How does permanent establishment risk work in Vietnam?

A PE in Vietnam creates several obligations for the foreign parent:

• Register with the General Department of Taxation (GDT) and obtain a tax code
• File Vietnamese corporate income tax (CIT) returns attributing profits to the Vietnamese PE
• Maintain Vietnamese accounting records to support the attribution analysis
• Pay CIT at 20% on attributable profits (the standard rate for most enterprises in 2026)

The GDT has discretion to estimate profit attribution where records are inadequate. In practice, this often produces a higher tax assessment than a carefully documented approach would. Getting the structure right at the start is significantly cheaper than resolving a GDT dispute later.

The OECD-based analysis the GDT applies requires three elements:

1. A place of business: premises, equipment, or facilities in Vietnam
2. That is fixed: located in a specific place with a degree of permanence over time
3. Through which the enterprise's business is wholly or partly carried on

Vietnam's GDT reads 'at the parent's disposal' more broadly than some other OECD-aligned jurisdictions. A shared co-working desk used consistently by one of your staff, or a hotel suite used systematically for client meetings, can qualify if the pattern is regular and business-related.

The preparatory or auxiliary carve-out

Some activities do not create a PE even when conducted through a fixed location. These are activities that are preparatory or auxiliary to the main business, such as storage, purchasing, or information gathering. Post-2017 OECD anti-fragmentation rules narrowed this carve-out. The GDT applies it restrictively, so do not assume that labelling an activity as 'marketing support' or 'business development' automatically avoids a fixed-place finding.

The post-2017 BEPS update to the OECD Model Tax Convention extended the dependent-agent test. Before 2017, you could argue 'our Vietnam person does not sign contracts; HQ signs.' Post-2017, a person who plays the principal role leading to contracts that are routinely entered without material modification triggers the test. Vietnam's treaties generally follow this updated position.

What principal role looks like in practice

• Pitching to Vietnamese prospects and leading commercial negotiations
• Setting pricing terms or material contract provisions that HQ approves without material change
• Using a job title such as 'Vietnam Country Manager', 'Head of Vietnam Sales', or 'Vietnam Director'
• Being introduced in customer-facing materials as the contact for the parent's Vietnam operations

The independent-agent carve-out

The PE test does not apply to agents acting in the ordinary course of their own independent business. A genuine local distributor operating on its own account is not a dependent agent. An EOR sits somewhere in between: the EOR (such as Teamed's partner entity in Vietnam) is independent commercially, but the employee's actual working relationship is with the foreign parent, not with the EOR's own operations. This is why EOR reduces but does not eliminate the dependent-agent risk for commercial roles.

An EOR arrangement helps in three ways:

1. The legal employer is a Vietnamese entity, so payroll, social insurance contributions, and employee-side taxes flow through a Vietnam-registered entity
2. The contract chain is 'parent to EOR to employee', not 'parent to employee directly', which gives some treaty-analysis room
3. EOR-employed staff do not hold formal authority to bind the parent as a director or officer of the parent entity

What EOR does not fix:

• If the employee functionally negotiates or promotes contracts for the parent in Vietnam, the dependent-agent test still triggers under the GDT's broad approach
• If the employee works from a fixed Vietnam location rented or resourced by the parent (not by the EOR), the fixed-place test still applies
• If customer-facing materials present the employee as part of the parent's Vietnam operations, or use language such as 'our Vietnam office' or 'our Vietnam team', the GDT reads that as PE evidence

EOR through Teamed's partner entity in Vietnam is a sound arrangement for engineering, product, design, support, marketing operations, and finance roles. It is not adequate protection for sales, business development, country management, or customer-success roles with commercial authority over Vietnamese accounts.

1. Sales hire with a quota selling to Vietnamese customers. Almost always triggers. The GDT is explicit that commercial promotion activity constitutes dependent-agent presence.
2. Vietnam office leased in the parent's name or presented as the parent's Vietnam address. Fixed-place trigger, even if the lease is short-term or shared with another party.
3. Country Manager, VP Vietnam, or Head of Vietnam title. The title is treated as strong evidence of dependent-agent status. The GDT does not require a formal power of attorney.
4. Customer success or account management for Vietnamese accounts with authority to renew, expand, or discount contracts. Increasingly treated as dependent-agent activity under the post-BEPS approach.
5. Marketing or events roles regularly hosting in-country meetings that present the parent's offerings to Vietnamese prospects. Blends fixed-place and dependent-agent triggers if the pattern is systematic.

Lower-risk patterns in our experience: engineers building product for the global business from Vietnam; designers contributing to global product; support staff handling tickets for a global customer base (not just Vietnamese accounts); finance or operations roles that serve internal functions. These roles carry low PE risk when properly structured with no Vietnamese customer-facing commercial authority.

Step 1: honest assessment

For each Vietnam hire, ask: does this person have customer-facing commercial authority in Vietnam? Do they operate from a fixed Vietnam location the parent has access to? How would the GDT characterise the role if they read the job description and the customer-facing materials? Most PE risk is foreseeable at the hiring-brief stage.

Step 2: tax memo

A short PE-risk memo from a Vietnam-qualified tax adviser gives you a defensible position. Fees vary by complexity and firm, but a focused memo is significantly cheaper than a GDT dispute. The memo does not bind the GDT, but it is evidence of reasonable care and it matters significantly to the penalty position if the risk does materialise.

Step 3a: structure to avoid

If the activities can be carried out without triggering PE, most operational, technical, and back-office roles can, structure the engagement accordingly. Use EOR through Teamed's partner entity in Vietnam, ensure the employee has no Vietnamese customer-facing commercial authority, and keep working arrangements consistent with an internal global function rather than a local commercial presence.

Step 3b: incorporate a Vietnamese entity

If the activities genuinely require a commercial presence in Vietnam, or cannot be reshaped to avoid PE, the right answer is your own Vietnamese legal entity. A representative office (limited to market research and promotion) or a foreign-invested company (full commercial activity) gives you explicit, controlled PE rather than accidental PE with uncertain attribution. The tax position becomes predictable.

1. Map every Vietnam hire

   For each role, ask whether the person has customer-facing commercial authority or a fixed Vietnam location at the parent's disposal. This takes about ten minutes per hire and surfaces the risk before it is built in.

2. Commission a PE-risk memo

   A Vietnam-qualified tax adviser can review the working arrangements and produce a short memo. This is your defensible position if the General Department of Taxation raises a query.

3. Structure to avoid or formalise

   Either remove the commercial trigger (no customer-facing authority, no parent-rented office) or incorporate a Vietnamese entity and make the PE explicit. Both paths are better than leaving the exposure unmanaged.

4. Keep working arrangements consistent

   Customer-facing materials, job titles, and internal communications should all reflect the actual structure. Materials that describe an employee as part of the parent's Vietnam operations are PE evidence regardless of the legal contract.

5. Review annually as headcount grows

   One remote engineer in Vietnam rarely triggers PE. A ten-person team with a Hanoi office and a sales lead with quota is a different position. Review the analysis each time the Vietnam team structure changes.

Real HR and legal experts handle your Vietnam hires, from the first offer letter through every social insurance filing and annual personal income tax settlement. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.

Most teams graduate from a single EOR hire to a multi-person Vietnam team. EOR works well until it isn't the right vehicle: the Crossover Calculator shows the month the model flips to entity. EOR payroll, contractor onboarding, and entity setup all live on one platform. Start from the Vietnam hiring overview; each guide here takes one layer of Vietnam employment law.

Key sources: General Department of Taxation of Vietnam, Ministry of Industry and Trade, and Ministry of Labour, Invalids and Social Affairs.