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.
A representative office can enhance and support a lot for parent company’s business and it also avoids risky things from local compliance procedures: no corporate income tax, no accounting books, no financial statement, no independent audit required… but there are many representative offices have been paying for very expensive lessons because they fail to meet requirements on compliance procedures.
These potential risks and exists can be verified and prevented in advance. So, what are compliance procedures? VIVA proudly suggests 08 key compliance procedures which will help your office properly comply with local laws and regulations.
PROCEDURES 01 OF 8: INITIAL COMPLIANCE PROCEDURES AFTER GRANTING THE OFFICE LICENSE
- Publish on three consecutive issues of a printed or online newspaper licensed in Vietnam
- The representative office must officially commence its operation and notify in writing the provincial/municipal Trade Service of the commencement of its operation at the registered head office.
- Open current bank account at a commercial bank.
- Register for your office electronic signature that you can declare and submit reports to competent state agencies via internet.
- Collect employee profile and prepare labor contracts.
- Tax code – Estimate personal income tax for local staffs and expats. Registering Personal Tax Code for each employee.
- Declaration of using employees.
- Managing business records, especially of compliance records for requirements from competent authority.
PROCEDURES 02 OF 8: SOCIAL INSURANCE – MEDICAL INSURANCE – UNEMPLOYMENT INSURANCE
- You should register and declare labor use for any new employee.
- For employees with labor contracts from 01 month, you should deduct 10,5% from the employees and pay more 23,5% on the salary budget for compulsory insurance. Your employees .usually focus on net receivable amount, it means if you want to pay salary net amount of 10 million VND, your actual cost will be 13 million or more.
- If you pay that way, it may impact your cash flow or headcounts limited, otherwise, you may face issues from competent authorities. So how to survive? There are still some ways…
TASK 03 OF 08: ENTER LABOR CONTRACTS
- How to prepare labor contracts in line with labor law and regulations?
- How to make the terms and conditions about working hours and Resting time; Working regulations; Working safety, health safety; Property protection and business secret, Technology secret, intellectual property; Conflict of interest, corruption – gifts or benefits and the corresponding form of discipline, responsibility?
- How to amend, renew, terminate a labor contract… to avoid labor disputes?
- And you should prepare monthly payroll and payslips in accordance with labor regulations.
TASK 04 OF 8: PERSONAL INCOME TAX
- Personal income tax for local employees.
- Personal income tax for expat.
- Personal income tax for resident.
- Personal income tax for non-residents.
- Personal monthly, quarterly declaration and annually settlement.
- 1st-year tax declaration/PIT finalization for expats having consecutive 12-month working in Vietnam.
- Taxable incomes, non-taxable incomes, tax incentives, tax exemption…
- Tax completion certificates.
TASK 05 OF 08: CASHBOOK AND PETTY CASH
- Most of people think that, a representative office does not need any accounting book. In fact, there are no full accounting books system but there must be standard reports to verify every cash in from parent company, cash out for each expenditure. And, each transaction must have a lawful invoice or papers. Fail to prepare the report or collect the lawful invoices, your office will face serious issues when tax officers do inspection or when you want to shut down your office.
TASK 06 OF 08: ANNUAL REPORT
- By January 30th of each year, every representative office shall submit operation status reports using the form stipulated by the Ministry of Industry and Trade to the licensing agency by post.
- Representative offices shall submit reports, documents and explanations for their operation upon the request of competent state regulatory authorities.
- Fail to submit the reports on time, there will be a penalty amount up to 40 million VND and a black record will impact the extension office license process in the future.
TASK 07 OF 08: EXTENSION THE OFFICE LICENSE
Other than cases be revoked such as:
- Fail to come into operation for 01 year and fail to enter into transactions with licensing agencies.
- Fail to submit reports on the operation of the representative office for 02 consecutive years.
- Fail to submit reports to the licensing agency within 06 months from the deadline of submission or at the written request of the licensing agency.
- Every office shall be eligible for grant of extension of the license or establishment of the representative office.
There are many reasons may prevent you to extend the license properly, and you should prepare in advance at least 03 months. It would take time to prepare for the papers and dossiers for the extension. Moreover, the officers will audit your previous operations, tax declaration and settlement and other condition before making decision that your office will be extended or not, new period will be 1 year or 5 years…
PROCEDURES 08 OF 8: WORKING PERMIT AND TEMPORARY RESIDENT CARD FOR EXPAT
- Foreign employees shall produce his/her work permit when carrying out immigration procedures and upon request of a competent state agency. Any foreign citizen working in Vietnam without a work permit shall be deported from Vietnam according to the Government’s regulations. Any employer employing foreign citizens without work permits shall be handled in accordance with law.
- With a work permit, foreign employees can obtain a temporary residence card (TRC) which is equivalent to 02 years multiple visas. And with a TRC, he or she can obtain the same for their family.
- There are cases in which the foreign is exempted from applying for work permit and there are cases in which the work permit is revoked or cancel. The representative office shall be responsible to sort out the work permit and temporary resident cards for their employees.
ABOUT VIVA BUSINESS CONSULTING
VIVA is the local expertise for local business compliance procedures, has been trusted by thousands of foreign investors, multinational companies from Europe, Japan, Singapore, India, Korea, USA… for the required business compliance procedures by local laws and regulations since 2006.
Thanks for consistent of practice expertise in Business laws - Employment relations – Tax and accounting – Corporate finance – Corporate services, VIVA has been successfully providing service for thousands of leading companies in such industries: Garment, energy, pharma, advertising, agricultural…
VIVA keeps its signature by offering one-stop business platform with regard to market entry and the mandatory business compliances. We ensure for our client’s good standing, in lawful and optimal manners whenever they are working and doing business in Vietnam.
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