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LEGAL TUTORIALS FOR DOING BUSINESS IN VIETNAM

Set up a foreign representative office in Vietnam


Representative offices enable foreign traders to learn about the Vietnam market as well as promote their goods and/or services without having to pay a corporate income tax rate of 20%.

Conditions to establish foreign representative offices in Vietnam

A foreign trader is entitled to set up a representative office 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 representative office in Vietnam, the foreign trader must have operated for at least 1 years in the country or territory where it is established.
  • Upon submitting the application dossier for establishment of the representative office 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 representative office 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).

Licensing procedures for representative office establishment
Set up a foreign representative office in Vietnam

 

In the event where a representative office'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 representative office must be approved by the Minister of relevant Ministries.

Heads of representative office of foreign traders must meet the following conditions:

  • A foreign national, who is appointed as the Head of the Representative Office, must apply for a work permit before working in Vietnam.
  • A Head of representative office 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.

Article 11 of Decree 07/2016/ND-CP
 

Application dossier for representative office establishment

  • Application letter for Establishment License of representative office;

  • Copies of the foreign trader’s Business Registration Certificate or equivalent documents certified by competent authority where the foreign trader is founded;
  • The foreign trader’s operation duration, if stated in the Business Registration Certificate or equivalent documents, should be at least 1 year. 
  • Copies of the audited financial statements or documents of equal value proving real existence and operation of the foreign traders in the latest fiscal year;

  • A letter of appointment of the Chief Representative;

  • Copy of the passport or ID card (for Vietnamese) or copy of the passport (for foreigners) of the Chief Representative;

  • Documents on the expected location of the representative office, 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 representative office‘s head office;
    • Copies of documents on the expected location of the representative office in accordance with the law.
Article 10 of Decree 07/2016/ND-CP


Validity of Representative Offices Establishment License

The representative office’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:

S-white Company was issued an Establishment License (by the Government of Singapore) with a 5-year validity commencing from April 2017.  
In April 2018 (one year later), S-white Company applied for an Representative Office Establishment License in Vietnam. Consequently, this License would be valid only for 4 years, same as the remaining validity of the Company’s License in Singapore.
When expires, a Representative Office Establishment License can be extended for a maximum of another 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.

Article 4 and 14 of Decree 07/2016/ND-CP

Issuance fees of Representative Offices Establishment License

Issuance fee for a new License: ~USD140.

Fee for reissuance, amendment, supplement, and extension of the License: ~USD70.

Article 4 of Circular 143/2016/TT-BTC

Functions of Representative Offices

To function as a liaison office.

To promote the development of cooperation projects of the foreign traders in Vietnam.

To undertake market research to promote the opportunity of purchasing and selling goods, providing and consuming commercial services of the traders for whom they represent.

To execute trade promotion activities, such as:

  • A representative office may exhibit and introduce goods and services only for the traders it represents, which takes place exclusively at the representative office’s headquarters.

Should another location be desired, the representative office may sign contracts with traders providing display and introduction services of goods and services when so authorized by the foreign traders.
  • A representative office is not allowed to directly promote, organize, or participate in trade fairs and exhibitions. Only when being authorized by traders will it have the right to sign contracts with traders providing advertising, trade fair, and exhibition services.

To supervise and facilitate the execution of contracts signed with Vietnamese partners or related to the Vietnam market by the foreign traders for whom the representative offices represent.

Other activities permitted by Vietnamese law.

Article 103, 118, and 131 of the 2005 Commercial Law
 

Limitations of a Representative Office

A representative office is not permitted to undertake direct profitable activities in Vietnam.

Investors wishing to carry out profitable activities in Vietnam are advised to consider establishing a foreign-invested company or a branch of a foreign company.

A representative office may not enter into, amend, or supplement contracts already signed by foreign traders, except for the following:

  • The Chief Representative has a Power of Attorney from the foreign traders.

  • Contracts to rent head offices or rent and purchase equipment and facilities necessary for the representative office’s operations.

  • Contracts to recruit employees to work for the representative office.

  • Contracts to open accounts for the representative office’s operations.

A foreign trader cannot establish more than one representative office that has the same name within a province or city in Vietnam.

Article 18 of the 2005 Commercial Law, Article 3 of Decree 07/2016/ND-CP


Obligations of Representative Offices

To perform financial obligations in accordance with the law of Vietnam such as paying personal income tax (PIT) on behalf of the employees working for the representative office and other taxes on behalf of foreign contractors.

May not lend or sublease its head office.

To send reports on its activities in the previous year to the Department of Industry and Trade before the 30th day of January of every year.

And other statutory obligations.

Article 18 of the 2005 Commercial Law, Article 28 and 32 of Decree 07/2016/ND-CP
 

For more details, please contact:

Procedures for setting up a wholly foreign-owned enterprise in VietnamPLF 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

Email: legal@plf.vn

Website: http://www.plf.vn

Working hours:

8h00 - 17h30 (UTC+7)

Mondays - Fridays


 

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