Setting up a representative or branch office in Vietnam
Setting up a local representative or branch office in Vietnam can be quite challenging due to language issues and often arduous procedures. However, the process is very straightforward and clear and if you already have a local team or contact, all you need is time and patience. Alternatively, you could consider working through an agent. There are many local companies and foreign law offices providing services and advice in business matters that can do the application on your behalf.
Representative office (“RO”) is not a separate legal entity under the laws of Vietnam. The activities of a RO are limited to business promotion, identification and accelerating trade opportunities, and supervising the implementation of contracts signed between its parent company and local partners. However, an important feature of the RO is that it may sign commercial contracts and agreements with local companies and governmental organizations in Vietnam.
ROs of foreign seafood businesses fall within the jurisdiction of the province-level Departments of Industry and Trade (“DOIT”). Accordingly, the title that the RO holds reflects the respective province where the business is located (e.g. the representative office of company X in Ho Chi Minh City). However, this is merely an administrative question and does not limit the authority of the RO geographically.
The Commercial Law (14 June 2005) constitutes the legal ground for representative offices and branches of foreign businesses in Vietnam. This is further specified by the Decree No.72/2006/ND-CP, on representative offices and branches of foreign businesses in Vietnam, issued by the Government on 25 July 2006, as amended and supplemented by Decree No.120/2011/ND-CP, dated 16 December 2011, of the Government (“Decree 72”).
Under Article 4 of the Decree 72, a foreign business entity duly established and operating for at least one year under the laws of the country of its head office may apply for establishment of a resident representative office in Vietnam. The foreign company is entitled to establish representative offices in any province in Vietnam. The number of representative offices in Vietnam of a foreign company is unlimited.
To establish a representative office in Vietnam, a foreign company must apply for a license issued by the provincial DOIT, and complete post licensing procedures including notice of operation and obtaining a seal. A set of application files for establishment of the representative office must be submitted to the provincial DOIT. As orientation, an application must contain the following documents (this might change or vary depending on the place of application):
- Application form;
- A legalized copy of the Certificate of Incorporation and any amendments of the parent company;
- A certified and legalized copy of the Memorandum and Articles of Association of the parent company (if any);
- A legalized copy and Vietnamese translation of the audited financial statements of the parent company for its latest financial year issued by an auditing company;
- A notarized copy of Office Lease Contract; and
- A notarized copy of Chief Representative’s passport.
All foreign documents must be legalized and then translated into Vietnamese by an authorized translator.
A RO license should be granted within reasonable fifteen days from the receipt of the satisfactory file. After receiving the RO license, further steps need to be undertaken as part of the registration process. These include, among others, a public announcement of the establishment of the RO in a printed (and licensed) newspaper in Vietnam, start of operations, and submitting a notice of operation. At that stage, the RO can then also open a bank account, apply for a business seal and start an application for work permits (for foreign employees).
The entire process depends on many factors (e.g. if the documents meet the required ‘format’) and will typically take between two to six months until the office if normally operating.
There are certain obligations that the RO needs to meet with:
Duration of License
- The staff of the RO is subject to relevant tax obligations in accordance with the laws of Vietnam. The RO is responsible for its proper declaration and accordant payments.
- The RO needs to report once a year on its operations
- Important changes (e.g. change in staff) need to be reported
The license of a representative office has a term of three to five years. After that, the license can be renewed. If the parent company’s business license or establishment certificate expires, the license of the representative office will also expire.
The RO’s operations are not subject to tax, except for personal income tax on the salaries of its staff mentioned above.
A RO is not allowed to directly engage in commercial activities. It may therefore not receive payments or funding other than from its parent company.
Unlike the representative office, branches of foreign business entities are allowed to conduct commercial activities such as the purchase and sale of goods and other activities consistent with its license and in accordance with the laws of Vietnam and any international treaty to which Vietnam is a member.
The application process and reporting duties of a branch are similar to that of a RO.