1. Governing laws:
- Commercial Law adopted by the National Assembly on 14 June 2005 (the “Commercial Law“);
- Decree No. 07/2016/NĐ-CP (“Decree 07“) dated 25 January 2016.
2. Establishment Procedures:
Under the Decree 07, a foreign business entity duly established and operating for at least one (01) year under the laws of the country of its head office may apply for establishment of a representative office in Vietnam. The number of representative offices in Vietnam of a foreign company is unlimited. To establish a representative office (the “Rep. Office”) in a province in Vietnam, a foreign company must submit dossier to obtain a license for establishment of the Rep. Office (the “License”) issued by the Provincial Department of Industry and Trade.
(i) Application File
The following documents must be submitted to the licensing authority for obtaining the License:
- An original copy of Application for setting up the Rep. Office (under the standard form);
- A legalized copy and a notarized translation copy of the Certificate of Incorporation (i.e. the certificate of business registration) and any amendments of the parent company;
- A legalized copy and a notarized translation copy of the Memorandum and Articles of Association (i.e. the company charter) of the parent company (if any);
- A legalized copy and a notarized translation copy of the legalized copy of the audited financial statement of the parent company for its latest financial year audited by an auditing firm;
- An original or notarized copy of Office Lease Contract;
- A copy of the chief representative’s passport; and
- An original copy of Power of Attorney.
(ii) Time-limit and competent bodies for issuing the License
Within a time-limit of fifteen (15) days from the date of receipt of a complete and valid application file, The Provincial Department of Industry and Trade shall complete its evaluation and issue the License for establishment of the Rep. Office.
(iii) Term of License
The License of the Rep. Office has a term of five (05) years. If the parent company’s business license or establishment certificate expires, the License of the Rep. Office will also expire. In other words, the term of the Rep. Office cannot exceed any term of existence of its parent company.
The License of the Rep. Office may be extended and must be carried out at least 30 days prior to the expiry of the License.
(iv) State fee for issuance of the License
VND3,000,000 /License.
3. Post-License Works
After obtaining the License, the Rep. Office must carry out other post-licensing steps, as follows:
(i) Obtaining the Seal of the Rep. Office:
To obtain a seal, the chief representative of the Rep. Office is required to personally lodge the application to the police authority. This seal will be provided within around 5 working days since the date of submission.
(ii) Registration of Tax Code for the Rep. Office:
Though there is no tax imposed on the Rep. Office’s operation, the Rep. Office must submit an application dossier to the taxation authority for obtaining the Tax code (for purpose of tax contribution on behalf of the employees).
(ii) Opening of Bank Account:
The Rep. Office shall open a bank account for spending only purpose at a bank in Vietnam (including accounts in foreign currency, and accounts in Vietnamese dong sourced from foreign currency). The procedure will depend on the bank that the Rep. Office elects to open for its convenience.
(iii) Advertisement on Newspaper:
Within 45 days from the date of issuance of the License, the Rep. Office is required to advertise on three consecutive issues of a printed or online newspaper licensed in Vietnam.
(iv) Notice of Commencement of the Rep. Office’s operation:
Within 45 days from the date of issuance of the License, the Rep. Office must commence its official operation and must provide written notice to the Provincial Department of Industry and Trade of its commencement of operation at the registered office. For this purpose, the following documents must be submitted to the Provincial Department of Industry and Trade so that the Notice of Activities is certified by such authority:
- An original copy of Notice of Activities of the Rep. Office (under the standard form);
- 03 certified copies of Receipts of press or e-newspaper agency for the publishing of three consecutive issues for Notice of Activities;
- A certified copy of Registration of Seal Sample;
- A certified copy of Registration of Opening Bank Account;
- A certified copy of the passport of the chief representative;
- An original copy of Letter of Appointment for the chief representative; and
- An original copy of CV ad labor contract of the chief representative (and other employees of the Rep. Office).
4. Operation of the Rep. Office
(i) Permitted Activities, by the Rep. Office:
- Exercise of the function of a liaison office
- Facilitation of formulation of co-operative projects of the foreign business entity in Vietnam.
- Market research to promote opportunities for purchase and sale of goods and for provision and sale of commercial services of the foreign business entity that it represents.
- Monitoring and activating performance of contracts of the foreign business entity that it represents which have been signed with Vietnamese parties or which relate to Vietnamese markets.
(ii) Prohibited Activities:
As a main principle rule, the Rep. Office is prohibited to “conduct business”. Further, it is not allowed to promote the goods or services of its parent company or enter into contracts with local companies for such promotion. This must be done directly between the parent company and the local promotion agency. The Rep. Office is also not permitted to act as the representative of another business entity, and may not sub-lease its office space.
The chief representative may not concurrently hold the following positions:
- Chief of a branch in Vietnam;
- Legal representative of the foreign entity who can sign contracts without written power of attorney from such foreign entity; or
- Legal representative of an enterprise established pursuant to the laws of Vietnam.
(iii) Labor Matters:
The Rep. Office may employ Vietnamese and foreigners with no restriction on the total number of employees. The number of employees and relevant information are required to be reported to the authorities. All foreigners including the chief representative working for the Rep. Office are required to obtain a work permit.
(iv) Tax Matters:
The Rep. Office, as the employer, must register personal income tax code for; declare, submit and pay monthly personal income tax of; and complete personal income tax finalization for its employees; (although the labor contracts can provide that personal income tax is included in their salary).
(v) Reporting Regime:
Each year, prior to the last working day of January, the Rep. Office must notify the Provincial Department of Industry and Trade of its operations over the previous year. The Rep. Office is also obliged to provide reports relevant to tax and labor matters at request of relevant authorities. Any changes to the number of employees must also be notified to the relevant Provincial Department of Industry and Trade.
(vi) Registration of Changes:
During the validity period of the License, any changes to the contents of the License (including the change of name, change of addresses of the Rep. Office or of the parent company, change of the legal representative), the Rep. Office is required to carry out relevant procedures to record such change with the licensing authorities and obtain the revised License. Other papers also need to be revised, including the certificate of tax code, certificate of seal sample, seal, etc., to reflect this change. New advertisement on newspapers may be also required.
5. Post-License Works for a Representative Office in Vietnam
Relating to the post licensing works (after having obtained the License for setting up the Rep Office), the followings are noted:
(a) Registering the seal specimen of the Rep Office (at the competent authority).
Legal ground: Decree No. 78/2015/NĐ-CP: Article 34.2 of Decree No. 78/2015/NĐ-CP provides that [Before using… a seal specimen of an enterprise or its representative office, the enterprise must send a notification to Business Registration Office of the province where the enterprise, … or representative office is situated in order to post the seal specimen on National Business Registration Portal. The notification shall contain:
- Name, ID number, address of the enterprise or its branch/representative office
- The quantity of seals, seal design, and its effective date]
(b) Registering the tax code for the Rep Office (at the competent authority) (for purpose of tax contribution and declaration for the employees working for the Rep Office).
Legal ground: Law No. 68/2014/QH13 on enterprise: Article 45.2: [A representative office is a unit dependent on the enterprise and obliged to represent the enterprise’s interests under authorization and protect such interests]
Law No. 36/2005/QH11 on commerce:
[Article 18: Obligations of representative offices
- 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 where chief representatives obtain valid letters of authorization from foreign traders or other cases specified in Clauses 2, 3 and 4, Article 17 of this Law.
- 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.]
Article 17: Rights of representative offices
- 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 law.]
Legal ground: Decree No. 07/2016/NĐ-CP: [Article 30: Scope of operation of representative offices: The operation of a representative office shall be solely confined to the conduct of liaison activities, market research, and promotion of its head office’s businesses, excluding services the establishment of representative office in which is specified in specialized legislative documents.]
[Article 5. Issuance and usage of Tax Identification Numbers (“TINs”): 1. Issuing TINs: A taxpayer shall register for tax so as to be issued a TIN as prescribed in Article 21 of the Law on Tax administration. In particular: (a) Each of business entities and other entities shall be issued with a unique TIN for the whole operation as from the tax registration until the shutdown; (h) … representative offices of an enterprise that are eligible for affiliated entities identification numbers of enterprises as prescribed in Law on enterprises.]
(c) Opening the bank account (at the bank in Vietnam).
Legal ground: Circular No. 32/2013/TT-NHNN: [Article 3. Principles in restricting the use of foreign exchange in the territory of Vietnam
In Vietnam’s territory, except for the cases allowed to use foreign specified in Article 4 of this Circular, all transactions, payments, listing, advertisements, quotations, pricing, prices in contracts, agreements other similar forms (including conversion or adjustment of prices of goods and services, the value of contracts and agreements) of residents and non-residents are not allowed to be conducted in foreign exchange.]
Article 4 of Circular No. 32/2013/TT-NHNN does not allow paying salary from the representative office to Vietnamese employee or tax contribution, paying for office rental by foreign currency.
Legal ground: Decree No. 70/2014/NĐ-CP: [Article 6. Money transfer from foreign countries to Vietnam: 1. Foreign currency receipts of residents as organizations earned from such transfer process must be deposited into foreign currency accounts opened at authorized credit institutions or sold to these credit institutions.]
(d) Labor matters, such as:
- Applying for work-permit (for foreign employees of the Rep Office, including the Chief Representative of the Rep Office if he/she is a foreigner),
Legal ground: Decree No. 11/2016/NĐ-CP on foreign employees in Vietnam
- Declaring and making compulsory insurances schemes (for employees of the Rep Office) (e.g. social insurance) according to the laws.
Legal ground: Decree No. 143/2018/ND-CP on social insurance: [Article 2. Subjects of application:1. Employees who are foreign nationals working in Vietnam shall be required to participate in the compulsory SI program if they obtain work permits, practicing certificates, practicing licenses issued in Vietnam, indefinite-term employment contracts or employment contracts valid for at least one year with employers in Vietnam.]
(e) Tax matters:
The Rep Office as the employer shall be required to declare, submit, pay and finalize the personal income tax (PIT) for its employees according to the laws of.
Legal ground: Circular No. 92/2015/TT-BTC on VAT and Personal Income Tax and Circular No. 95/2016/TT-BTC on tax registration
(f) Reporting regime:
Prior to the last 30 of January every year, the Rep Office shall be required to report its operations over the previous year. Besides, at request of relevant authorities, the Rep Office shall be also required to reports relevant to tax and labour matters relating to its operations.
Legal ground: Decree No. 07/201/ND-CP on detailing regulations on establishment of Representative Ofices or Branches of foreign traders in Vietnam under Law on commerce: Article 32. Reporting: 1. By January 30th of each year, every representative office and branch shall submit operation status reports using the form stipulated by the Ministry of Industry and Trade to the licensing agency by post; 2. Representative offices and branches shall submit reports, documents and explanations for their operation upon the request of competent state regulatory authorities.
(g) Changes registration:
Registration of adjustment of the issued License for setting the Rep Office in such case of changes of as stipulated by the laws (such as: changes in the name or location of the head office of a foreign trader (i.e. mother company); replacement of the Chief of the Rep Office; changes in the name of the Rep Office; changes in the operations of the Rep Office; change in the location of the Rep Office) within the time line of 60 business days from the date of change to obtain the revised License.