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.
HOW VIVA BUSINESS CONSULTING ENSURE REPRESENTATIVE OFFICE BE FULLY COMPLIED WITH LOCAL REGULATIONS – KEEP YOUR GOOD STANDING IN CONSISTENT MANNER?
WHY FOREIGN REPRESENTATIVE OFFICE IN VIETNAM?
- The foreign representative office in Vietnam is a dependent unit supporting business operations of the parent company, which is allowed to do basic business activities such as open a resident office, recruit employees, manage and promote 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.
- The representative offices are generally easier to establish than a branch or subsidiary, as they are not used for actual “business” (e.g., sales) and therefore there is less incentive for them to be regulated.
- The representative office is quite simple and cost-effective: No investment capital, no Value Added Tax, no Corporate Income Tax, no Accounting, no financial statements, no independent audit required … and easy to extend, terminate or dissolve when necessary.
ALLOWED ACTIVITIES OF FOREIGN REPRESENTATIVE OFFICES
Vietnam-based representative offices of foreign enterprises can conduct these activities:
- Act as a bureau of communication.
- Market research.
- Facilitate investment projects of foreign enterprises.
- Expedite and monitor the implementation of projects in Vietnam, which are sponsored by foreign enterprises.
- Representative offices of foreign enterprises in Vietnam shall not carry out business activities in Vietnam.
MORE ADVANTAGES OF FOREIGN REPRESENTATIVE OFFICES?
Establishing a foreign representative office is the optimal option for local customer care, market research, without having to invest capital or pay corporate income taxes.
- 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 the new Labor law in Vietnam, there is no limit on the number of foreign employees for a representative office. In case the office can prove its demand fair with commercial operations, the office is entitled 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.
OUR SERVICE OF “FULL COMPLIANCE PROCEDURES FOR REPRESENTATIVE OFFICE IN VIETNAM” WITH EXCLUSIVE SCOPES FOR YOUR OFFICE IN 2023:
The general required compliance procedures:
- Local Bank accounts
- Business record management: Standard folders |Daily records | Scan into soft files | Records completion…
- Manage the labor relations: Employee profile | Labor contract | Payrolls | Compulsory insurances | PIT
- Tax management and Accounting: Bank statements | Cashbook | Petty cash | Complete the reports and risk management
- Foreign employees: Employee profile | WP | TRC | PIT | Compulsory insurances | Rights, obligations, and compliance requirements on the chief
- Licensing and other procedures: Annual operation reports | Extension of office license | Amending and adjusting the license
Some typical procedures for daily transactions:
Management of employment relations:
- Employee profile.
- Labor regulations, labor contracts, labor agreements with employees.
- Implement and manage the labor contracts.
- Payrolls service.
- Internal Labor rules and codes of conduct.
- Compulsory insurances, labor regimes, labor disputes.
- Monthly and quarterly reports of Social and medical declaration.
- Representative, on behalf to manage and settle with the competent state agencies for any query or requirement.
- Other required relations between employees with a company in signing and implementation of labor contracts.
- Other required relations between a company with Insurances and Labor agencies in reporting and payments.
- Other required relations between a company with Tax Department in reporting, payments and annual settlement.
Accounting and Tax management:
- Monthly and quarterly reports on Tax declaration.
- Preparing Personal Income Tax declaration, tax settlement, and obtaining a certificate of tax completion of the chief or expat when they leave Vietnam.
- Preparing cashbooks, petty cash, vouchers and records for tax inspection. Transactions review, and complete legal documents for every transaction. Optimize tax payable amount and risk management.
- Business record management: Standard folders | Daily records | Scan into soft files | Records completion…
- Representative, on behalf of clients to manage and settle with the competent authorities for any query or requirement.
Required compliance reports:
- Annual operation reports and periodic reports for the Department of Industry and Trade.
- Monthly, quarterly and annually reports and procedures at the Department of Labour and Social Welfare Services.
- Monthly, quarterly and annually reports and procedures relating to personal income tax for staff at the Department of Taxation.
- Manage all business records and make them ready for any inspections from authorities.
- On behalf of clients to settle any query or requirement from local competent state agencies.
Required compliance for foreign employees:
- Work permit | Labor contracts | Employee profile according to local labor laws.
- Temporary resident card.
- Personal income tax.
- Compulsory insurances.
- Driving license.
- Exclusive advice for the Chief of representative office and Legal representatives in Vietnam.
THE REQUIRED PROCEDURES FOR THE CHIEF OF REPRESENTATIVE OFFICE
Professional employee profile and establish local employment relations:
- Know your employer and your title position
- Local job descriptions that shall be inlined and consistent with the position
- Establish lawful employment relations in forms of appointment letters, labor contracts, internal assignments…
- Required papers to meet local conditions on foreign employment in Vietnam.
- Manage your work permits, and residence.
Manage your personal income tax and compulsory insurances:
- Taxable incomes and tax exemption, methods of tax declaration and payment.
- Review and identify your sources of income, and tax deductions to avoid potential violations that may impact your good standing.
- Calculation of your tax payable amount and compulsory insurances in lawful and optimal manners.
- Review your tax reports and annual final settlement, apply for insurance benefits and avoid double tax payments according to the tax agreements.
- Representative on behalf to manage and settle any query or requirements from the local competent state agencies.
Manage the local business rules and regulations:
- Procedures for setting up representative offices / foreign-invested companies.
- Procedures for amendment, supplementation, and termination of office license.
- Labor rules and regulations, forms and procedures.
- Personal income tax declaration and settlement.
- Requirements and queries from competent state agencies.
- Business records and internal reports.
- Managing establishment licenses, annual operation reports, renewal and adjustment.
- Optimizing – Managing employment relations – salaries – compulsory insurances.
- Optimizing – Managing personal income tax and inspection procedures from the tax department.
- Accounting Management.
- Visas, work permits and temporary residence cards for expats.
- Extension or termination of representative office license.
- Exclusive advice for the Chief of representative office and Legal representatives in Vietnam.
- Updating new laws and regulations on foreign representative offices and expats. Closuring and upgrading representative office into a subsidiary.
MANAGE THE CASHFLOW AND REQUIRED COMPLIANCES
There are many foreign representative offices in Vietnam that have been paying serious lessons for violations of unallowed transactions or lawful invoices.
The cashflow chart from VIVA business consulting may help you for an overview on cashflow of a foreign representative office, the main transactions in order to manage the required compliances properly:
- Local bank accounts – regulations on currency and investment.
- Allowed activities of a foreign representative office.
- Employment relations.
- Compulsory insurances.
- Personal income tax.
According to the Laws on VAT invoices: The sellers should issue the lawful invoices for any services or goods sold and the buyers have responsibility to collect and keep the invoices.
Since 2012, together with the Anti-money laundering regulations and the latest updates on tax laws, the tax inspectors specially focus on representative offices for tax inspection.
EXCLUSIVE PROMOTION FOR LOYAL CLIENT WHO WILL GO WITH US IN NEXT 04 YEARS – FREE CONSULTING AND SUPPORTING:
TRANSFORM A FOREIGN REPRESENTATIVE OFFICE IN TO A SUBSIDIARY COMPANY IN Vietnam
Why no longer foreign representative office?
- Could not directly conduct profit-generating activities in Vietnam. Not allowed to do any profitable activities (No trading, no provide service, no import – export goods, no inventory, no manufacturing…)
- Has no legal status, not to enter into contracts, not to amend or supplement contracts already entered into by foreign traders.
- Limit operating period for every 5 years.
- Cannot transfer the ownership.
- Cannot expand more office, branch.
- Only get paid from headquarter for limited activities of the office.
- Must pay VAT, PIT, fees and charges, and fulfill other financial obligations provided for by Vietnamese law.
Why a subsidiary company?
Vietnam top business opportunities:
- Vietnam has been developing strongly after joining the World Trade Organization (WTO) more than 10 years ago thanks to expansion of relations and reform policies.
- The admission to the WTO opened a wide door for the Southeast Asian country to enter the global playground.
Your rights and chances:
- You can do full business activities such as trading, manufacturing, service… directly
- No limit operating period
- Open unlimited number of bank accounts, receive and payment domestic and abroad, transfer of profits to home country
- Have full legal status and enjoy all rights of a business unit in civil administrative and business regulations such as ownership of properties, expand investment, open new branch, new factory, new office, invest in others business, transfer / sale the portions of capital…
- Enjoy the tax incentives -VAT refund, CIT exemptions, duty exemption on goods imported for manufacture of domestic exports…
- There is only business Laws system, equal for both local local and foreigner investors to do business in Vietnam, deals with the establishment, organization, restructuring, dissolution, and relevant activities of enterprises, including limited liability companies, joint-stock companies, partnerships, sole proprietorships, and groups of enterprises.
HOW TO TRANSFORM THE FOREIGN REPRESENTATIVE OFFICE INTO A SUBSIDIARY COMPANY?
Firstly, terminate – dissolute – Closure the foreign representative office
There are 03 key steps to closure a foreign Representative office in Vietnam:
- Preparing for the official dissolution decision and applications and submit to the competent state agencies for closuring any further obligation. This step aims to suspend, terminate any new obligation, especial for the tax reports and other compliance procedures. From the date of proper notice to the local competent state agencies, the office is in closured standby status.
- To collect, complete the compliance business records and arrange for any certificates of obligation completion. Especial for the liquidation of employment, the certificate of tax, social insurance. This is legal requirement to guarantee that the office has no more pending obligation before allowed to closure under legal procedures.
- Upon the certificates of obligation completion, the office will closure the bank accounts, return the business licenses, return the legal stamp as final step of company closuring. This is the final paperwork as completion.
Secondly, setting up a company
There are 05 key steps to setup FDI company in Vietnam:
- Find a lawful location for your head office.
- Preparation of required legal papers.
- Apply for the investment license and enterprise registration.
- Initial compliance procedures after obtaining the licenses.
- Periodically line up compliance tasks with local regulations.
MANAGING – PLANNING ON COMPULSORY SOCIAL INSURANCE FOR FOREIGN EMPLOYEES WHO ARE WORKING IN VIETNAM
According to Decree No. 143/2018/ND-CP October 15, 2018, compulsory social insurances (SI) for foreigners who are working in Vietnam include the following benefits: sickness, maternity, occupational accident, disease, retirement and death insurance benefits. The main contribution and rates shall enter into force from January 1, 2022, as follow:
The foreigners who are required to participate in the compulsory insurances
Employees who are foreign nationals working in Vietnam shall be required to participate in the compulsory SI program if they obtain work permits, practicing certificates, practicing licenses issued in Vietnam, indefinite-term employment contracts or employment contracts valid for at least one year with employers in Vietnam.
The foreign employees referred above shall be excluded from participation in the compulsory social insurance as provided herein if:
- They are intra-company transferees as stipulated in the Labor Code regarding foreign employees working in Vietnam.
- They reach retirement age under the Labor Code.
What are the compulsory insurance rates
Total compulsory social insurances contribution rates are 30%, consist of:
- The employee side shall, on a monthly basis, make a total SI contribution accounting for 9,5% of monthly pay (8% into the retirement and death benefit fund and 1,5% into the sickness and parental insurance benefit fund)
- The employer side shall, on a monthly basis, make a SI contribution accounting for 20,5% in proportion to the employee’s payroll in the SI payment month (14% in to the retirement and death insurance benefit fund, 3% into the sickness and parental insurance benefit fund, 0.5% of into the occupational accident and disease benefit fund, 3% into the health medical fund).
We are a business consulting firm who have been continuously trusted by thousands of reputation clients since 2006. We dedicated to creating added value for clients by offering exclusive and tailored services related to market entry and business compliances, keep their good standing in optimal manners whenever they are doing business in Vietnam.
We wish to serve your business successfully as our other thousand of loyal clients. We are looking forward to receiving your consideration and acceptance.
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.
- Representative office in Vietnam – What you need to know
- Representative office in Vietnam – Conditions and required papers for setting up
- Required compliance for a foreign representative office in Vietnam – what you need to know
- Representative office in Vietnam – Typical rights and obligations
- Representative office in Vietnam – Manage 08 compliance procedures
- Why foreign representative offices must open bank accounts in Vietnam?
- Representative office in Vietnam – Annual budget and running cost
- Representative office in Vietnam – Annual operation report
- Representative office in Vietnam – Risk management on operation
- Representative office in Vietnam – Chief of representative office or head of branch – role and responsibility
- Representative office in Vietnam – Cashbook and lawful invoices for tax inspection
- Representative office in Vietnam – Cases of re-grant of licenses
- Representative office in Vietnam – Taxable incomes from wages and remunerations
- Representative office in Vietnam – Internal audit – the required business records and procedures