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Does a Vietnam EOR Create a Permanent Establishment?

By Nguyễn Quốc Trung — Deputy General Director · Updated

Hiring Vietnamese staff through an EOR that is an independent Vietnamese legal entity does not, in itself, usually create a permanent establishment (PE) for the foreign company. The reason is that the party named as the employer — the one that carries the labour, insurance and tax obligations in Vietnam — is the EOR entity itself, not the foreign parent company. But the conclusion is not absolute: a PE can still arise depending on what the workers actually do and for whom, under the Law on Corporate Income Tax No. 67/2025/QH15 (Article 2(3), in force from 1 October 2025) and Circular 95/2026/TT-BTC guiding double taxation agreements (Article 14(2), in force from 1 July 2026).

This article is written for foreign companies weighing up whether to hire staff in Vietnam through an EOR, and for their tax and legal teams. It reflects the texts in force up to September 2026 and sets out the cases in which an EOR arrangement can still give rise to a PE; this is general legal information, not a substitute for tax advice on a specific situation.

How is a permanent establishment (PE) defined in Vietnam?

A permanent establishment in Vietnam has two definitions that must be kept apart. The domestic-law layer sits in Article 2(3) of the 2025 CIT Law (No. 67/2025/QH15): a permanent establishment is a production or business establishment through which a foreign enterprise carries out part or all of its activities in Vietnam, grouped into six categories a to e, in which the service-supplying establishment carries no day threshold. The second layer comes from the double taxation agreement — Circular 95/2026/TT-BTC, Article 14(2) — which applies only to enterprises resident in a country that has signed an agreement with Vietnam, and is narrower: there must be a fixed place of business, or the supply of services for more than 183 days in any 12 months, or a dependent agent.

Definition layerLegal basisTime thresholdApplies to
Domestic law2025 CIT Law (67/2025/QH15), Article 2(3)No day threshold for a service-supplying establishmentEvery foreign enterprise
Tax treaty (DTA)Circular 95/2026/TT-BTC, Article 14(2)A service establishment must exceed 183 days in any 12 monthsOnly enterprises resident in a country that has signed an agreement with Vietnam

Domestic law lists six categories of permanent establishment:

The point that matters for the EOR model is point (c), which reads in full: "A service-supplying establishment, including consultancy services, provided through employees or through other organisations or individuals." Because domestic law sets no day threshold for a service establishment, it is wrong for many sources to apply a hard 183-day mark to every case — 183 days is only the treaty rule. The 2025 CIT Law took effect on 1 October 2025 and replaced the 2008 CIT Law, so the current basis is the 2025 version.

Does hiring Vietnamese staff through an EOR create a PE for the foreign company?

Hiring Vietnamese staff through an EOR that is a Vietnamese legal entity usually does not by itself create a permanent establishment for the foreign company, because the EOR entity — not the parent company — is the party that signs the employment contract, pays the insurance and files the tax, so the workers belong to the EOR entity rather than to an office or representative of the parent in Vietnam. The tax treaty states plainly that one company controlling or being controlled by another "shall not of itself make either company a permanent establishment of the other" (Article 14(2) of Circular 95/2026/TT-BTC). Even so, the conclusion is not absolute and depends on what the workers actually do.

Two things must be told apart. Having no permanent establishment does not mean having no tax obligation: under Article 2(2) of the 2025 CIT Law, a foreign enterprise without a permanent establishment in Vietnam still pays tax on taxable income arising in Vietnam. In other words, the PE question decides how tax is charged and the scope of income taxed, not whether a tax obligation exists at all. If you are not yet clear on how the EOR model works, see what an EOR is and how it works in Vietnam.

When can an employee's activity in Vietnam still create a PE even with an EOR?

An EOR arrangement can still give rise to a permanent establishment for the parent company in three main groups of situation, whoever is named on the employment contract, because the dividing line is what the worker actually does rather than the EOR label. Those three groups are:

On the other side, the treaty lists activities that do not create a permanent establishment, such as use solely for storage or display of goods, or solely to carry on preparatory or auxiliary activities (Article 14(2)(c) of Circular 95/2026/TT-BTC). Because the line depends on the real situation, a foreign company should review its specific model with a tax adviser before drawing a conclusion.

Does an employee with authority to sign contracts for the parent create a dependent agent?

It can. Both domestic law and the treaty treat a person who regularly negotiates and signs contracts in the name of a foreign enterprise as a sign of a permanent establishment through a representative or dependent agent. Under Article 14(2) of Circular 95/2026/TT-BTC, an enterprise that has in Vietnam an agent devoting all or most of its activity to that enterprise (a dependent agent), or a person with "authority to habitually negotiate and conclude contracts in the name of that enterprise", is treated as having a permanent establishment. Domestic law says the same at Article 2(3)(đ) of the 2025 CIT Law.

For the EOR model, the operational point is this: if a worker only performs internal professional work for the foreign company and is not given power to sign or bind contracts in the name of the parent, that activity does not fall into the "representative with signing authority" branch. This is something to design into the scope of work stated in the contract, not a given that holds in every case, so each position still needs to be reviewed against what actually happens.

How does an EOR differ from setting up your own entity on PE risk and setup time?

The core difference is who is present in Vietnam. When you set up your own entity — a subsidiary or a wholly (100%) foreign-owned company — that entity is itself a tax resident in Vietnam and pays corporate income tax in full; it is a taxable presence you deliberately create. With an EOR, an existing Vietnamese legal entity is named as the employer, so the model does not by itself create a fixed presence for the parent company, and staff start work in 5 to 7 working days rather than the 2 to 6 months it takes to set up an entity.

Circular 95/2026/TT-BTC also notes that the relationship of ownership or control between the foreign parent and the Vietnamese entity does not by itself create a permanent establishment for either side; the parent is treated as having a permanent establishment through that joint-venture or 100% foreign-owned enterprise only where one of the three conditions in point (d) of Article 14(2) is met — that entity habitually signs contracts in the name of the parent, habitually acts as a delivery agent for the parent, or the parent has the right to dispose of the entity's facilities and equipment on other than arm's-length terms. Comparing the cost of the two options is outside the scope of this article — see the fee structure and the items a company must budget for on the EOR services in Vietnam page.

Who is liable for PIT and insurance when hiring Vietnamese staff through an EOR?

For a Vietnamese worker hired through an EOR run by a Vietnamese legal entity, that entity is the employer on record, so the EOR entity withholds, declares and finalises personal income tax and pays social insurance, health insurance, unemployment insurance and occupational-accident and occupational-disease insurance on the salary used as the contribution base. The foreign company does not have to register as an employer, register for insurance or file personal income tax in Vietnam itself.

This is very easily mixed up with the PE question, so the two subjects and the two kinds of tax must be kept apart. The personal income tax and insurance above are the obligation of each individual Vietnamese worker, handled by the EOR entity; the permanent establishment and corporate income tax in the sections above are the parent company's story. If you are weighing the two service models, see how EOR and PEO differ.

How does the double taxation agreement affect PE risk?

A double taxation agreement applies only to an enterprise that is a resident of a country that has signed an agreement with Vietnam, and it generally narrows the scope of a permanent establishment compared with domestic law: there must be a fixed place of business, or the supply of services for more than 183 days in any 12 months, or a dependent agent or a representative with authority. For an enterprise in a country with no agreement with Vietnam, only the domestic definition applies — which is wider, because a service establishment carries no day threshold.

One frequent confusion to correct: the 183-day treaty threshold is used to establish a company's service permanent establishment, which concerns corporate income tax, and is entirely different from the 183-day mark used to decide whether an individual is a tax resident for personal income tax. The two marks share the same number but concern different subjects and different taxes. The time threshold for a permanent establishment can differ from one bilateral agreement to another, so the applicable agreement must be checked rather than relying on a single common figure. How an individual tax residence is determined is covered in PEO services in Vietnam.

How does Nhan Kiet act as the legal employer when you use an EOR?

Nhan Kiet — Nhan Kiet Manpower Supply Company Limited, tax code 0308022768 — is the Vietnamese legal entity named as the employer on the employment contract with the Vietnamese worker, so it is Nhan Kiet that bears the labour relationship in Vietnam, not your parent company abroad. Because Vietnam has no dedicated law for an "employer of record", Nhan Kiet runs EOR through two statutory frameworks and settles which one applies before signing:

Because a Vietnamese legal entity is named as the employer and bears the labour relationship in Vietnam, the workers belong to Nhan Kiet rather than to an office or representative of the parent — the core PE argument set out in the sections above, though the final conclusion still depends on the actual work. Nhan Kiet is the entity that holds the licence and does not sub-contract this part out. To understand the line between labour sub-leasing and labour supply, see how labour outsourcing and labour dispatch differ; to run proper due diligence before choosing a provider, see how to choose an Employer of Record in Vietnam.

Sources

This article summarises the rules for orientation; specific situations need individual tax advice.

Contact us

Foreign companies that need to assess permanent establishment risk when hiring staff in Vietnam through an EOR can contact:

Need advice for your own headcount?
Call +84 908 636 108 or see labour compliance, payroll outsourcing, EOR Vietnam.

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