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.
Enterprises incorporated in Vietnam under the legal forms such as limited liability companies, joint-stock companies, and private enterprises, etc., whether they are owned by domestic or foreign investors, may establish representative office at locations other than the places where their head offices are based (but only within the territory of Vietnam).
GENERAL INFORMATION
- Enterprises incorporated in Vietnam under the legal forms such as limited liability companies, joint stock companies, and private enterprises, etc., whether they are owned by domestic or foreign investors, may establish representative office at locations other than the places where their head offices are based (but only within the territory of Vietnam).
- An established representative office is a dependent unit of an enterprise that represents the interests of such enterprise in proxy and protects such interests.
- There is no limit to the number of established representative offices as well as their locations in the territory of Vietnam.
WHEN SHOULD AN ENTERPRISE ESTABLISH REPRESENTATIVE OFFICE?
- Typically two following distinct business needs will give rise to the establishment of representative office: first, there are transactions that require personnel organization outside the province, away from the head office to conduct; and second, these transactions are not directly related to the revenue generation and sales or purchases of goods, for instance, product introduction, customer care, HR training, and contract performance support for the head offices, etc.
- Setting up representative offices in other provinces becomes a good choice for enterprises operating in certain services that are not directly available at the entities’ addresses such as tourism, construction, consultancy, and so on.
- Furthermore, for satisfying the requirements of business management as well as the easiness of decentralization and authorization, enterprises can also establish representative office with specific objectives and tasks.
RIGHTS OF A REPRESENTATIVE OFFICE
- To have its own establish license, seal, and bank account.
- To display and introduce goods and services.
- To act and support business transactions on behalf of and under authorization of the head.
- Not to pay annual excise taxes (except in certain cases where the office is part of the revenue chain for the head office).
- Not to make accounting books, financial statements or tax returns (all will be accounted and declared dependently on the head office).
OBLIGATIONS OF A REPRESENTATIVE OFFICE
- To duly conduct business registration.
- To hang the signboard and operate in accordance with the provisions of the Enterprise Law and within the scope of authorization of the head office.
- Not to directly carry out trading in goods and services.
- To prepare and keep records and books to report to the parent company and at the request of the state regulatory authorities.
REPRESENTATIVE OFFICE MANAGEMENT
- A representative office may be managed on the basis of its functions – scope of activities stated on the business registration certificate. Accordingly, depending on business requirements, the head office may make the list of areas to be registered. Be sure to properly and fully register activities needed to control the risks right from the beginning. In this way, the highest manager of the business can control the representative office’s scope of activities thoroughly and legally. (*)
- Management may also be exercised by limiting the rights and obligations of the representative office’s chief through the appointment decision, labor contract, authorization contract, working procedures, and reporting regime. Since the record defining the rights and obligations of the chief of the representative office, involves, in addition to risk prevention, fairness and transparency for both the company and the employees, the employment-related rights and obligations, personal income taxes, and so on, it must be prepared by a skilled officer. By means of these clear regulations combined with the scope of activities specified in the license (*), the enterprise can manage and control in a systematical and legal manner all operations of its representative office so that it would be easy to identify persons responsible for and handle any errors.
- Also, other than the Chief of the Representative Office, there are employees involved in the work; hence, clear regulations on workplace, compensation, confidentiality and other matters should be provided.
ESTABLISHMENT AND DISSOLUTION PROCEDURES
- It is quite simple to establish representative office and apply for a rep office registration certificate, just with the provision of 03 documents consisting of a copy of the parent company’s business license, a copy of the ID card of the Chief of Office, and a copy of the office lease. The procedures can be completed for about 05 days with the package cost of between VND 03 million and VND 06 million. Once granted the operating license, the office can decide whether or not to use the round seal.
- The office dissolution procedures are even simpler and may be done only with the original of the registration certificate and the forms. However, in office dissolution, it is necessary to pay attention to the procedures for adjustment and liquidation of labor contracts entered into with employees properly to avoid subsequent matters regarding personal income tax, insurance, and wages. In addition, the procedures for liquidation of the lease, seal cancellation, and announcement issuance, etc should be fulfilled.
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