Establishing a representative office is one common form of commercial presence for foreign traders in Vietnam to survey the market and seek partners. So what is the representative office of foreign enterprises in Vietnam and what are its related issues? Let's learn the current legal regulations related to this issue with NP Law.
Establishing a representative office is one common form of commercial presence for foreign traders in Vietnam to survey the market and seek partners. So what is the representative office of foreign enterprises in Vietnam and what are its related issues? Let's learn the current legal regulations related to this issue with NP Law.
I. The state of the representative office of foreign enterprises in Vietnam
Currently, the establishment of representative offices of foreign enterprises has a positive development in Vietnam. Here are some highlights of this issue:
- An increase in the number of the representative offices: The number of representative offices of foreign enterprises in Vietnam has increased significantly in recent years. This shows the large interest and potential development of the Vietnamese market in the future.
- Diversity of professions: The representative office of foreign enterprises in Vietnam has engaged in many activities in sectors such as manufacturing, services, finance, real estate, information technology and media.
- Most are located in big cities: Representative offices of foreign enterprises are mainly located in large cities such as Hanoi and Ho Chi Minh City where have great opportunities for business development, good infrastructure, and diverse human resources.
- Diverse functions and scales: Representative offices of foreign enterprises can have different functions such as marketing, sales, research and development, branch management, customer support, etc. The scale of the representative offices also varied from small to large, depending on the enterprises’ objectives.
- Contribution to economic development: The representative office of foreign enterprises contributes significantly to the economic development of Vietnam. Besides, it creates job opportunities, attracts foreign investment, improves the quality of products and services, and enhances economic cooperation between Vietnam and other countries.
However, there are still issues related to some aspects such as competition market, legal regulation, business culture, and language. Therefore, foreign enterprises need the appropriate strategy and knowledge to succeed in Vietnamese businesses.
II. Regulations on representative offices of foreign enterprises in Vietnam
1. Conditions for issuing the representative office license for foreign traders in Vietnam
Pursuant to Article 7 of Decree 07/2016 / ND-CP on the conditions for issuing the representative office license for foreign traders as follows:
- Foreign traders are entitled to establish and register for their businesses in accordance with Vietnamese laws and territories being parties to international treaties to which Vietnam is a member or recognized by the laws of aforesaid countries and territories;
- Foreign traders have been operated for at least 01 year from the date of establishment or registration;
- In the case of business registration certificate or equivalent valid documents of foreign traders with specified term of operation, the term must be at least 01 year from the date of submission;
- The scope of operation of the representative office shall be consistent with Vietnam's commitments in international treaties to which Vietnam is a member;
- If the scope of operation of the representative office is inconsistent with that in the commitments of Vietnam or foreign traders are not in the countries or territories being party to the international treaties to which Vietnam is a member, the establishment of the representative office must be approved by the Ministers, Heads of ministerial agencies (hereinafter referred to as "Minister").
2. Rights and obligations of the representative office of foreign traders
Pursuant to Article 34 of Decree 07/2016/ND-CP on the rights and obligations of the representative office of foreign traders as follows:
- Rights and legal interests of the representative office shall be protected in the process of operating in Vietnam in accordance with Vietnamese law.
- The representative office shall exercise the rights and obligations prescribed in the Law on Commerce and the License.
3. Headquarters of the representative office of foreign traders
Pursuant to Article 28 of Decree 07/2016/ND-CP on the headquarters of the representative office of foreign traders as follows:
- The location of the headquarters of the representative office of foreign traders must be consistent with the provisions of Vietnamese Laws on the conditions of security, order, occupational safety and health, and others as prescribed by Law.
- Representative offices shall not lend or sublet their headquarters.
4. Cases of termination of representative office activities
Pursuant to the provisions of Article 35 of Decree 07/2016/ND-CP on cases of termination of operation of the representative office as follows:
- By the request of foreign traders.
- When foreign traders terminate operations under the Law of the country or the territory in which the traders establish or register for operating their representative office.
- Expiration of the operation term under the Establishment License of the representative office and branches that foreign traders do not request to renew.
- Expiration of the operation term under the Establishment License of the representative office and branches without being agreed to renew by the licensing Agencies.
- The Establishment Licenses of the representative office and branch are revoked according to Article 44 of this Decree.
- Foreign traders, representative offices and branches no longer satisfy one of the conditions prescribed in Article 7 and Article 8 of this Decree.
III. Some questions about the representative office of foreign enterprises in Vietnam
1. Can a foreign trader establish more than one representative office in Vietnam?
Pursuant to Article 3 of Decree 07/2016/ND-CP on the rights to the establish the representative office and branches of foreign traders in Vietnam as follows:
1. Foreign traders are entitled to establish their representative offices and branches in Vietnam consistent with Vietnam's commitments in international treaties to which Vietnam is a member.
2. A foreign trader shall not establish more than one representative office or branch of the same name within a central province or city.
Therefore, under the aforesaid provisions, foreign traders are entitled to establish their representative offices in Vietnam consistent with Vietnam's commitments in international treaties to which Vietnam is a member. In addition, a foreign trader can establish many representative offices. However, foreign traders are not entitled to establish more than one representative office with the same name within a central province or city.
2. What is the difference between the representative office and the branch of foreign traders
Some criteria for distinguishing the representative office and the branch of foreign traders:
|
Criteria |
Representative office |
Branch |
|
Function |
The representative office only operates and performs the representative function as the contact office under the authorization, learning the market and promoting the business investment opportunities of its trader. |
It operates and performs both business functions and representative functions under authorization. If the representative office operates in the professions with requested conditions, it is only allowed to operate when meeting the conditions prescribed. |
|
Business operations |
No business function |
Being entitled to have business registration for all professions registered by the company |
|
Rights |
+ Operating for the right purposes, scope and duration specified in the License of the representative office. + Renting headquarters, and renting and buying the necessary facilities for the representative office's operations. + Recruiting Vietnamese and foreign employees to work in the representative office in accordance with Vietnamese law. + Opening accounts in foreign currency and foreign currency-based Vietnam dong at banks licensed to operate in Vietnam, and only using this account for activities in the representative office. + Having a seal under the name of the representative office in accordance with Vietnamese law. |
+ Renting headquarters, and renting and buying the necessary facilities for the branch's operations. + Recruiting Vietnamese and foreign employees to work in the branch in accordance with Vietnamese law. + Entering into contracts in Vietnam consistent with the operation contents specified in the Establishment License of the branch and this Law. + Opening an account in Vietnamese Dong, and in foreign currency at the bank licensed to operate in Vietnam. + Transferring abroad profits in accordance with Vietnamese law. + Having a seal under the name of the branch in accordance with Vietnamese law. + Performing activities to buy and sell goods and other commercial activities in compliance with the License in accordance with the Vietnamese laws and international treaties to which the Socialist Republic of Vietnam is a member. |
|
Obligations |
+ Not operating profit-generating activities directly in Vietnam. + Operating trade promotion activities only within the scope permitted by The Commercial Law in 2005. + Not entering into contracts, and not amending or supplementing contracts already entered into by foreign traders, except where the head of the representative office has legal power of attorney from foreign traders or the cases specified in Clauses 2, 3, and 4, Article 17 of the Commercial Law 2005. + Paying taxes and fees, and fulfilling other financial obligations stipulated in Vietnamese law. + Reporting on the operation of the representative office according to Vietnamese law. |
+ Implementing the accounting regime stipulated in Vietnamese law; in cases where it is necessary to apply another common accounting regime, approval by the Finance Ministry of the Socialist Republic of Vietnam is required. + Reporting the branch’s operation according to Vietnamese law. |
|
Taxes shall be paid |
Personal income tax |
Value Added Tax Business License Tax Corporate Income Tax Personal Income Tax |
|
Tax accounting |
Declaring independently to the company at the tax office where the headquarters of the representative office is located. |
Being entitled to select an accounting form whether independent or dependent one |
3. Can the representative office of the foreign trader operating in Vietnam perform commercial advertising activities directly?
Pursuant to Article 103 of the Commercial Law 2005 on the right to commercial advertising stipulated as follows:
- Vietnamese traders, and branches of Vietnamese traders and branches of foreign traders entitled to conduct commercial activities in Vietnam have the right to advertise their goods and services, or hire merchants who trade in advertising services to do for themselves.
- The representative office of the trader shall not directly perform commercial advertising activities. In the case of being authorized by the trader, the representative office has the right to sign contracts with commercial advertising services to advertise for the trader’s business operation.
- Foreign traders who expect to advertise their goods and services in Vietnam must hire commercial advertising services in Vietnam to advertise for themselves.
From the above specific legal bases, the representative offices of foreign traders operating in Vietnam are not entitled to directly perform commercial advertising according to Clause 2, Article 103 of the Commercial Law 2005. However, in the case of being authorized by traders, your representative office has the right to sign contracts with commercial advertising services to advertise for the trader’s business operation. (according to Clause 2, Article 103 of the Commercial Law 2005).
IV. Legal consulting services on representative offices of foreign enterprises in Vietnam
Above are all the details that NPLaw provides to assist you in the matter of the representative office of foreign enterprises in Vietnam. In case you have any questions related to the above issue or other legal issues, please contact NPLaw for direct advice and guidance to resolve.
