Establishing a branch of the foreign trader in Vietnam is an important issue and needs to be considered carefully. It is not only a significant step and decision in expanding business operations, but also compliance with Vietnamese Law strictly. Thus, How is such a matter regulated according to Vietnamese legal regulations? NPLaw will provide readers with the following necessary information on a branch of the foreign trader:
Establishing a branch of the foreign trader in Vietnam is an important issue and needs to be considered carefully. It is not only a significant step and decision in expanding business operations, but also compliance with Vietnamese Law strictly. Thus, How is such a matter regulated according to Vietnamese legal regulations? NPLaw will provide readers with the following necessary information on a branch of the foreign trader:
I/ Current state of establishing a branch of the foreign trader
In the context of global integration and strong development of international commerce. Traders not only conduct business operations in a country but also seek opportunities to expand their commercial existence in many different nations in the world. Establishment of branches in potential places becomes a commonly important strategy, helping them access new markets and customers and creating various incomes. Vietnam is also one of nations paying attention to many traders with considerable economic developing potential. However, besides its significant benefits, the extension of international business also has many troubles and challenges. One of the troubles is compliance with Vietnamese Law strictly, requesting traders to clearly understand and seriously apply legal regulations.
II/ Legal regulations on a branch of the foreign trader
1. What is a branch of the foreign trader?
Pursuant to Clause 7, Article 3 of the Commercial Law 2005, a branch of the foreign trader in Vietnam is considered a dependent unit of such foreign trader, established and operated in Vietnam according to Vietnamese legal regulations or treaties in which the Socialist Republic of Viet Nam is a member.
2. How are rights and obligations of a branch of the foreign trader according to Vietnamese Law?
For rights, according to Article 19 of the Commercial Law 2005, rights of a branch of the foreign trader in Vietnam are specifically stated, as follows:
- Hiring headquarters, and hiring and purchasing necessary means and equipment for branch’s operations.
- Recruiting Vietnamese and foreign employees for working at a branch as defined by Vietnamese Law.
- Entering into contracts in Vietnam appropriate with operation contents as stated in the Branch Establishment License and this Law.
- Opening an account in Vietnamese dong and foreign currency at a bank permitted to operate in Vietnam.
- Transferring profits abroad as defined by Vietnamese Law.
- Having the seal named a branch as defined by Vietnamese Law.
- Conducting activities of good purchase and sale and other commercial operations appropriate with the establishment license as defined by Vietnamese Law and treaties in which the Socialist Republic of Viet Nam is a member.
- Other rights as prescribed by Law.
For obligations, according to Article 20 of the Commercial Law 2005, obligations of a branch of the foreign trader in Vietnam are specifically stated, as follows:
- Implementing accounting regimes in accordance with Vietnamese Law; if there is any application for other common accounting regimes, it needs to be approved by the Ministry of Finance of the Socialist Republic of Viet Nam.
- Reporting branch’s operations according to Vietnamese Law.
- Other obligations according to legal regulations.
3. What are conditions for issuing the establishment license of a branch of the foreign trader?
Pursuant to Article 8 of Decree No. 07/2016/ND-CP, a foreign trader who is issued for the Branch Establishment License has to meet the following conditions:
- Foreign traders are allowed to establish and register their businesses according to Law of countries and territories participating in International Treaties in which Viet Nam is a member or as prescribed by Law of such countries or territories;
- Foreign traders have operated for at least 05 years from the date of the establishment or registration;
- If the Business Registration Certificate or equivalently value documents of foreign traders specifically state an operation duration, such a duration must be valid for at least 01 year from the date of submitting dossiers;
- Branch’s operation contents are required to be appropriate with Vietnam’s market opening commitments in international treaties to which Viet Nam is a member and consistent with business lines of foreign traders;
- If branch’s operation contents aren’t appropriate with Vietnam’s commitments or foreign traders aren’t subject to countries or territories participating in international treaties to which Viet Nam is a member, the relevant Ministers are competent agencies for approving the branch establishment.
III/ Questions on a branch of the foreign trader
1. Is the branch establishment license a required condition for setting up a branch of the foreign trader?
In cases of establishing a branch in general and a branch of the foreign trader in particular, the Branch Establishment License is the most basic and mandatory condition for a branch to be officially established and put into operation.
In addition to, according to Clause 5, Article 35 of Decree 07/2016/ND-CP, the revocation of the branch establishment license of a foreign trader will be a legal basis to terminate branch’s operations.
Thus, the branch establishment license is a required condition for setting up a branch of the foreign trader.
2. Is a branch of the foreign trader allowed to enter into the lease contract of headquarters?
Pursuant to Clause 1, Article 19 of the Commercial Law 2005, a branch of the foreign trader is allowed to enter into the lease contract of headquarters to serve a branch’s operations.
3. How long does a branch of the foreign trader not operate, then it will be revoked the establishment license?
Pursuant to Article 44 of Decree No. 07/2016/ND-CPCP, a branch of the foreign trader in Vietnam will be revoked for the establishment license in the following cases:
- Not operating within 01 year and not arising any transaction with the Agency issuing such the license.
- Not reporting any operations of a Representative Office and a branch within 02 continuous years.
- Not providing any documents or explaining issues related to its operation as required by the competent State authorities to the Agency issuing the license within 06 months from the date of the submission of reports expires or the receipt of a written request.
- Other cases as defined by Law.
4. Can a branch of the foreign trader organize the sale promotion in Vietnam?
Pursuant to Article 91 of the Commercial Law 2005, a branch of the foreign trader in Vietnam is allowed to organize the sale promotion by itself or hire traders operating promotion services to implement it. Thus, in common, a branch of the foreign trader can be permitted to conduct promotion activities.
IV/ Legal advice services on a branch of the foreign trader
Above is some content on a branch of the foreign trade. To receive support and advice on legal regulations for such a matter from professional lawyers and a team of specialists, Clients may contact NPLaw immediately with some of the following information:
