VI In the context of increasingly profound international economic integration, Vietnam continues to be an attractive destination for foreign traders wishing to expand their business activities in Southeast Asia. One of the popular forms of commercial presence is the establishment of a branch, which allows foreign traders to directly conduct business activities and establish a position in the Vietnamese market. However, this process requires strict compliance with relevant legal regulations, ranging from licensing conditions and application dossiers to the scope of operations and resulting legal obligations. Let’s explore the legal issues related to the establishment of branches of foreign traders in Vietnam with Pham Consult.
I. What is a Branch of a Foreign Trader in Vietnam?
A branch of a foreign trader in Vietnam (hereinafter referred to as the Branch) is a dependent unit of the foreign trader, established and conducting commercial activities in Vietnam in accordance with the laws of Vietnam or international treaties to which the Socialist Republic of Vietnam is a member.
According to Article 3 of Decree 07/2016/NĐ-CP, foreign traders may establish branches in Vietnam in accordance with Vietnam’s commitments in international treaties to which Vietnam is a member. However, the foreign trader shall be held responsible before Vietnamese law for all activities of its branch in Vietnam.
A foreign trader may not establish more than one branch with the same name within the boundaries of a single province or centrally-run city.
II. Rights and Obligations of a Branch of a Foreign Trader in Vietnam
- Rights of the Branch
Pursuant to Article 19 of the 2005 Commercial Law, a branch of a foreign trader in Vietnam has the following rights:
– To rent an office; to rent or purchase the equipment and facilities necessary for the Branch’s operations.
– To recruit Vietnamese and foreign employees to work at the Branch in accordance with Vietnamese law.
– To enter into contracts in Vietnam in accordance with the scope of operation specified in the Branch Establishment License and the provisions of the Commercial Law.
– To open accounts in Vietnamese Dong and foreign currencies at banks licensed to operate in Vietnam.
– To remit profits abroad in accordance with Vietnamese law.
– To have a seal bearing the name of the Branch in accordance with Vietnamese law.
– To conduct activities involving the purchase and sale of goods and other commercial activities consistent with the Establishment License, in accordance with Vietnamese law and international treaties to which the Socialist Republic of Vietnam is a member.
– Other rights as prescribed by law.
- Obligations of the Branch
Article 20 of the 2005 Commercial Law stipulates that branches of foreign traders in Vietnam have the following obligations:
– To implement an accounting system in accordance with Vietnamese law; in cases where another common accounting system needs to be applied, it must be approved by the Ministry of Finance of the Socialist Republic of Vietnam.
– To report on the Branch’s activities in accordance with Vietnamese law.
– Other obligations as prescribed by law.
III. Conditions for Establishing a Branch of a Foreign Trader in Vietnam
According to Article 8 of Decree 07/2016/ND-CP, a foreign trader shall be granted a Branch Establishment License upon satisfying the following conditions:
– The foreign trader is incorporated or registered for business under the laws of a country or territory that is a member of an international treaty to which Vietnam is a party, or is recognized by the laws of such country or territory.
– The foreign trader has been in operation for at least 05 years from the date of establishment or registration.
– If the Business Registration Certificate or equivalent document specifies an expiration date, that date must be at least 01 year away from the date of application submission.
– The scope of operation of the Branch must be consistent with Vietnam’s market access commitments in international treaties to which Vietnam is a member and consistent with the business lines of the foreign trader.
– If the operations are inconsistent with Vietnam’s commitments or the foreign trader is not from a country/territory participating in an international treaty with Vietnam, the establishment of the Branch must be approved by the Minister of the relevant specialized Ministry.
IV. Application Dossier for Establishing a Branch in Vietnam
The dossier for the establishment of a branch of a foreign trader is regulated under Article 12 of Decree 07/2016/ND-CP, including:
(i) An application form for the Branch Establishment License (using the template provided by the Ministry of Industry and Trade), signed by an authorized representative of the foreign trader.
(ii) A copy of the Business Registration Certificate or equivalent document of the foreign trader.
(iii) A document of appointment by the foreign trader for the head of the Branch.
(iv) A copy of the audited financial statements or documents certifying the fulfillment of tax or financial obligations in the latest fiscal year, issued or certified by competent authorities where the foreign trader is established, proving the existence and operation of the trader.
(v) A copy of the Branch’s Charter (Operational Regulations).
(vi) A copy of the passport or ID card (if Vietnamese) or passport (if foreign) of the head of the Branch.
(vii) Documents regarding the expected location of the Branch office, including:
– A copy of the memorandum of understanding (MOU), lease agreement, or documents proving the trader’s right to exploit and use the location.
– Copies of documents relating to the expected location in accordance with Article 28 of this Decree and relevant laws.
Note: Documents mentioned in items (ii), (iii), (iv), (v), and (vi) (for foreign heads of branches) must be translated into Vietnamese and certified in accordance with Vietnamese law. Documents in item (ii) must be certified or legalized by a Vietnamese diplomatic mission or consulate abroad.
V. Procedures for Establishing a Branch in Vietnam
The foreign trader submits the dossier directly, by post, or online (if applicable) to the Licensing Authority.
Within 03 working days of receipt, the Licensing Authority examines the dossier and requests supplements if it is incomplete or invalid. This request can only be made once.
Except for special cases, within 07 working days of receiving a valid dossier, the Licensing Authority shall grant or refuse to grant the License. Any refusal must be explained in writing.
If the operations are not covered by treaties or specialized laws, the Licensing Authority sends a written request for comments to the relevant specialized Ministry within 03 working days. The Ministry then has 05 working days to provide its opinion. Within 05 working days of receiving the Ministry’s response, the Licensing Authority shall issue the final decision to grant or deny the License.
