10 Jan Cases and how to shutdown a foreign representative office in Vietnam
An application for shutdown of representative offices shall include: A notification of shutdown of REP office using the form issued by the Ministry of Industry and Trade and signed by a competent representative of the foreign trader. Copies of written refusals of grant of extension of the license or establishment of the representative office or a copy of the decision on revocation of the license for establishment of the representative office released by the licensing agency.
CASES OF SHUTDOWN OF REPRESENTATIVE OFFICE
- It is requested by its head office;
- The foreign trader ceases to operate according to laws of the country or territory in which such foreign trader is established or registered.
- The License for Establishment of the representative office is expired but its head office does not apply for extension of the license.
- The licensing agency refuses to grant an extension of the expired License for Establishment of the representative office.
- The License for Establishment of the representative office is revoked as decisions from local competence state agencies.
- The foreign trader or its representative office no longer satisfies one of the requirements hereof:
- The foreign trader is not incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties to treaties to which Vietnam is a signatory or is recognized by the aforesaid countries or territories;
- The foreign trader has not come into operation for at least 01 year from the date of establishment or registration;
- The Certificate of Business Registration or the equivalent document is valid less than 01 more year from the date of submission of the application;
- The scope of operation of the representative office is not consistent with that in Vietnam’s Commitments to treaties to which Vietnam is a signatory;
APPLICATIONS FOR SHUTDOWN OF REP (*)
1/ An application for shutdown of rep shall include
- A notification of shutdown of representative office using the form issued by the Ministry of Industry and Trade and signed by a competent representative of the foreign trader.
- Copies of written refusals of grant of extension of the license or establishment of the representative office or a copy of the decision on revocation of the license for establishment of the representative office released by the licensing agency.
- Lists of creditors and the number of debts, including outstanding taxes and social insurance premium.
- Lists of employees and their current benefits.
- The original License for Establishment of the representative office.
2/ Importance notes on shutdown of representative offices
- The head of the closed representative office and their head office shall be responsible for the reliability and accuracy of their application for shutdown of representative office.
- Where the representative office shuts down to relocate to another province or territory within the administration of another Management Board, the application for shutdown shall only include notification of shutdown of the representative office and Lists of employees and their current benefits.
- Pursuant to the tax regulations and anti-money laundering laws, since years 2012, after every 3 to 5 years of office operation, the Department of Taxation requires foreign representative office to provide the cashbook, petty cash, bank statements, employee profiles as well as payroll vouchers and together with lawful documents for tax inspection. Tax officers will review each transaction to ensure that the office’s expenditures have been made legally and duly, without violating the tax or anti-money laundering laws. In addition, in case of dissolution, before the office’s closing, the tax authorities will also carry out similar tax inspection for final settlement procedures. After reviewing the unreported or unduly invoiced expenses, the tax authorities will retrospectively calculate the back taxes payable, at a minimum of 10% plus a fine of around 17% per annum. Since the tax inspection is conducted after 3 to 5 years of operation, the total amount of arrears and cumulative fines may be huge. Paying a large amount of back tax and fines together with spending much time traveling for clarification, impact to the reputation of the parent company are unexpected while the risks can absolutely be avoidable.
PROCEDURES FOR PROCESSING OF APPLICATIONS FOR SHUTDOWN OF REPRESENTATIVE OFFICES
- The foreign trader shall submit the proper applications (*) for shutdown of their representative office to the licensing agency directly or by post or only
- Within 03 working days from the date of receipt of the application, the licensing agency shall examine such application and request the applicant to complete the application (if the application is incomplete). The request for supplementation to the application shall be made only once during the processing of the application.
- Within 05 working days from the date of receipt of the valid application, the licensing agency shall publish the decision on shutdown of the representative office on their portal.
- Upon the decision on shutdown of representative office, the foreign trader shall return the round stamp to the local administration police department properly.
- In addition to the execution of procedures for shutdown of representative offices hereof, the representative office shall publicly put up the notice of the shutdown at their office and fulfill other involving obligations under provisions of laws.
- Every foreign trader having closed representative offices or branches shall fulfill obligations to contracts and debt settlement including outstanding taxes and settlement of legal benefits of employees working for such representative offices in compliance with provisions of laws.
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