Setting up a representative office in Vietnam is one of the most inexpensive and easier entry alternatives. Representative Office (RO) is similar to setting up a branch of the firm that acts as a liaison.
It requires less work and allows you to engage and understand more about the Vietnamese market. The Representative Office also allows you to promote the operations of its main office through meetings and other events locally.
IS YOUR BUSINESS QUALIFIED TO SET UP A RO IN VIETNAM?
In Vietnam, the trade law on representative offices and branches of foreign businesses is governed by Decree No. 07/2016/ND-CP.
The rules governing the establishment, operation, rights, and obligations of a Representative Office in Vietnam are also mentioned in detail by this decree.
Importantly, not every business is qualified to establish its Representative Office. Based on the decree, the basic qualification for establishing a Rep Office in Vietnam is that the foreign companies must have originated from countries that are members of the treaties that Vietnam has ratified.
The business must have a Certificate of Business Registration and hold a validity not less than 1 year from the submission date.
RIGHTS FOR VIETNAMESE REPRESENTATIVE OFFICE
The applicant must follow Vietnamese law if they intend to open a Representative Office in Vietnam. The general rules are listed below.
- The business RO must run for an appropriate duration, range, and purposes as outlined in the establishment permits.
- The business RO is allowed to rent or buy basic necessities to run their business matters such as offices building, tools, and facilities.
- In terms of employment, the business RO can hire local or foreign personnel to work for the office.
- RO is permitted to open accounts using a licensed Vietnam bank with foreign currency or foreign currency based on Vietnam dong. However, this account is only authorized to be utilized for the purpose of business commercial activities.
- The RO is granted to have its own seals bearing its business name and branding.
ARE THERE ANY COMPLIANCE OBLIGATIONS FOR A REPRESENTATIVE OFFICE IN VIETNAM?
The laws from Decree No. 07/2016/ND-CP and Vietnam Commercial Law No. 36/2005/QH11 have stipulated that Representative Offices in Vietnam are also entitled to some of the compulsory business compliances.
Some compliances are as follows:
- Pay all fines, penalties, and taxes in accordance with the law.
- Fulfill every legal and financial duty.
- Declare operations in accordance with the law.
- Observe other requirements outlined in the law.
PROHIBITIONS OF A VIETNAMESE REPRESENTATIVE OFFICE
In general, a RO is not allowed to carry out any profitable operations directly in the Vietnamese market. This is because the main purpose of establishing a RO is to conduct local research and serve as its parent company’s liaison office. The three prohibited activities for RO in Vietnam are listed below:
- The Rep. Offices cannot carry out commercial marketing in Vietnam themselves or hire others to do so.
- In Vietnam, Rep Offices are not permitted to engage in any profitable operations.
- ROs are prohibited from participating in contracts at any level, including during negotiations, signing, or concluding new contracts (except for renting or purchasing an office, buying equipment, hiring employees, and opening a bank account).
- The Representative Office is not permitted to act as a representative for another business company.
THINGS TO CONSIDER BEFORE APPOINTING A CHIEF REPRESENTATIVE IN VIETNAM
- The chief of a Rep. Office cannot be a chief of another branch in Vietnam
- Holding the position as legal representative of another foreign business who can sign and approve contracts with the absence of formal power from an attorney. To put it in simpler terms, this means that the chief for Rep. Office cannot be someone who has the position of a legal representative that has the same power as an attorney for a foreign business.
- The Chief Rep. Office is a legal representative for another enterprise in Vietnam. This means that the chief of a Vietnamese Rep. Office cannot be someone who holds the position of legal representative regardless of whether they have a power of attorney or not.
These three matters are crucial to be looked at before an appointment of the chief representative office is made in Vietnam.
PROCESS TO SET UP A REPRESENTATIVE OFFICE IN VIETNAM
On average, it will take 10 to 13 days to obtain a representative office license.
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Submit a completed application to the licensing agency of the Representative Office location
The licensing agency will conduct an inspection for the following three working days after receiving a completed application from the applicant. The application can be sent directly, by mail, or online. If the application meets all legal requirements, a license will either be granted or denied within the next 7 working days.
It should be noted that if the application is incomplete, the applicant will need to finish it before the authorized agency can review it.
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Obtain approval from a relevant Minister
The application for a RO license must be approved by the relevant Minister if it is incompatible with Vietnam’s commitments or if the applicant is not a resident of a signatory nation or territory. Hence, the licensing agency will send a request for approval to the relevant Minister three working days after receiving the application.
The Minister must thereafter send a notification of the approval or denial of this application within the next five working days. The licensing agency will issue the RO license in the next five working days after receiving the notification.
DOCUMENTS REQUIRED TO SET UP A REPRESENTATIVE OFFICE
- Letter of appointment for the Chief of RO, along with copies of identification and the corporate seal;
- Authorization letter authorizing the consultant to submit the application dossier;
- The company’s certificate of incorporation or its certificate of business registration;
- Company’s most recent fiscal year’s audited financial report;
- Leasing office memorandum of understanding (MoU) or lease agreement;
- Documents outlining the landlord’s legal rights in relation to the leasing office.
CHECKLIST FOR SETTING UP AN RO POST LICENSING IN VIETNAM
Operating Announcement
According to Decree No. 100/2011/ND-CP, the RO is required to publish the following details for three issues in a row in a print or online publication in Vietnam during the first 45 working days of receiving the licence:
- Name and address of RO
- The RO’s Director
- Name and location of the foreign trade promotion agency’s headquarters
- Number, issue date, and terms of the establishment license and licensing body’s information
- Operation content
Also, the licensing agency must publish the same information on its website within 15 working days as per Decree No. 07/2016/ND-CP.
The RO must also formally begin operating within these initial 45 days and inform the licensing body, the People’s Committee, and the Industry and Trade Department about its location.
Filing a tax code
While being prohibited from engaging in any revenue-generating activities, a representative office must register for a tax code in Vietnam.
- Opening a bank account
A representative office may open accounts at any Vietnam-licensed bank in both foreign currency and Vietnam dong of foreign currency origin. Only RO’s operations may be carried out using these accounts.
The Vietnam State Bank’s rules must be followed while opening a bank account. For more information, refer to our page Vietnam corporate bank account opening.
Tax and Reporting Duties
Since a RO is not allowed to engage in any revenue-generating commercial operations, it is not liable to corporate income tax. This is also the rationale behind why the majority of foreign businesses opt for this kind of legal structure when entering the Vietnamese market for the first time. But, in order to file for personal income tax, a representative office is necessary, as stated in Circular No. 111/2013/TT-BTC.
By the final working day of January of each year, representative offices are required to submit an operating report about the previous year to the licensing body. Moreover, financial statements and statistical reports must be completed in accordance with Vietnamese law. A RO may be compelled by Vietnam Law to provide reports and documentation in specific circumstances.
POST-LICENSE RESPONSIBILITY OF THE REP. OFFICE IN VIETNAM
| Task | Representative Office |
| Announcement of Operation | Publish the Representative Office information either in print media or online newspapers in Vietnam. The information is: 1) Name and address of RO 2) The Head of the RO's 3) Name and location of the foreign trade promotion agency's headquarters 4) Number, issuance date, and terms of the licensing agency 5) Content of the operation |
| Bank Account Opening | Authorization for an opening of a bank account: 1) Foreign currency 2) Vietnam dong of foreign-currency origin accounts |
| Employment Matters | Applying for work-permit for: 1) Foreign employee of the Rep. Office including if the Chief Representative is foreigner 2) Declaring mandated insurances schemes for employee of the Rep. Office |
| Income Tax Registration and Duties | Declare, file, pay and finalise the personal income tax (PIT) for the employees. |
| Reporting Duties | 1) Registration change - Report any adjustment made for the Rep. Office, such as the name, location or the head office of the parents’ company (within 60 days from the date of the change). 2) Yearly Report - A report for relevant tax and labour matters must be made to the Ministry of Industry and Trade. - The report must be made prior to 30 January of every year. |
DIFFERENCES BETWEEN SETTING UP A REP. OFFICE AND LIMITED LIABILITY COMPANY IN VIETNAM
| Aspects | Representative Office | Limited Liability Company |
| Capital Requirement | Inexpensive | The cost depends on the business capital |
| Shareholding | Not able to have any shareholder and its benefits | Eligible for shareholder between the company members |
| Parent Company | Need a parent company that has been a registered company for at least 5 years | No parent company needed |
| Commercial Activity | Not authorised to earn any revenue | Allowed to a lot of business activities especially activities for profit making |
| Duration | Vary between 6 to 8 weeks | Can take up to 2-3 months and more |
BENEFITS OF SETTING UP AN RO IN VIETNAM
Research of the Local Market
A representative office can serve as a hub for market research and intelligence gathering. It allows foreign companies to gain a better understanding of the local market, customer needs, and competition.
Brand promotion
Representative offices can help foreign companies promote their brand and products in Vietnam. They can engage with potential customers and partners, build relationships, and establish credibility in the market.
Legal compliance
Representative offices can help foreign companies navigate the legal and regulatory requirements of doing business in Vietnam. They can provide support with paperwork, licences, and permits.
Cost savings
Representative offices can be a cost-effective way to establish a presence in Vietnam. They require less investment than setting up a subsidiary or joint venture and can be a good option for companies testing the market.
Flexibility
Representative offices do not engage in direct revenue-generating activities and are limited to non-trading activities, making them a flexible option for foreign companies. They can be easily established and closed down if needed.
HOW MUCH TIME IS REQUIRED TO SET UP A RO IN VIETNAM?
It can take 6 to 8 weeks to set up an RO. An RO license has a five-year expiration date but may be renewed for an additional five years. Refer to Vietnam Company Formation for additional information on Limited Liability Company.
With the help of a professional service provider such as Relin Consultants, it will be easy to navigate complex rules and regulations. Our team of experts will guide you through the licensing process and assist you in setting up the RO in Vietnam.
Reach out to us at Relin Consultants for further assistance.
FAQs
What are the required documents to apply for the Rep. Office licence?
In Vietnam, the required documents to apply for a Representative Office (Rep. Office) license typically include an application form, a letter of appointment of the Chief Representative, a business registration certificate or equivalent document of the parent company, a copy of the parent company’s charter or equivalent document, and a plan for the operation of the Rep. Office.
Additional documents may also be required, such as a copy of the Chief Representative’s passport, a leasing contract for the office space, and a bank guarantee, etc.
Can a foreigner be the legal representative of the Rep Office in Vietnam?
Yes, the legal representative of the Rep Office can be a foreigner. This is because Rep Offices in Vietnam can hire either local or foreign workers. The Legal Representative must only be an investor or someone working in the company, either in a management role or a higher
How many types of enterprise are there in Vietnam?
In total, there are 5 types of enterprise in Vietnam. According to the Enterprise Law 2020 of Vietnam, 5 forms of enterprise are:
- Joint-stock company
- Single-member limited liability company,
- Limited liability company (2 or more members)
- Partnership
- Sole proprietorship
How do I register for the representatives office in Vietnam?
To register for a representative office in Vietnam as a foreign company, the following steps are typically required:
- Obtain an investment certificate from the Ministry of Planning and Investment.
- Register the representative office with the Department of Industry and Trade.
- Obtain a tax code from the Department of Taxation.
- Open a bank account with a Vietnamese bank.
- Register with the local labour department and obtain a work permit for the chief representative.
The specific requirements and procedures may vary depending on the location and industry of the representative office.
What is the function of the representative office in Vietnam?
The function of a representative office in Vietnam is to serve as a liaison office for a foreign company. Representative offices are limited to non-trading activities and typically engage in activities such as market research, promotion, and other business support activities.
They serve as a hub for market research and intelligence gathering, allowing foreign companies to gain a better understanding of the local market, customer needs, and competition.
Representative offices can also help foreign companies navigate the legal and regulatory requirements of doing business in Vietnam and provide support with paperwork, licences, and permits. Additionally, representative offices can be a cost-effective way to establish a presence in Vietnam and can be easily established and closed down if needed.
