Is the U.S.–Vietnam tax treaty in force?

No. The U.S. and Vietnam signed an income tax treaty on July 7, 2015, but as of November 2026 it still isn't in force, and Vietnam isn't on the IRS list of treaty countries. Vietnamese companies and individuals are taxed under U.S. domestic law and can't use a treaty to reduce withholding.

How much is withheld on dividends from a U.S. subsidiary to a Vietnamese parent?

30%. With no U.S.–Vietnam treaty in force, U.S.-source dividends paid to a Vietnamese company carry 30% withholding, reported by the U.S. company on Form 1042-S. A Chinese parent that meets the U.S.–China treaty requirements gets 10%; a Hong Kong or Singapore holding company also faces 30%.

Does assembling Chinese parts in Vietnam make furniture Vietnamese-origin?

Not necessarily. Origin depends on substantial transformation, and simple assembly or repacking may leave the goods Chinese-origin, paying China's tariff rates and possibly treated as antidumping evasion. CBP closely investigates furniture transshipment, so production and purchasing records need to show the work done in Vietnam.

Vietnamese Factory Selling to the U.S.: No Treaty

Q: Does a Vietnamese factory exporting furniture FOB owe U.S. income tax?

Generally not. Income from inventory a company produces is sourced where it's produced, so a factory that manufactures in Vietnam, delivers at a Vietnamese port and has no U.S. office or fixed place of business has foreign-source income that the U.S. doesn't tax. The retailer doesn't withhold or issue a 1099; the factory provides a W-8BEN-E.

The U.S. and Vietnam signed their first income tax treaty on July 7, 2015, but as of November 2026 it still isn't in force, and Vietnam isn't on the IRS list of treaty countries. For a Vietnamese furniture factory that sells FOB and has no U.S. place of business, that matters little. Once it adds a U.S. warehouse, U.S. sales staff or a U.S. subsidiary, there's no treaty rule that storage and delivery facilities aren't a permanent establishment, and dividends, interest and royalties a U.S. company pays to a Vietnamese company all carry 30% withholding. Many Vietnamese factories have Chinese owners, and which company owns the U.S. entity makes a real difference.

What's missing without a treaty?

A tax treaty limits how far the U.S. can tax a foreign business and lowers withholding rates. Without one, a Vietnamese business is taxed under U.S. domestic law alone.

No permanent establishment threshold. Under a treaty, a foreign company's business profits are taxed in the U.S. only if it has a permanent establishment there, and facilities used solely to store, display or deliver goods don't count (as in Article 5 of the U.S.–China treaty). Without a treaty, a Vietnamese company engaged in a U.S. trade or business pays the 21% federal corporate tax on its effectively connected income (ECI) and may owe the 30% branch profits tax.

No reduced withholding. U.S.-source dividends, interest and royalties paid to foreign persons carry 30% withholding by default. A Chinese company with a W-8BEN-E can claim 10% under the U.S.–China treaty; a Vietnamese company has no treaty to claim, so it's 30%.

Does a Vietnamese factory selling FOB need to worry?

Generally not. Under §863(b), income from selling inventory the taxpayer produces is sourced where it's produced. A factory that manufactures in Vietnam, delivers at a Vietnamese port and has no U.S. office or fixed place of business has foreign-source income, with or without a treaty, and the U.S. doesn't tax it. The U.S. retailer is paying for goods, not income that calls for withholding; the factory provides a W-8BEN-E, and the retailer generally doesn't withhold or issue a 1099.

The situations to watch are renting a U.S. warehouse and shipping from U.S. stock, hiring U.S. sales staff or stationing people in the U.S., and having someone in the U.S. negotiate prices or sign contracts for the factory. A Chinese factory could then look to the treaty; a Vietnamese factory has only domestic law, which asks whether its U.S. activity is considerable, continuous and regular.

If you set up a U.S. subsidiary, who should own it?

To sell DDP or run a U.S. warehouse, the usual step is a U.S. C corporation that acts as importer. It pays the 21% federal corporate tax and files Form 1120 with Form 5472 each year. When profit goes out, the owner determines the withholding rate:

Owned directly by the Vietnamese factory: 30% on dividends.

Owned directly by a Chinese parent: 10% on dividends if the treaty requirements are met.

Owned by a Hong Kong or Singapore company: the U.S. has no comprehensive income tax treaty with either, so it's 30% as well.

Example (hypothetical numbers, to show the method): a U.S. subsidiary earns $300,000 of taxable profit, pays $63,000 of federal corporate tax at 21%, and distributes the remaining $237,000. Owned by the Vietnamese company, withholding at 30% is $71,100; owned by the Chinese parent, withholding at 10% is $23,700. That's a $47,400 difference each year.

This is only the U.S. withholding. How China or Vietnam taxes the dividend, and whether it can be credited, is a separate question. Treaty rates require beneficial ownership and other conditions, and arrangements without business substance made only to get treaty benefits don't work. Ownership also affects where the money comes from and how intercompany payments flow, so plan it before you form the U.S. company.

Which payments from the U.S. company to the Vietnamese factory need withholding?

Payments for goods. When the U.S. subsidiary buys furniture from the Vietnamese factory, it's paying for goods, with no withholding. But the price must be arm's length (§482), the tax cost of inventory can't exceed the declared customs value (§1059A), and the purchases go on Form 5472.

Interest. If the Vietnamese parent lends to the U.S. subsidiary, the interest is U.S.-source. A 10% or greater shareholder can't use the portfolio interest exemption, so without a treaty it's 30% withholding, reported on Form 1042-S.

Royalties and design fees. If the U.S. company pays royalties to use the Vietnamese company's designs or trademarks, the portion for use in the U.S. is U.S.-source and carries 30% withholding. Design services performed in Vietnam by a Vietnamese team are foreign-source and generally not subject to withholding.

Tariffs: Vietnamese origin has to hold up

As of November 2026, Vietnam-origin furniture faces 12.5% under the Section 301 forced-labor tariffs in effect since July 24, 2026. Most China-origin furniture pays the original 25% Section 301 tariff on China, with whether the new 12.5% stacks on top per CBP guidance, and wooden bedroom furniture from China also faces antidumping duties. Upholstered furniture with wooden frames pays 25% under Section 232 regardless of origin. Check the latest CBP and USTR notices.

Origin turns on substantial transformation: repacking in Vietnam or simple assembly of Chinese parts may leave the origin Chinese. CBP actively investigates furniture transshipment and antidumping evasion, so purchasing records, production records and material sources need to stand up to review.

How we can help

For the full picture of supplying U.S. furniture retailers, including the Rooms To Go model, product compliance, FOB vs. DDP, entity choice and platform comparisons, see our Rooms To Go supplier guide; for the U.S. subsidiary filing list, see the U.S. subsidiary guide. YCL compares the withholding cost of different owners before you form a U.S. company, then handles Form 1120 with 5472, Forms 1042-S, intercompany pricing and bookkeeping. Taxes in China and Vietnam are for local advisers, and results depend on your facts. Start with a 15-minute free consultation, or reach us on WeChat at YCLUSA.