New Procedures For Opening Representative Office

Opening Representative office in Vietnam allows a foreign company to have a presence in Vietnam without incorporating a company.

It can be seen that more and more companies have established many business locations/ branches/ representative offices outside the head office in the same or different province with head office but not registered with the Department of Planning and Investment.

Doing business at a location without notifying Department of Planning and Investment where your company conducts business, when being inspected or examined, it will be subject to administrative penalties in accordance with Article 37 of the Decree 50/2016/ND-CP.

“Article 37. Violations against regulations on establishment, shutdown of branches, representative offices and business locations of enterprises

1. A fine of VND 5,000,000 – VND 10,000,000 shall be imposed for any of the following violations:
2. a) Doing business at a location that is not notified to the Business Registration Office of the province where the business takes place;
3. b) Shutting down a branch, representative office, or business location without notifying the Business Registration Office of the province.
4. Remedial measure: Notify the location of the business location to the Business Registration Office of the province in case of the violation specified in Point a Clause 1 of this Article.”

As a result, if your company is doing business at a location besides head office but has not yet registered with the managing authority, you need to follow the procedures for opening representative office, branch, and business location below to avoid unnecessary risks.

1. Comparison between Branch, Representative Office and Business Location

A.      SIMILARITY	Is a dependent unit of the company
	Procedures for setting up a Branch/ Representative Office/ Business Location are the same

DIFFERENCES 

ITEM	BRANCH	REPRESENTATIVE OFFICE	BUSINESS LOCATION
Scope of business	Branch is responsible for performing all or partial company business functions within the business lines that the company has registered.	A representative office of a company is its dependent unit which acts as the company’s authorized representative, represents and protect the company’s interests. A representative office shall not do business.	Business location is a place where the company performs some particular business activities.
Rights	–  Perform partly or all company business functions such as signing and implementing economic contracts, labor contracts,… – Conduct authorized representative activities of the company; – Have a seal bearing the name of the Branch; – Other rights in accordance with the law.	– Conduct representative activities as authorized by the company; – Have a seal bearing the name of the Representative Office (according to the decision of the company); – Other rights in accordance with the law.	– Perform the registered business activities; – No tax code ; – Not allowed to be named on economic contracts, do not register or use invoices. –   Other rights in accordance with the law.
Accounting and tax declaration	– Your company can choose to register either independent and dependent branch: + Dependent Branch: This branch will declare and pay taxes together with the head office (if the same province) or declare and pay taxes at direct tax administration agency (if different provinces). However, year-end financial statements and corporate income tax will be declared centrally at company‘s headquarters. + Independent Branch: This branch will declare and pay taxes by itself like a normal company. The company will make consolidated financial statements. – Other obligations in accordance with the law	– Dependent accounting: Representative Office pays license tax at the directly managing tax authority; – Declare and pay personal income tax on income from wages and salaries of employees (if any); – Other obligations as prescribed by law.	– Business locations pay license tax, declare VAT and corporate income tax through the head office of the company. – Other obligations in accordance with the law.
Advantages	– Suitable for expanding diversity of business scope; – Branch has higher authority in production and business activities than Representative Office and Business locations helping to promote business activities quickly and proactively.	– Suitable for businesses that only need to establish a legal address for transaction and communication, no profit-generating activities. – Simple model, not many accounting and tax obligations; – Lower administration and maintenance costs than branches.	– Suitable for business locations that only conduct 1 or some specific business activities; – Simple model, not many accounting and tax obligations; – Lower administration and maintenance costs than branches.
Disadvantages	– Must comply tax and accounting obligations as prescribed by law; – Administration and maintenance costs are higher than Representative Offices and Business locations	Most operations require the authorization and approval of the company, which is less flexible than branches.	All operations/ business activities must be done by the company, less flexible than branches

 2. Procedure for setting up Representative Office, Branch and Business Location

• Step 1: Prepare the dossier for Representative Office, Branch and Business Location establishment procedure;
• Step 2: Submit the dossier for Representative Office, Branch and Business Location establishment at Department of Planning and Investment (DPI);
• Step 3: Engrave the seal (if any)
• Step 4: Perform initial tax registration procedure at Tax authority.

3. The dossier that needs to be prepared includes:

• A notification of establishment of branch/ representative office/ business location signed by the company’s legal representative;
• The copy of the resolution or decision and the copy of the minutes of meeting of the Board of Members of the multi-member limited liability company or partnership, or of the General Meeting of Shareholders of the joint-stock company; the copy of the resolution or decision of the owner of the single-member limited liability company on establishment of branch/representative office/ business location;
• Copies of legal documents of the person who is the head of branch/representative office/ business location.

4. Consultancy service for setting up Representative Office, Branch and Business Location at Pham Consult

With many years of experience in consulting on the setting up/ opening Representative Office, Branch and Business Location of a company, Pham Consult provides consulting services with the competitive price, assisting you in:

• Consulting in conditions, procedures and issues arising when setting up Representative Office, Branch and Business Location of a company;
• Preparing all the required dossiers in bilingual languages (Vietnamese and English) to ensure that foreign clients can easily follow up and evaluate the progress of work (if clients have requests)
• Assisting client with notarization, consular legalization and notarized translation;
• Being on behalf of clients for submitting and receiving the results at state agencies;
• Consulting, explaining to the state agencies in case of arisen problems.

If you are interested in establishment setting up/ opening Representative Office, Branch and Business Location of a company and you still have many problems about this procedures, please kindly contact us via the following information for free consulting. Pham Consult always desires and undertakes to provide clients with the best services and support to help you optimize operating costs for your business goals.