FOREIGN REPRESENTATIVE OFFICES IN VIETNAM

HOW TO MANAGE THE ANNUAL OPERATION REPORTS

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.

Fail to prepare and submit the annual operation reports may impact to good standing, prevent office license extension, leads to serious penalties, and special inspection from licensing agency.

LEGAL GROUNDS

1. By January 30th of the following year, every representative office shall deliver in person or mail the annual report on its operations using the form issued by the Ministry of Industry and Trade to the licensing agency.
2. Also, upon the request of competent state regulatory authorities, a representative office shall submit operation reports, documents and other explanatory information, which are kept at its office for its license renewal/revision during its operation.
3. There will be comparison between licensing agency with others state agencies, therefore, the figures and information in the report shall be consistent with submitted reports to the Tax department and Labor department.
4. Failure to submit the annual operation reports on time may lead to a penalty of up to 40 million VND and impact to good standing of representative office in Vietnam, prevent representative office license extension in future.
5. Last but not least, based on the annual operation report, the competent state agencies will review and identify if there are any violation between actual activities with allowed activities of a representative office, and, if the the activities are fair with number of employees, operation expenditures…

WHAT ARE THE REQUIREMENTS ON ACCOUNTING AND TAX REPORT FOR A REPRESENTATIVE OFFICE

Base on every 3 to 5 years of office operating, the Tax Department will require your office to provide cashbooks – petty cash, bank statements, all related vouchers – lawful invoices as well as employees profile, payrolls for tax inspection:

1. How much the fund from headquarters over the years of operation.
2. How much the paid expenditures.
3. How much the paid salary and insurances.
4. If the paid expenditures are in line with allowed activities of the office? If the paid expenditures proved by the lawful invoices? If not, there will be tax arrears and fines.
5. If the paid salary has lawful labor records? If not, there will be tax arrears and fines.

Actually, many representative offices have been paying for disaster lessons during the inspections. To avoid seriously tax arrears and fines which may also impact to your good standing in Vietnam, you should:

1. Review the required business records and compliance reports in advance,
2. Verify for any of exists and risks,
3. Complete the required records and reports to manage the final payable amount in the optimal – reasonable – lawful manner.

WHAT ARE THE REQUIRED PROCEDURES THAT FOREIGN EMPLOYEES IN VIETNAM SHALL BE COMPLIED WITH?

1. Visa for experts and businessmen
2. Work permit
3. Temporary residence card
4. Personal income tax
5. Compulsory insurances
6. Labor contracts, Employment records and relations
7. Rights and obligation of Chief of representative offices and other procedures at the local competent state agencies

WHAT ARE THE REQUIRED PROCEDURES ON LABOR RELATIONS?

1. Relations between employees with company in signing and implementation of labor contracts, payrolls…
2. Relations between company with Compulsory insurances and labor agencies in reporting and payments, Social/health/unemployment insurance management.
3. Relations between company with Tax Department in reporting, payments and annually settlement, quarterly declaration, annual final tax settlement, tax refund, tax completion certificates.

We hope will support you to completely remove any exists and risky things from 2020 and before, create good bases for you to prevent the same things may happen in years ahead.

Read more:

• Annual operation reports for foreign representative offices
• Manage the annual operation reports 2021
• Manage the annual operation reports 2022
• Representative office in Vietnam: Internal audit plan
• Representative office in Vietnam: Business records management
• Representative office in Vietnam: Risk management on operation
• Representative office in Vietnam: Annual budget and running cost
• Representative office in Vietnam: Manage 08 compliance procedures
• Representative office in Vietnam: Cashbook and lawful invoices for tax inspection
• Representative office in Vietnam: Annual operation reports for foreign representative offices
• Representative office vs subsidiary vs branch? How to transform business models in Vietnam