Nowadays, foreign investors planning to conduct business activities in Vietnam shall have a lot of opportunities to choose. Pursuant to Clause 2 Article 16 of Commercial Law, foreign investors are entitled to set up their Representative Offices or Branches in Vietnam; to establish in Vietnam foreign-invested enterprises in the type of business provided by Vietnamese law.
Therefore, the following article will focus on analyzing Representative Office so that foreign investors can understand and choose the appropriate type of business, which saves costs. and operate effectively.
- Definition of Representative Office
Representative Office of foreign investors means a dependent unit of the foreign investors, which is established under the provisions of Vietnamese law to conduct market survey and a number of commercial promotion activities permitted by Vietnamese law.
- Requirements for grant of Licenses for Establishment of Representative Office
Foreign investors planning to set up a Representative Office in Vietnam must comply the requirements specified in Article 7 of Decree No. 07/2016/ND-CP detailing the Commercial Law regarding Representative Offices and Branches of foreign investors in Vietnam:
- The foreign trader (parent company) has come into operation for at least 01 year from the date of establishment or registration;
- The Certificate of Business Registration or the equivalent document is valid for at least 01 more year from the date of submission of the application;
- The scope of operation of the Representative Office is consistent with that in Vietnam’s Commitments to treaties to which Vietnam is a signatory.
- Rights and obligations of Representative Offices
Pursuant to Article 17 of the Commercial Law, a Representative Office has the following rights:
- To operate for the purposes, within the scope and duration stipulated in their establishment licenses.
- To rent offices, rent and purchase equipment and facilities necessary for their operations.
- To recruit Vietnamese and expatriate employees to work for them according to the provisions of Vietnamese law.
- To open accounts in foreign currencies or foreign currency-based Vietnam dong at banks licensed to operate in Vietnam, and to be allowed to use those accounts solely for their operations.
- To have seals bearing their names according to the provisions of Vietnamese law.
- To have other rights as defined by Vietnamese
Pursuant to Article 18 of the Commercial Law, a Representative Office has the following obligations:
- Not to directly conduct profit-generating activities in Vietnam.
- To conduct commercial promotion activities within the scope permitted by this Law.
- Not to enter into contracts, not to amend or supplement contracts already entered into by foreign traders, except Chief representatives obtain valid letters of authorization from foreign traders;
- To pay taxes, fees and charges, and fulfil other financial obligations provided for by Vietnamese law.
- To report on their operations according to Vietnamese law.
- To have other obligations as defined by Vietnamese law.
The basic difference between the establishment of a Representative Office and a foreign-invested company is that the Representative Office cannot conduct business activities, so it does not generate profits. The Representative Office does not need to fulfill the obligations of Value Added Tax, Corporate Income Tax, some other special taxes related to business activities as a foreign-invested.
- Procedures of set up Representative Office
Dossiers of set-up a Representative Office are specified in Article 10 of Decree No. 07/2016/ND-CP detailing the Commercial Law regarding Representative Offices and Branches of foreign traders in Vietnam, including:
- An application form for License for Establishment of the Representative Office
- Copies of the Certificate of Business Registration or equivalent documents of the foreign trader;
- A letter of appointment of the head of the Representative Office;
- Copies of audited financial statements or certificates of fulfillment of tax liabilities or financial obligations of the last financial year or equivalent documents as proof of existence and operation of the foreign trader issued or certified by competent authorities where such foreign trader is established;
- Copies of the passport or ID card (for Vietnamese) or copies of the passport (for foreigners) of the head of the Representative Office;
- Documents on the expected location of the Representative Office
The above documents must be consular legalized and notarized translation according to the provisions of law.
- Effective periods of Licenses for Establishment of Representative Office.
- The License for Establishment of a Representative Office shall be valid for 05 years but not exceeding the remaining effective period of the Certificate of Business Registration or the equivalent (for documents having expiry date);
- Representative Office will be considered for extension when the effective period specified in the License has expired.
- Consultancy service for set-up Representative Office of Pham Consult
With a wealth of experience in consulting for setting up Representative Office and other legal issues after establishment such as taxes, labor, social insurance,… Pham Consult provides consulting services to set up Representative Office with the competitive price, assisting you in:
- Consulting conditions, procedures and other issues when establishing a Representative Office;
- Preparing all the establishment dossiers in bilingual languages (Vietnamese and English) to ensure that foreign investors can easily follow up and report to the Parent Company (if customers have requests);
- Assisting customers with 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;
- Consulting procedures after establishment (Marking and registering stamp, initial tax declaration, bookeping, social insurance registration, payroll for employers,… )
If the Representative Office is the right type for your current business goals and you still have many problems about establishing a representative office, please kindly contact us via the following information for free consulting. Pham Consult always desires and undertakes to provide customers with the best services and support to help you optimize operating costs for your business goals.