Vietnam-based representative office of a foreign investor means a dependent unit, a lawful office in Vietnam, allowed to recruit staff to manage and promote sale contracts with local business partners, research and develop products, seeking opportunities for the purchase or sale of goods and provision of services. A foreign representative office is a simple form of investment in Vietnam to enhance business from overseas, with multiple advantages while fewer risks regarding the required business compliance procedures such as investment capital, tax, accounting, and auditing. And it is easy to be extended or terminated or dissolved. The expatriate employees who work for representative office can obtain work permit and two years multiple visa (temporary residence card) for themselves and their family in Vietnam.
All foreign businesses have the right to establish branch or foreign representative office in Vietnam. However, depending on the situation, the choice of establishing branch or representative office will bring different advantages and disadvantages. There are some analyzes to help businesses consider choosing to establish a branch or a foreign representative in Vietnam.
ADVANTAGES OF ESTABLISHING BRANCH OR REPRESENTATIVE OFFICE
Branch:
- Can do full business activities such as trading, manufacturing, service, inventory… directly. (upon the business lines of headquarter only)
- Can register and issue VAT invoice independently.
- Can keep accounting records independently or dependently.
- Can enter into contracts, to amend or supplement contracts directly.
Foreign representative office:
- Simple license procedures.
- Have separate round stamp, bank account.
- Can open and operate lawful office without limitation of number of staff.
- No monthly, annually compliance procedures of tax, accounting, labor declaration…
- No license tax.
- Easy to shutdown a representative also.
DISADVANTAGES OF ESTABLISHING BRANCH OR REPRESENTATIVE
Branch:
- Initial setting up procedures more complicated.
- Shall setting up accounting system, tax declaration separately and follow monthly, quarterly, annually compliance reports to competent state agencies.
- Annual license tax.
- Shall clear all tax obligation (final tax settlement) before shutdown.
Foreign representative office:
- Not to directly conduct profit-generating activities: No sales, no invoice, no inventory,…
- Can not issue invoices.
- Not to enter into contracts, not to amend or supplement contracts, except where chief representatives obtain valid letters of authorization from foreign the headquarter or other special cases.
Read more:
