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.
According to Circular No. 32/2016/TT-NHNN guiding the opening and maintenance of current accounts at payment service providers and under the provisions of this Circular, the organizations without legal person status such as family households, cooperative groups, private enterprises, lawyer’s offices and foreign representative offices are not eligible for opening current bank accounts for representative office.
BANK ACCOUNTS FOR REPRESENTATIVE OFFICE
Many current bank accounts for representative office of the organizations without legal person status such as family households, cooperative groups, private enterprises, lawyers’ offices, foreign representative offices, etc. which have been opened before Circular 32 takes effect shall be closed before March 01, 2018. For this issue, we would like to share as follows:
FOR THE OPINIONS OF STATE BANK OF VIETNAM
- Circular 32 is issued after the National Assembly adopts the Civil Code 2015 and under the provisions of Article 1 of the Civil Code 2015, effective from 01/01/2017, the subjects of the civil relations only include the individuals and legal entities. Therefore, Circular 32 is built on the basis of ensuring compliance with the provisions of the Civil Code 2015 on the subjects in civil relations. For organizations without legal person status, under the provisions of the Civil Code 2015, are not the subject of the civil relations, therefore, they do not qualify to be independent subjects participating in the opening and maintenance of current accounts at payment service providers, which are essentially contractual relationships of opening and maintaining payment accounts.
- Therefore, it can be said that the restriction of subjects participating in the opening and maintenance of current accounts only including individuals and legal entities as provided in the Civil Code 2015 and the provisions on the subjects opening and maintaining current account in the Circular 32 is in the line with the provisions on the subjects of the civil relations in the Civil Code 2015. This provision is necessary, limiting the risk to the parties, ensuring the opening and maintenance of accounts not to be invalidated due to violations of provisions on subjects under the provisions of the Civil Code 2015.
- It is true that there exit current bank accounts for representative office of organizations without legal person status before the effective date of Circular 32, and to limit the disturbance in the opening and maintenance of current bank accounts, Circular 32 provides the detailed guidance on the order and procedures for carrying out the transitional handling of these current accounts. Specifically, Circular 32 stipulates the responsibilities of banks and branches of foreign banks as follows:
- Firstly, reviewing the records, contracts for opening and maintaining current bank accounts for representative office of clients that are organizations without legal person status;
- Secondly, within 3 months from the effective date of Circular 32, notifying the customers of the transition of the existing accounts to the individual current accounts or shared current accounts (for cases involving accounts of many individuals), of the duration for completing the transformation of accounts and the handling after the expiry of the transitional duration;
- Thirdly, within 12 months from the effective date of Circular 32, coordinating with customers to complete the renewal of the opening and maintenance of current bank accounts for representative office to convert to individual or shared current or to close the accounts, if requested by the customer;
- Fourthly, after 12 months from the effective date of Circular 32, closing the accounts for the current bank accounts for representative office of clients being organizations without legal person status that have not completed the transformation of the account form.
REASONS AND IMPACTS
- There will be millions of involved organizations that shall spend a lot of time and money to close bank accounts for representative office and do other related procedures following.
- According to the Constitution 2013, the subjects of the law are “citizen” and “organization”, the simplest meaning is that the legal person of the highest and fullest legal status of the legal subject is “organization”. However, unlike the Civil Code 2005, the civil subjects include “individuals, legal entities and other entities”, while the Civil Code 2015 recognizes only two types of subjects namely legal entities and individuals. This change is considered as a “great revolution” in the legal field and has caused unforeseen disturbances.
- The underlying reason for this provision is very clear and intentional from the Civil Code 2015, which tries to remove 5 million individual business households and hundreds of thousands of existing cooperative groups from adjustment violation (so that these subjects have to transform into enterprise with full legal status).
Read more:
- Annual operation reports for foreign representative offices
- Risk management on representative office operation in Vietnam
- Tax management service for Representative offices in Vietnam
- Why foreign representative offices must open bank accounts in Vietnam?
- Representative offices in Vietnam: required to open the local bank accounts
- Opening bank accounts for representative offices and non-juridical entities
- Compliance procedures for license of foreign representative office in Vietnam
- Account for payment, withdrawals capital of foreigners who invest directly in Vietnam
