FOREIGN INVESTED COMPANY OR REPRESENTATIVE OFFICE
WHICH FORM OF BUSINESS FOR YOU IN VIETNAM?

foreign invested company or foreign representative office in vietnam

FOREIGN INVESTED COMPANY OR REPRESENTATIVE OFFICE
WHICH FORM OF BUSINESS FOR YOU IN VIETNAM?

(Last Updated On: September 12, 2022)

foreign invested company or foreign representative office in vietnam

WHY REPRESENTATIVE OFFICES?

The foreign representative office in Viet Nam is a dependent unit supporting business operations of the parent company, which is allowed to do basic business activities such as opening a resident office, recruiting employees, managing and promoting local business contracts, market research., etc. Representative Offices tend to be utilized by foreign investors in fields such as sourcing of products, quality control, and general liaison activities between the Head Office and the Representative Offices overseas. Some reasons that representative office is a preferred  option when doing business in Vietnam:

  • No investment capital required.
  • No Value Added Tax, no Corporate Income Tax, no Accounting, no financial statements, no independent audit required.
  • Easy to extend, terminate or dissolve when necessary.
  • Allowed to recruit local and foreign employees.
  • Based on new Labor law in Vietnam, there are no limit on the number of foreign employees for representative office. In case the office can prove its demand fair with commercial operations, the office entitles to determine the demand for foreign workers for every job position for which Vietnamese workers are underqualified and request acceptance from the local competent state agencies for work permits.

Despite the advantages, representative offices are not allowed for actual “business” such as sales and profitable activities and must strictly complied with the local regulations and procedures. In fact, many representative offices have been paying for expensive lessons due to unintentional violations.

WHY FDI COMPANY IN VIET NAM?

Foreign investors can grab more business opportunities in the Vietnamese market thanks to the current political and economic context in Vietnam. The State recognizes the continued existence and development of types of business entities defined in the Law On Enterprises; ensures the legal equality of enterprises regardless of their forms and economic sectors, and acknowledges the legitimate profitability of the business.

The four most common types of legal entities in Vietnam are:

  1. Limited liability company
  2. Joint stock company
  3. Incorporated partnership
  4. Representative office

The list of required business licenses that a foreign invested company shall be granted:

  1. Investment registration certificate (for foreign investors to invest in Viet Nam directly).
  2. Enterprise registration certificate (for doing business in line with local business laws).
  3. Business license (for trading activities).
  4. Registration website for providing e-commerce service
  5. Other permits depend on the actual operation (Regarding environmental, fire protection, conditional industries).

 

 

ADVANTAGES AND DISADVANTAGES?

VIVA would like to share some advantages and disadvantages of each business model that may sharpen your business choice in Vietnam.

COMPETITIVE FORM FDI COMPANYREPRESENTATIVE OFFICE
ADVANTAGES1. Has separate legal identity than its shareholders and directors. It has the rights of a natural person.1. No Corporate Income Tax.
2. Can sue and be sued in its name.2. No monthly and quarterly VAT declaration.
3. Can do full business activities such as trading, manufacturing, service, purchase property and estates for its own use.3. Annually audited financial statements are not required to file their annual accounts.
4. Full legal status and can enjoy all rights of a business unit in civil administrative and business regulations such as ownership of properties, expansion investment, opening new branches, new factories, new offices, invest in others businesses.4. Easy to terminate – dissolute – closure.
5. Shareholders and directors’ liability extends only to their amount invested in the shares of the company.5. Compliance requirements of a representative office are not as strict as compared to other types of subsidiary companies.
6. A Limited Liability Company (LLC) is responsible for its own debts and losses.6. Running costs of the representative office is lower as the law demands fewer administration requirements.
7. A LLC has perpetual existence which does not depend on the membership of any shareholders. It still goes on if a shareholder or a director dies or is bankrupted.
8. Shareholders can transfer their ownership in the company by selling their shares.
9. The rules and regulations applied to these companies are the same for local or foreign investors.
10. Enjoy the tax incentives: VAT refund, CIT exemptions, exemption of import duty.
11. Open bank accounts with no limit, receipt and payment domestic and abroad, transfer of profits to home country.
12. Invest – withdraw the capital and profit abroad officially.
13. Allowed to receive incomes from many sources such as investors, customers, loans…
DISADVANTAGES1. Full accounting system on VAS is required to file their annual accounts.1. Not allowed to do any profitable activities (No trading, no manufacturing, no provide service, no import – export goods, no inventory...)
2. Annually audited financial statements are required to file their annual taxes settlement.2. Can not recruit directly, restrictions on the number and area permitted recruitment.
3. Should declare and pay for Corporate Income Tax (0% to 20%) on profit and audit by tax department, declare for VAT and other taxes monthly and quarterly.3. Limited operating period for every 5 years.
4. Should prove for financial ability at the beginning and pay up the registered capital in the investment license.4. Can not transfer the ownership.
5. There are still some limitations on foreign investors in the number of business areas. 5. Limited income and payment: Not allowed to receive income from many sources such as investors, customers, loans… , but a single source from Headquarter and pay for limited activities of the office.
6. Can not expand more offices, branches.
7. Has no legal status.
8. Can not deduct or refund VAT – has to bear VAT as the end users / consumers.

 

ABOUT VIVA BUSINESS CONSULTING

Who we are?

  • VIVA is a business consulting company, specializes in business compliance procedures according to local business laws and regulations since 2006. VIVA has been continuously trusted by thousands of well-known clients since 2006.
  • The insights and consistent backgrounds in Business Laws – Accounting and Corporate Finance – Tax Management – Labor Relations and Payroll – Secretarial services help us build trust and confidence in the entrepreneur's community.
  • We have been successfully providing service for thousands of leading companies from Hong Kong, Japan, US, EU, Singapore, India, China, Korea…. in forms of FDI companies, Foreign representative offices, Foreigners working in Vietnam, Vietnamese SMEs, Chief Operation Officers.

What we do

  • Services for Expats in Vietnam: Visa, Work Permit, Temporary residence card, Compulsory Insurances, Personal Income tax, Labor contracts, Employment Records and Relations, Other Secretarial Services.
  • Services for Representative offices in Vietnam: Establishment, extension of representative office licenses. Required compliance procedures during operation. Rights and obligations of the chief of representative office. Closure of representative office risks management.
  • Services for a company in Vietnam: Setting up a new company and licensing service. Business records management. Daily business transactions management. Tax management. Accounting and financial statements. Employments, payroll and compulsory insurances. Representative on behalf of competent state agencies for any business administration procedures.

 

Motivated by our core values of ceaseless improvement, our great insights in local business culture and regulations, as well as the exclusive services, promise to offer you one-stop and tailored-made solutions that optimize every of your business in Vietnam in the lawful manner.

We are looking to be your valued business partner and resources in Vietnam as we have been choosing since 2006.

 

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