The representative office of a foreign business entity in Vietnam is a dependent unit of the foreign trader, established in accordance with Vietnamese law to understand the market and carry out certain trade promotion activities permitted by Vietnamese law. So, how is the head of the representative office of a foreign business entity regulated? The article below by NPLaw will clarify this issue.
The representative office of a foreign business entity in Vietnam is a dependent unit of the foreign trader, established in accordance with Vietnamese law to understand the market and carry out certain trade promotion activities permitted by Vietnamese law. So, how is the head of the representative office of a foreign business entity regulated? The article below by NPLaw will clarify this issue.
I. Legal regulations on the head of the representative office of a foreign business entity
Pursuant to Article 33 of Decree 07/2016/ND-CP, the head of the representative office of a foreign business entity is specifically regulated as follows:
- The head of the Representative Office or Branch must be responsible to the foreign business entity for their own activities and those of the Representative Office or Branch within the scope authorized by the foreign business entity.
- The head of the Representative Office or Branch must be responsible for their activities in case they conduct activities beyond the scope authorized by the foreign business entity.
- The head of the Representative Office or Branch must authorize another person in writing to perform the rights and obligations of the head of the Representative Office or Branch according to the law when leaving Vietnam. This delegation must be agreed upon by the foreign business entity. The head of the Representative Office or Branch Office is still responsible for performing the delegated rights and obligations.
- In case the authorization period pursuant to Clause 3 of this Article has expired and the head of the Representative Office or Branch has not returned to Vietnam and there is no other authorization, the authorized person has the right to continue performing the rights and obligations of the head of the Representative Office or Branch within the scope of the authorization until the head of the Representative Office or Branch returns to work at the Representative Office or Branch or until the foreign business entity appoints another person as the head of the Representative Office or Branch.
- The head of the representative office of a foreign business entity is not allowed to concurrently hold the following positions:
+ The head of the Branch of the same foreign business entity;
+ The head of the Branch of another foreign business entity;
+ The legal representative of that foreign business entity or another foreign business entity;
+ The legal representative of the economic organization is established in accordance with Vietnamese law.
+ In the case where the head of the representative office is authorized by the foreign business entity to conclude contracts, amend, or supplement concluded contracts, the foreign business entity must carry out the authorization in writing for each instance of contract conclusion, amendment, or supplementation.
II. Conditions for issuing a work permit to the head of the representative office of a foreign business entity
Pursuant to Clause 1, Article 151 of the Labor Code 2019, to issue a work permit to the head of the representative office of a foreign business entity, the following conditions must be met:
- At least 18 years old and fully capable of civil acts;
- Possess professional qualifications, technical skills, craftsmanship, work experience; in good health as per the regulations of the Minister of Health;
- Not a person currently serving a sentence or not yet having their criminal record expunged or currently under criminal investigation according to foreign law or Vietnamese law;
- Having a work permit issued by the competent state agency of Vietnam, except for cases where foreign workers in Vietnam are not subject to the issuance of a work permit pursuant to Article 154 of the Labor Code 2019.
III. What is required for a work permit for the head of the representative office of a foreign business entity?
Currently, there are 20 cases exempted from the work permit requirement pursuant to Article 154 of the Labor Code 2019 and Article 7 of Decree 152/2020/ND-CP. Among them, the Head of the representative office, projects of international organizations, and non-governmental organizations in Vietnam are exempt from the work permit.
For the Head of the Representative Office of a foreign company in Vietnam (not an international organization or a non-governmental organization), they will not be exempt from the work permit requirement. Therefore, after opening the Representative Office, the Head of the Representative Office needs to carry out the procedures to apply for a work permit as stipulated by law.
To obtain a work permit for the head of the representative office of a foreign business entity, it is necessary to prepare the documents pursuant to Article 9 of Decree 152/2020/ND-CP as follows:
- The employer's application for a work permit pursuant to Form Number 11/PLI Appendix I issued together with Decree 152/2020/ND-CP.
- Health certificates or health examination certificates issued by authorized foreign or Vietnamese medical organizations or agencies are valid for a period of 12 months, from the date of the health conclusion to the date of application or the certificate of sufficient health according to regulations of the Minister of Health.
- Criminal record or document confirming that the foreign worker is not currently serving a sentence, has not had their criminal record expunged, or is not under criminal investigation by a foreign country or Vietnam.
The criminal record or the document confirming that the foreign worker is not currently serving a sentence, has not had their criminal record expunged, or is not under criminal investigation must be issued no more than 06 months prior to the application submission date.
- Documents, papers proving that one is a manager, executive director, expert, technical worker, and some professions and jobs pursuant to Clause 4, Article 9 of Decree 152/2020/ND-CP;
- 02 color photos (size 4 cm x 6 cm, white background, facing straight, bare-headed, no colored glasses), taken no more than 06 months from the date of application submission.
- Document approving the need to use foreign workers except in cases where the need to use foreign workers is not required.
- Notarized copies of valid passports according to legal regulations.
- Documents related to foreign workers pursuant to Clause 8 and Article 9 of Decree 152/2020/ND-CP.
IV. Answering questions about the head of the representative office of a foreign business entity
1. What types of taxes does the head of the representative office of a foreign business entity have to pay?
Pursuant to Article 1 of Circular 111/2013/TT-BTC (amended and supplemented by Article 2 of Circular 119/2014/TT-BTC) regarding personal income taxpayers, the scope of determining the taxable income of the taxpayer is as follows:
- For residents, taxable income is income generated both within and outside the territory of Vietnam, regardless of where the income is paid.
- For individuals who are citizens of countries or territories that have signed agreements with Vietnam to avoid double taxation and prevent tax evasion on income taxes and are residents of Vietnam, the personal income tax obligation is calculated from the month of arrival in Vietnam in the case of individuals making their first appearance in Vietnam until the month of contract termination and departure from Vietnam (calculated fully by month) without having to undergo consular confirmation procedures to avoid double taxation according to the double taxation avoidance agreement between the two countries.
- For non-resident individuals, taxable income is income generated in Vietnam, regardless of where the income is paid or received.
Accordingly, the head of the representative office of a foreign business entity in Vietnam is obligated to pay personal income tax on income generated both within and outside the territory of Vietnam.
2. Can the Head of the Representative Office of a foreign business entity also be a member of the Board of Management of the company?
Pursuant to Clause 6, Article 33 of Decree 07/2016/ND-CP, it is regulated as follows:
The head of the representative office of a foreign business entity is not allowed to concurrently hold the following positions:
- The head of the branch of the same foreign business entity;
- The head of the Branch of another foreign business entity;
- The legal representative of that foreign business entity or another foreign business entity;
- The legal representative of the economic organization is established in accordance with Vietnamese law.
Therefore, except for the positions that the head of the representative office of a foreign business entity is not allowed to hold pursuant to Clause 6 and Article 33 of Decree 07/2016/ND-CP, the head of the representative office of a foreign business entity can simultaneously be a member of the Board of Management.
3. Can the director of a subsidiary company be the head of the representative office of a foreign business entity in Vietnam?
Pursuant to Clauses 6 and 8 of Article 33 of Decree 07/2016/ND-CP, the head of the representative office of a foreign business entity is not allowed to concurrently hold the following positions:
- The head of the Branch of the same foreign business entity;
- The head of the Branch of another foreign business entity;
- The legal representative of that foreign business entity or another foreign business entity;
- The legal representative of the economic organization is established in accordance with Vietnamese law.
The head of the Branch of a foreign business entity is not allowed to hold the following positions:
- The head of the representative office of another foreign business entity;
- The head of the representative office of the same foreign business entity;
- The legal representative of the economic organization is established in accordance with Vietnamese law.
Thus, if a foreign business entity has a branch in Vietnam, the head of the foreign business entity's representative office cannot simultaneously be the director of the subsidiary (which is a branch of the foreign enterprise).
V. Should I hire a lawyer to consult on issues related to the head of the representative office of a foreign business entity?
Come to NPLaw, where our team of lawyers will provide the best services when you want to become the head of the representative office of a foreign business entity.
- Consultation on legal regulations regarding the responsibilities of the head of the representative office of a foreign business entity;
- Consultation on the conditions for granting work permits to the head of the representative office of a foreign business entity;
- Support customers in preparing the dossier for a work permit for the head of the representative office of a foreign business entity;
- Support customers in completing the procedures for obtaining a work permit for the head of the representative office of a foreign business entity.
Above is the basic information about the head of the representative office of a foreign business entity. If you still find the above information difficult or confusing, please contact us. NPLaw always provides customers with the best services in terms of law. NPLaw not only provides consulting in the fields of commerce and investment but also many other services. NPLaw strives to be the wings accompanying the success of the customer. The trust of the customer today will be the foundation to help NPLaw develop further.
