VI In the context of increasingly deep and wide international economic integration, Vietnam continues to be an attractive destination for foreign traders seeking to expand their business operations and explore investment opportunities. In addition to establishing foreign-invested enterprises, the establishment of branches of foreign traders in Vietnam is also a form of commercial presence permitted by Vietnamese law in certain specific sectors. However, to ensure that the branch operates in compliance with regulations and to mitigate arising legal risks, foreign traders must thoroughly understand the regulations regarding establishment conditions, scope of operations, rights, obligations, as well as management requirements throughout the course of operation. Let us join Pham Consult in exploring the crucial legal regulations concerning the operations of branches of foreign traders in Vietnam.
I. Rights and obligations of branches of foreign traders 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 operations in Vietnam in accordance with the provisions of Vietnamese law or international treaties to which the Socialist Republic of Vietnam is a member.
The branch of a foreign trader in Vietnam shall have the rights and obligations prescribed by Vietnamese law. The foreign trader shall be legally liable before Vietnamese law for all operations of its Branch in Vietnam.
- Rights of the Branch
Pursuant to Article 19 of the Commercial Law 2005, a Branch of a foreign trader in Vietnam shall have the following rights:
– To rent offices, and to rent or purchase equipment and facilities necessary for the operations of the Branch.
– To recruit Vietnamese and foreign employees to work at the Branch in accordance with the provisions of Vietnamese law.
– To enter into contracts in Vietnam in conformity with the scope of operations specified in its Branch Establishment License and in accordance with the provisions of this Law.
– To open accounts in Vietnamese Dong and in foreign currencies at banks licensed to operate in Vietnam.
– To remit profits abroad in accordance with the provisions of Vietnamese law.
– To have a seal bearing the name of the Branch in accordance with the provisions of Vietnamese law.
– To conduct activities of goods purchase and sale and other commercial activities in conformity with its establishment license in accordance with the provisions of 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 Commercial Law 2005 stipulates that a Branch of a foreign trader in Vietnam shall have the following obligations:
– To implement the accounting regime in accordance with the provisions of Vietnamese law; in cases where it is necessary to apply another common accounting regime, such regime must be approved by the Ministry of Finance of the Socialist Republic of Vietnam.
– To report on the operations of the Branch in accordance with the provisions of Vietnamese law.
– Other obligations as prescribed by law.
II. Operations of branches of foreign traders in Vietnam
- Management apparatus of the Branch
Pursuant to Article 27 of Decree No. 07/2016/ND-CP, the management and personnel apparatus of the Branch shall be decided by the foreign trader.
The employment of foreign workers to work at the Branch must comply with the labor legislation and be consistent with Vietnam’s commitments in international treaties to which Vietnam is a member.
- Scope of operations of the Branch
The Branch shall operate to provide services in service sectors, excluding service sectors where the establishment of a Branch in such fields are stipulated in specialized legal documents.
In cases where the Branch operates in sectors or trades subject to conditional requirements under the law, the Branch may only operate when it satisfies all the prescribed conditions.
- Operation reporting regime of the Branch
Prior to January 30 of each year, the Branch shall be responsible for sending a report on its operations in the previous year, using the form provided by the Ministry of Industry and Trade, via post to the Licensing Authority.
The Branch is obliged to report, provide documents, or clarify matters related to its operations upon request of competent state management agencies.
III. Regulations on the head of the branch of foreign traders in Vietnam
Pursuant to Article 33 of Decree No. 07/2016/ND-CP, the Head of the Branch shall be responsible to the foreign trader for their own operations and the operations of the Branch within the scope authorized by the foreign trader.
The Head of the Branch shall be held responsible for their own activities in cases where they perform activities outside the scope authorized by the foreign trader.
The Head of the Branch must authorize another person in writing to exercise the rights and perform the obligations of the Head of the Branch in accordance with the law upon exiting Vietnam. This authorization must obtain the consent of the foreign trader. The Head of the Branch remains responsible for the performance of the authorized rights and obligations.
Upon the expiration of the authorization period, if the Head of the Branch has not yet returned to Vietnam and no other authorization is made, the authorized person shall have the right to continue exercising the rights and performing the obligations of the Head of the Branch within the authorized scope until the Head of the Branch returns to work at the Branch or until the foreign trader appoints another person as the Head of the Branch.
In cases where the Head of the Branch is not present in Vietnam for more than 30 consecutive days without authorizing another person to exercise the rights and perform the obligations of the Head of the Branch, or dies, goes missing, is detained, is sentenced to prison, or has their civil act capacity restricted or lost, the foreign trader must appoint another person as the Head of the Branch.
The Head of the Branch of a foreign trader shall not concurrently hold the following positions:
– The Head of a Representative Office of another foreign trader;
– The Head of a Representative Office of the same foreign trader;
– The legal representative of an economic organization established in accordance with the provisions of Vietnamese law.
