Advantages and disadvantages of branch or representative office

Establishing Branch or Representative Office For a Local Company

Advantages and disadvantages of branch or representative office

(Last Updated On: April 19, 2021)

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.

A. 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 seperate 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.

B. 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.

 

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Read more:

05 Key Steps to Set Up an FDI Company in Vietnam

Transform representative office into subsidiary in Vietnam – What you need to know



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