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.
Nowadays, many representative offices in Vietnam don’t open a bank account, or don’t use the account properly. That leads to many administrative violations and other problems.
LEGAL GROUNDS
- According to Commercial Law 2005, Paragraph 4, Article 17 about Representative offices rights, opening accounts in foreign currencies or foreign currency-based Vietnam dong at banks licensed to operate in Vietnam, and to be allowed to use those accounts solely for their operations.
- According to Circular No. 32/2013/TT-NHNN dated December 26th 2013 of the State Bank of Vietnam on guiding the implementation of regulations on restricting the use of foreign exchange within the territory of Vietnam, Article 4 about Cases allowed to use foreign exchange in the territory of Vietnam, using foreign currency for the payroll between Representative offices and Vietnamese individuals, Taxation, office rental,… is prohibited.
- According to Decree 70/2014/ND-CP, Paragraph 1, Article 6, date July 17th, 2014 about ” Money transfer from foreign countries to Vietnam”, “Foreign currency receipts of residents as organizations earned from such transfer process must be deposited into foreign currency accounts opened at authorized credit institutions or sold to these credit institutions.”
PRACTICE APPLYING
- Representative offices in Vietnam must open bank accounts, in foreign currencies and VND and those accounts are exclusive for allowed activities in Vietnam.
- Any received foreign currencies shall be exchanged into VND at authorized agencies. It is not allowed representative offices to use bank accounts of the chief or other staff to receive foreign currency and pay to for local transactions.
- According to the current currency management regulations, any local transaction and expenditure shall be listed and paid in VND only. The representative office has to open an account, which is specialized in transferring money for activities in Vietnam. The action of directly transferring money through chief of representative office or other individual’s accounts are considered illegal.
- Moreover, when using the accounts to receive money from the parent company, the representative office has to comply with Vietnam accounting and taxation regulations. Especially, the related fees have to be suitable to the office’s allowed activites, have the appropriate invoices and should be reported properly.
Read more:
- Representative office in Vietnam: What you need to know
- Bank accounts for foreign representative office in Vietnam
- Representative offices in Vietnam: required to open the local bank accounts
- Opening bank accounts for representative offices and non-juridical entities
- Representative office in Vietnam: Annual operation report
- Tax management service for Representative offices in Vietnam
- Representative office in Vietnam: Cases of re-grant of licenses
- Representative office in Vietnam: Typical rights and obligations
- Representative office in Vietnam: Risk management on operation
- Representative office in Vietnam: Business records management
- Representative office in Vietnam: Annual budget and running cost
- Representative office in Vietnam: Manage 08 compliance procedures
