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.
There are nearly 10.000 foreign representative offices in Ho Chi Minh City now, and the same numbers in Binh Duong, Dong Nai, Ha Noi… some have been operating since 1995 till today. Some representative offices are operating together with a subsidiary company which all belongs to the same headquarters from overseas. VIVA would like to share some information regarding typical rights and obligations of foreign Representative Office (RO) in Vietnam.
TYPICAL BENEFITS OF REPRESENTATIVE OFFICE
- With a representative office, foreign investors can set up a lawful office in Vietnam, 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… The expatriate employees who work for representative can obtain work permit and two years multiple visa (temporary residence card) for themselves and their family in Vietnam. The license of the representative office is renewed after every two or five years. Means, you can perform your investment activities in Vietnam form of a representative office.
- Although a representative office can enhance and support a lot for business of the parent company such as it is very easy to manage and save cost and avoid risky things from local compliance procedures: No add valued tax, no corporate income tax, no accounting books, no financial statement, no independent audit required… and it is easy to shut down a representative office also. Means, operating a representative in Vietnam can help to perform your investment in the most economical option.
TYPICAL CHALLENGES OF REPRESENTATIVE OFFICE
- A representative office of foreign companies is not allowed to perform profit-making activities, and their activities are limited to market research and other non-profit activities. In case you do not have sufficient information to make a decision to invest in Vietnam yet, it would be a suitable foothold in Vietnam. Generally speaking, the initial and operating cost of representative office is much lower than the cost of having a subsidiary. On the contrary, having a subsidiary in Vietnam in the form of either Joint Stock Company or Limited Liability Company is a better form of investment for an investor who intends to manufacture products in Vietnam or to conduct sales activities. As long as you follow the regulations in Vietnam, establishing a company in Vietnam gives you more flexibility in business activities.
- A representative office shall comply with labor, social insurance regulations by registering for labor use and paying monthly insurance. The compulsory payable amount of social insurance may be up to 34,5% on the salary budget. Expats working for more than 3 months shall be granted a work permit.
- A representative office shall comply with personal income tax regulations by registering tax code numbers for every staff and declaring for monthly personal income tax, preparing and submitting annual settlement reports. The personal income tax rate for none resident is 20% on the income earned inside Vietnam, for resident is from 5 to 35% on global incomes.
- A representative office shall comply with other regulations such as anti-money laundering law, other tax law, commercial law for any activity in Vietnam. In particular, the representative should collect and manage for all the business records in related to any query or question from competent authorities. After every 3 to 5 years of operations, the tax department will perform inspection procedures to verify the true, fair and lawful of each transaction…
- A representative office shall prepare and submit an annual report for the Licensing department.
- The operation term of a representative office is 5 years at maximum and can be extended.
According to the highest current local regulations:
- Commercial Law 36/2005/QH11 dated June 14, 2005 (Basic regulation)
- Decree No. 07/2016/ND-CP (Detailed regulation)
TYPICAL RIGHTS OF REPRESENTATIVE OFFICE
- To operate for the purposes, within the scope and duration stipulated in the establishment licenses.
- To rent offices, rent and purchase equipment and facilities necessary for its operations.
- To recruit Vietnamese and expatriate employees to work for the office according to the provisions of Vietnamese law.
- To have seals bearing its name according to the provisions of Vietnamese law.
- To open 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.
TYPICAL OBLIGATIONS OF REPRESENTATIVE OFFICE
- Not to directly conduct profit-generating activities in Vietnam.
- To conduct commercial promotion activities within the scope permitted by this Law.
- Not to enter into contracts, not to amend or supplement contracts already entered into by foreign traders, except where chief representatives obtain valid letters of authorization from foreign traders or other special cases.
- To pay taxes, fees and charges, and fulfill other financial obligations provided for by Vietnamese law.
- To report on its operations according to Vietnamese law.
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.
Thanks to a unique combination of local expertise and global experiences, VIVA BUSINESS CONSULTING is the one-stop solution for the required compliance procedures in Vietnam for foreign investors and experts. We are still here since 2006s because of our thousands of satisfied clients and our employees. Our staying power is a testament to the professional resources, and so much more.
VIVA not only manage business required procedures by laws but firstly places client’s compliance and good standing, in the optimal methods when offering any solution, and integrated with our intensive resources that allow us to prevent most of the risks in advance, create more benefits, advantages and business inspiration for entrepreneurs.
The insights and consistent backgrounds in Business Laws – Accounting and Corporate Finance – Tax Management – Labor Relations and Payroll – Serectarial and consistent with our exclusive standard operation processes, consisting of consultation – implementation – pratice operation help us fully protect client interests as one-stop solution.
- An email and a phone call from us
- A copy of our Confidentiality Commitment
- An appointment with our experts
- A suitable solution for your concern
“If you ask any successful businessperson, they will always have had a great mentor at some point along the road.”
Read more:
- Foreign representative offices in Vietnam: what you need to know
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- Foreign representative office in Vietnam: the required compliances that you need to know
- Operating representative office in Vietnam: manage your 08 compliance procedures
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- License of representative office in Vietnam: what you should keep in mind?
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- Annual budget and running cost of representative office in Vietnam
- Tax management foreign representative offices in Vietnam
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- Annual operation reports for foreign representative offices
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