A Branch is a dependent unit of an enterprise that is responsible for performing all or a part of its functions, including profitable activities within the scope of registered business sectors.
Conditions to establish branches
A foreign trader is entitled to set up a branch in Vietnam once satisfying the following conditions:
- Having been incorporated in accordance with provisions of laws of countries or territories being parties to international treaties to which Vietnam is a signatory or being legally recognized by said countries or territories;
- At the time of establishment of a branch in Vietnam, the foreign trader must have operated for at least 5 years in the country or territory where it is established.
- Upon submitting the application dossier for establishment of the branch in Vietnam, the foreign trader’ Business Registration Certificate must remain valid for at least another year (provided that such Certificate is regulated to have a duration of operation in his/her country or territory).
- The operation contents of the branch must be consistent with Vietnam’s Commitments on opening markets stated in International Treaties to which Vietnam is a signatory as well as the foreign trader’s registered business sector(s).
In the event where a branch's operation contents conflict with Vietnam's commitments, or its foreign trader is not from countries that are parties of the International Treaties of which Vietnam is a member, the establishment of said branch must be approved by the Minister of relevant Ministries.
Heads of branches of foreign traders must meet the following conditions:
- A foreign national, who is appointed as the Branch Head, must apply for a work permit before working in Vietnam.
- A Branch Head must not concurrently hold the following positions:
- Head of Representative Office of another foreign trader;
- Head of Representative Office of the same foreign trader;
- Legal representative of an economic organization established under the laws of Vietnam.
Branches operating in conditional sectors prescribed by law must meet the following conditions depending on their operation contents:
- Having a Business Registration Certificate and/or Certificate of eligibility for business.
For example: Foreign traders wishing to set up a branch in Vietnam that operates in accounting must obtain a Certificate of eligibility for accounting services
- Having a practice license or occupational insurance certificate.
For example: For a branch engaging in the business of securities and fund management services to be established, its Director and staff members, who undertake the profession of securities business, must possess securities practice certificates.
- Satisfying requirements on legal capital or other requirements as prescribed.
For example: Similar to branches operating in securities services, fund management firms must also meet a legal capital requirement of ~1.08 million USD.
Decree 07/2016/ND-CP 33Article 8
Article 59.4 and 60.4 of 2015 Law on Accounting
Article 62.1 and 77.1 of the 2006 Law on Securities, amended in 2010
Article 71.3 of Decree No. 58/2012/ND-CP
Licensing procedures of branch Establishment
The following cases must seek approval from the Ministers of specialized Ministries:
- The branch’s operation contents are inconsistent with Vietnam's commitments.
- Foreign traders are not from the countries participating in treaties to which Vietnam is a contracting party.
- The establishment of the branch is yet to be regulated in a specialized legal document.
In regards of the 3 cases mentioned above, the granting of an Establishment License shall be carried out as follows:
- The Licensing agency shall submit a written request for directions to the relevant Ministry within 3 working days from the date of receipt of the valid application.
- Within 5 working days from the date of receipt of the written response from the relevant Ministry, the Licensing agency shall proceed to grant the Branch Establishment License to the foreign traders.
Article 13 Decree 07/2016/ND-CP
Validity of Branch Establishment License
The Branch’s License remains valid for a period of 5 years but not exceeding the remaining duration of the foreign trader’s Business Registration Certificate in case that Certificate does have a limitation on validity.
For example: If the remaining duration of the Business Registration Certificate is 4 years, the duration of the Branch Establishment License shall not exceed 4 years.
A Branch Establishment License can be extended once become expired.
Article 9 of Decree 07/2016/ND-CP
Rights of branches
To lease accommodation and premises; and lease and procure equipment and facilities necessary for their operations.
For example: Car rental contracts, printer rental and stationery purchase contracts, etc.
To enter into contracts in Vietnam and conduct other commercial activities in accordance with the provisions of their License and international treaties to which Vietnam is a signatory.
The branch of a Japanese company in Vietnam is licensed with the following sector: “Implementing the right to wholesale distribution and retail distribution of clothing products.”
Within this scope, the branch is entitled to enter into sales contracts of clothing products and other contracts serving the same purpose, such as transport, packaging, and advertising contracts, etc., except for sales contracts of books and shoes products.
To remit profits abroad after fulfilling financial obligations to the State of Vietnam.
Article 19 of the 2005 Commercial Law
Obligations of branches
To carry out the accounting system in accordance with the Vietnamese law: reporting regime and accounting standards, methods of fixed asset depreciation and profit and loss determination, rules on ink color and letters on accounting documents and invoices, etc.
To comply with regulations on employment such as participation in compulsory Social Insurance, Medical Insurance, Work permits for foreign employees, and declaration of labor situation, etc.
Must not lend or sublease the head office.
To send reports on their activities in the previous year to the Department of Industry and Trade before the 30th day of January of every year.
Article 20 of the 2005 Commercial Law
Application dossier for Branch Establishment
- Application letter for Establishment License of a branch using the form promulgated by the Ministry of Industry and Trade, signed by a competent representative of the foreign trader;
- Copies of the foreign trader’s Business Registration Certificate or equivalent documents;
The foreign trader’s operation duration, if stated in the Business Registration Certificate or equivalent documents, should be at least 1 year.
- Copies of audited financial statements or documents of equal value proving real existence and operation of the foreign trader in the latest fiscal year;
- Copy of the Branch’s charter;
- A letter of nomination / appointment of the Head of the branch by the foreign trader;
- Copy of the passport or ID card (for Vietnamese) or copy of the passport (for foreigners) of the Head of the branch;
- Documents on the expected location of the branch, including:
- Memorandum of understanding or lease agreement or photocopy of the documents proving the rights of foreign traders to exploit and use the place for locating the branch ‘s head office;
- Copies of documents on the expected location of the branch in accordance with the law.
The branch’s office must be located where business activities are permitted to take place and not for dwelling.
Therefore, when signing rental agreements, the lessor should be asked to produce the documents proving the purpose of use. In addition, it is necessary to check the planning of sectors allowed to operate in the area in which the head office is to be based.
Article 12 of Decree 07/2016/ND-CP
Investors in need of legal advice and would like to be represented by PLF to apply for a Branch Establishment License, kindly contact:
PLF LAW FIRM
12th Floor, Ruby Tower,
81-85 Ham Nghi, District 1, Ho Chi Minh City, Vietnam
Tel: +8428 3821 2161 or +8428 3821 2162
Fax: +8428 3821 2165
8h00 - 17h30 (UTC+7)
Mondays - Fridays