Representative office of foreign company in Vietnam

Before going into details about the establishment conditions, let's learn about the legal basis of a representative office:

Legal basis: 

• Commercial Law 2005 

• Decree 07/2016/ND-CP 

Establishing a representative office not only helps foreign enterprises penetrate the Vietnamese market but also facilitates trade promotion activities.  Thus, the representative office of a foreign company in Vietnam is not allowed to conduct business and conduct business activities for profit purposes, it is only allowed to act as an intermediary to connect customers and research the market. 

Advantages: easy to manage, no independent audit required, and easier to renew and terminate than branch and enterprise models. 

Disadvantages:  not allowed to carry out profit-making activities, limited to surveys, market research, and other non-profit-making activities.

1. Conditions for establishment 

Pursuant to Article 7 of Decree 07/2016/ND-CP stipulating the conditions for granting a License to establish a Representative Office of a foreign trader in Vietnam. Accordingly, the following conditions must be met:

• Foreign traders have been operating for at least 01 year from the date of establishment or registration.

• In case the Business Registration Certificate or equivalent document stipulates a term of operation, that term must be at least 01 year.

• The activities of the Representative Office must comply with Vietnam's commitments in international treaties to which Vietnam is a member. 

• In case the scope of activities of the Representative Office is not consistent with Vietnam's commitments or the foreign trader is not from a country or territory participating in an international treaty to which Vietnam is a member, the establishment of the Representative Office must be approved by the Minister or Head of the specialized ministerial-level agency (hereinafter referred to as the Minister of the specialized ministry). In some cases, many supporting documents are required to obtain approval to establish a representative office from the Ministry level. In these cases, the time limit for establishing a representative office will be longer.

2. Profile components

2.1. Documents requiring consular legalization, translation into Vietnamese, and notarization:

• Copy of Business Registration Certificate or equivalent document of foreign trader 

Source: Anpha Accounting

2.2. Documents need to be translated into Vietnamese and notarized.

• Appointment document to appoint head of representative office 

• A copy of the audited financial report or a document confirming the fulfillment of tax or financial obligations in the most recent fiscal year or a document of equivalent value issued or certified by a competent authority or organization where the foreign trader is established, proving the existence and operation of the foreign trader in the most recent fiscal year; 

• Copy of passport or identity card or citizen identification card (if Vietnamese) or copy of passport (if foreign) of the head of the Representative Office;

2.3. Documents on rental location

• Documents on the proposed location of the Representative Office include:

- A copy of the memorandum of understanding or lease agreement or a copy of the document proving that the trader has the right to exploit and use the location to set up the Representative Office; 

- A copy of the location documents proving that the location is suitable in terms of security, order, labor safety and hygiene and other conditions.

              Note: 

• Representative offices are not allowed to lend or sublease their headquarters.

2.4. Documents to be filled out according to the form:  

Application for a License to establish a Representative Office according to the form of the Ministry of Industry and Trade signed by an authorized representative of the foreign trader;

Source: Law Library

3. Activities of foreign company representative offices in Vietnam

3.1. Permitted Content

- Operate according to the purpose, scope and duration specified in the Establishment License. 

- Rent office, rent and purchase equipment for office operations 

- Have a seal bearing the name according to the provisions of Vietnamese law 

Open accounts in foreign currency or Vietnamese Dong at banks licensed to operate in Vietnam and use these accounts only for operations. 

3.2. Prohibited Content

- Not directly conduct profit-making activities in Vietnam 

- Only conduct trade promotion activities within the scope permitted by law. 

Do not enter into contracts on behalf of the Representative Office. 

3.3. Obligation to perform 

- Pay taxes, fees, charges and fulfill other financial obligations as prescribed by Vietnamese law. 

- Report on office activities according to Vietnamese law

4. Notes when establishing a representative office of a foreign company in Vietnam

• In theory, the parent company can pay office expenses, employee salaries to suppliers in Vietnam but may have to pay withholding tax for each transaction and many other international bank fees. Therefore, the optimal choice is to find a suitable bank to be able to transfer a monthly budget into the office's local bank account. Normally, the representative office will not be allowed to open a local bank account directly but can change personal accounts or authorize someone to be the account holder (under a power of attorney). In this regard, it is necessary to contact and survey banks to find a suitable bank to support the business.

• During the operation, the tax department will request the office to provide bank statements, cash books, legal documents for inspection based on tax laws and anti-money laundering regulations. 

• Having a bank account in Vietnam to make monthly payments will also make it easier to provide payment records.