Conditions for establishing representative offices of foreign traders in Vietnam

Legal bases

• 2005 Commercial Law;
• Decree 07/2016/ND-CP dated 25/01/2016;
• Circular No. 11/2016/TT-BCT dated 05/07/2016.

Representative offices of foreign traders

• Foreign trader means a trader established or registered for business in accordance with the provisions of foreign law or recognized by foreign law.
• Foreign traders may establish their representative offices and branches in Vietnam according to Vietnam’s commitments in treaties to which Vietnam is a contracting party.
• Representative offices of foreign traders in Vietnam are dependent units of foreign traders, established in accordance with Vietnamese law to explore the market and carry out a number of trade promotion activities permitted by Vietnamese law.

Conditions for establishing representative offices of foreign traders in Vietnam

Conditions for granting a license for establishing a representative office

Foreign traders shall be granted licenses for establishment of representative offices when satisfying the following conditions:

• Foreign traders are established and registered for business in accordance with the laws of countries or territories acceding to treaties to which Vietnam is a contracting party or recognized by the laws of these countries and territories;
• Foreign traders have been operating for at least 01 year from the date of establishment or registration.
• Where the business registration certificate or a document of equivalent value of a foreign trader stipulates the operation term, such term must be at least 01 year from the date of submission of the application.
• The contents of operation of representative offices must be consistent with Vietnam’s commitments in treaties to which Vietnam is a contracting party.
• In case the operation contents of the representative office are inconsistent with the commitments of Vietnam or foreign traders not belonging to countries or territories acceding to treaties to which Vietnam is a contracting party, the establishment of a representative office must be approved by the Minister, Heads of ministerial-level agencies for specialized management (hereinafter collectively referred to as the Minister of Specialized Management).

Number of Representative Offices

A foreign trader may not establish more than one representative office with the same name within a province or centrally-run city.

Conditions on the head office of the representative office

• The location of the head office of a representative office of a foreign trader must comply with the provisions of Vietnamese law on security, order, occupational safety and health and other conditions as prescribed by law.
• Representative offices are not allowed to lend or sublease offices.

Conditions on the name of the representative office

• The name of the representative office must be written with letters of the Vietnamese alphabet, letters F, J, Z, W, numbers and symbols.
• The name of the representative office must bear the name of the foreign trader together with the phrase “representative office”.
• The name of the representative office must be written or affixed at the office of the representative office. The name of the representative office shall be printed or written in a smaller font size than the name of the foreign trader on transaction papers, dossiers and publications issued by the representative office.

Contents of activities of representative offices

Representative offices shall perform the functions of liaison offices, market inquiry, promotion and promotion of business investment opportunities of traders they represent, excluding service sectors for which the establishment of representative offices in that field is specified in specialized legal documents.

Operation reporting regime of representative offices

• Before January 30 of each year, the representative office shall send a report according to the form of the Ministry of Industry and Trade on its activities in the preceding year by post to the licensing agency.
• Representative offices are obliged to report, provide documents or explain issues related to their operations at the request of competent state management agencies.

Heads of Representative Offices

The head of a representative office of a foreign trader may not concurrently hold the following positions:

• The head of a branch of the same foreign trader;
• Heads of branches of other foreign traders;
• The legal representative of such foreign trader or other foreign trader;
• The legal representative of an economic organization established in accordance with Vietnamese law.

Cases in which licenses for establishment of representative offices of foreign traders in Vietnam are not granted

The licensing authority shall not grant a license for establishment of a representative office to a foreign trader in the following cases:

• Not meeting one of the conditions specified in Article 7 of Decree 07/2016/ND-CP.
• Foreign traders shall apply for a license to establish a representative office within 02 years from the date of revocation of the license for establishment of a representative office in Vietnam as prescribed in Article 44 of Decree 07/2016/ND-CP.
• The establishment of representative offices shall be restricted in accordance with law for reasons of national defense, security, social order and safety, social morality and public health.
• Other cases as prescribed by law.

Dossiers of establishment of representative offices of foreign traders in Vietnam

Dossier 01 set includes:

• An application form for a license to establish a representative office according to the form of the Ministry of Industry and Trade shall be signed by a competent representative of a foreign trader;
• A copy of the business registration certificate or a document of equivalent value of the foreign trader. This document must be certified or consular legalized by diplomatic missions and consular missions of Vietnam abroad in accordance with Vietnamese law;
• Documents of foreign traders appointing/appointing heads of representative offices;
• A copy of the audited financial statements or a written confirmation of the performance of tax or financial obligations in the most recent fiscal year or a document of equivalent value issued or certified by the competent agency or organization where the foreign trader is established, prove the existence and operation of foreign traders in the latest financial year;
• A copy of the passport or identity card or citizen identification card (if a Vietnamese) or a copy of the passport (if a foreigner) of the head of the representative office;
• Documents on the proposed location of the representative office include:
• A copy of the memorandum of understanding or agreement on site lease or a copy of documents proving that the trader has the right to exploit and use the location of the representative office;
• A copy of documents on the proposed location of the representative office as prescribed in Article 28 of this Decree and relevant laws.

In case the passport copy of the head of the representative office is a foreigner, it must be translated into Vietnamese and authenticated in accordance with the provisions of Vietnamese law.

Order and procedures for granting licenses for establishment of representative offices

Step 1: Prepare and submit your application

• Prepare 01 dossier of application for a license to establish a representative office of foreign traders in Vietnam.
• All dossiers of license for establishment of representative offices shall be signed and sealed by the parent company.
• Foreign traders shall submit their dossiers in person or by post or online (if applicable) to the Licensing Authority where the representative office is to be located.

Step 2: Receive the application and grant the Establishment License

• Within 03 working days from the date of receipt of the dossier, the licensing agency shall inspect and make additional requests if the dossier is incomplete and valid. Requests for additional documents are made up to once during the application processing process.
• Within 07 working days from the date of receipt of a complete and valid dossier, the licensing agency shall grant or fail to grant a license to establish a representative office for foreign traders. In case of refusal to license, a written statement clearly stating the reasons therefor must be provided.

In case the operation contents of a representative office are inconsistent with the commitments of Vietnam or foreign traders not belonging to countries or territories acceding to treaties to which Vietnam is a contracting party and where the establishment of a representative office has not been prescribed in specialized legal documents:

• The licensing agency shall send a written request for opinions of the Ministry of specialized management within 03 working days from the date of receipt of a complete and valid dossier.
• Within 05 working days from the date of receipt of the written request for opinions of the licensing agency, the Ministry of specialized management shall clearly state its agreement or disagreement with the license to establish a representative office.
• Within 05 working days after receiving comments from specialized management ministries, the licensing agency shall grant or not grant a license for establishment of a representative office for foreign traders. In case of refusal to grant a license, there must be a written statement clearly stating the reason.

Step 3: Engrave the circular mark and register the seal sample of the representative office

The seal engraving procedure shall be carried out at the Administrative Management Office for Social Order and Safety of the Police of the province/city where the head office of the representative office is located.

The stamped dossier includes:

• Certified copy of the license for establishment of a representative office;
• Certified copy of ID/Passport of the head of the representative office;
• Power of attorney for Viet An Law to carry out the procedure on its behalf. The power of attorney must be certified or consular legalized by diplomatic missions and consular offices of Vietnam abroad in accordance with the provisions of Vietnamese law.

Completion deadline: 05 working days.

Step 4: Register for tax identification number for the trader’s representative office

A dossier of tax code issuance to a representative office must be submitted to the tax authority within 10 days from the date of issuance of the Certificate of establishment of a representative office.

A dossier of application for a tax code includes:

• Tax registration declaration
• Certified copy of the license for establishment of a representative office
• Power of attorney for Viet An Law to carry out the procedure on its behalf.

Time limit for issuance of tax code: 05 – 07 working days from the date the tax authority receives a complete and valid dossier.

Competence to grant licenses for establishment of representative offices

• Departments of Industry and Trade of provinces and centrally-run cities where traders plan to set up their representative offices outside industrial parks, export processing zones, economic zones and hi-tech parks shall grant, re-grant, adjust, extend and revoke licenses for establishment of representative offices and terminate operation of representative offices in case of office establishment representation has not been specified in specialized legal documents.
• Management Boards of industrial parks, export processing zones, economic zones and hi-tech parks (hereinafter collectively referred to as Management Boards) shall grant, re-grant, adjust, extend and revoke licenses for establishment of representative offices and terminate operation of representative offices located in industrial parks, export processing zones, economic zones or hi-tech parks in cases where the establishment of representative offices has not been prescribed in specialized legal documents.

Advantages of foreign traders representative offices in Vietnam

• The establishment of a representative office in Vietnam helps foreign investors to have a legal office in Vietnam, recruit staff to manage and promote sales contracts with local business partners, search and develop products, seeking opportunities for the purchase and sale of goods and the provision of services…
• Foreign workers working for representative offices may be granted work permits and temporary residence cards for 02 (two) years equivalent to multiple visas for themselves and their family members.
• Representative offices can support many business activities for foreign traders but are easy to manage, cost-effective and avoid risks arising from local administrative procedures such as not being subject to license tax, not having to prepare accounting books or having to carry out independent audit procedures.

Disadvantages of Foreign Traders Representative Office in Vietnam

• Representative offices do not have business functions, so they do not generate profits.
• The period of operation is limited to 5 years.
• It is forbidden to enter into contracts, to modify or supplement contracts already signed by foreign traders.
• Only be spent within the budget from foreign traders transferred in, not receiving additional income from any other source.

If you want to establish a representative office of foreign traders in Vietnam, please contact Viet An Law Firm for the best support!