and capacity, without needing specific authorization from the head office for each act. The branch's acts (or omissions) are deemed to be the acts (or omissions) of the head office.
Of the two, Interpretation 2 is considered the more reasonable, for the following reasons.
① Reasons for applying the Enterprise Law preferentially
· The Enterprise Law sits below the Civil Code in the hierarchy of legislation and specifically governs corporate activities. Because it was enacted after the Civil Code, its specific provisions take precedence.
· Under the Enterprise Law, a branch may act in its own name and may receive delegated authority from the head office or from third parties.
② Implied authorization by the head office
· The moment the head office establishes a branch and allows it to perform certain functions, the head office is considered to have implicitly authorized treating the branch's acts as its own. Accordingly, no specific delegation is required for each individual act.
③ Article 84 of the Civil Code
· Article 84 of the Civil Code provides that "the legal entity holds the rights and obligations arising from transactions established and carried out by its branch."
4‐3
Practical Impact and Solutions
In practice, it is not uncommon for a parent company to deny liability after a branch fails to perform its obligations under a contract, arguing that "the branch was never delegated that authority."
Adopting Interpretation 2 protects the rights of the counterparty that contracted with the branch.
This is also necessary to ensure stability in transactions conducted with branches.
The conflict between the Civil Code and the Enterprise Law regarding the scope of a branch's activities has given rise to various interpretations. However, giving priority to the Enterprise Law and adopting Interpretation 2 is reasonable both legally and practically, and is appropriate for protecting the rights of the parties concerned. When dealing with a branch, it is also important to clearly define the terms of the contract and to fully confirm each party's scope of responsibility — particularly with respect to authority to execute contracts.