How to set up a representative office in Vietnam?

Legal basis

• The Law on Commercial 2005;
• Decree 07/2016/ND-CP detailed regulations on establishment of representative offices or branches of foreign traders in Vietnam under laws on commerce;
• Decree 99/2016/nd-cp on management and use of seals.
• Circular No. 11/2016/TT-BCT on forms prescribed in Decree 07/2016/nd-cp on guildelines for the law on commerce in terms of representative offices and branches of foreign traders in Vietnam.

Representative office of foreign trader

• A foreign trader is a trader who is established or registered for business by foreign law or recognized by foreign law.
• Foreign traders may establish their representative offices or branches in Vietnam according to Vietnam’s commitments in international treaties to which Vietnam is a contracting party.

To compare two formation of affiliated units, please refer to the article Compare branch, representative office and business location of company in Vietnam of Viet An Law.

• Representative offices of foreign traders in Vietnam are affiliated units of foreign traders, established in accordance with Vietnamese law to market research and execute trade promotion activities permitted by Vietnamese law.

Conditions for establishing representative offices of foreign trader  in Vietnam

Conditions for issuance of licenses for the establishment of representative offices 

Foreign traders are granted a license to establish a representative office when satisfying all following requirements:

• Foreign traders are allowed to establish and register their business in accordance with the laws of countries and territories participating in international treaties to which Vietnam is a contracting party or recognized by the laws of these countries and territories;
• Foreign traders have operated for at least 01 year from the date of establishment or registration.
• In case the foreign trader’s enterprise registration certificate or equivalent legal documents has a specified term of operation, such time limit must be at least 01 year from the date of application submission.
• The operation contents of the Representative Office must be consistent with Vietnam’s commitments in international treaties to which Vietnam is a signatory.
• In case the operation contents of the representative office do not conform to the commitments of Vietnam or the foreign trader is not a member of a country or territory participating in an international treaty to which Vietnam is a contracting party, the establishment of a representative office shall be approved by the minister or head of the specialized management ministerial-level agency (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 of the same name within a province or centrally-affiliated city.

Conditions for the headquarters of the representative office

• The location of the representative office of foreign traders must be by the provisions of Vietnamese law on conditions of security, order, occupational safety and hygiene and other conditions as prescribed by law.
• The representative office is not allowed to lend or lease the headquarters.

Conditions for representative office name

• The name of the Representative Office must be written in letters in the Vietnamese alphabet, the letters F, J, Z, W, digits and symbols.
• The name of the representative office must bear the name of the foreign trader with the phrase “Representative Office”.
• The name of the representative office must be written or attached to the representative office headquarters. The name of the representative office is printed or written in smaller font sizes than the foreign trader’s name on the transaction papers, documents and publications issued by the Representative Office.

Operational content of representative office

The representative office performs the function of liaison office, market understanding, promotion of business investment opportunities of traders that it represents, excluding the service industry but the establishment of representative offices in that field is stipulated in specialized legal documents.

Representative Office Operation Reporting Mode

• Before January 30 of every year, the representative office is responsible for sending a report on the form of the Ministry of Industry and Trade on its activities in the previous year by post to the Licensing Authority.
• The representative office is obliged to report, provide documents or explain issues related to its activities at the request of competent state management agencies.

Head of Representative Office

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

• The head of the branch of the same foreign trader;
• The head of the branch of another foreign trader;
• The legal representative of that foreign trader or another foreign trader;
• The legal representative of the economic organization was established by Vietnamese law.

Cases of not being granted a license to establish a representative office of a foreign trader in Vietnam

The licensing agency that does not issue a license shall establish an office representing foreign traders in the following cases:

• Failing to meet one of the conditions specified in Article 7 of Decree No. 07/2016/ND-CP.
• Foreign traders request the issuance of a license to establish a representative office within 02 years from the date of revoking the license for the establishment of a representative office in Vietnam as prescribed in Article 44 of Decree No. 07/2016/ND-CP.
• The establishment of representative offices is restricted by law on national defense, national security, social order and safety, social ethics and public health.
• Other cases by the law.

Dossier on the establishment of foreign trader representative office in Vietnam

The 01-set of dossier includes:

• An application form for License for Establishment of the representative office using Form MD-1 of Appendix issued with Circular 11/2016/TT-BCT and signed by a competent representative of the foreign trader;
• Copies of the Certificate of Business Registration or equivalent documents of the foreign trader. This document must be certified or consularly legalized by a diplomatic mission or consular office of Vietnam abroad in accordance with Vietnamese law;
• A letter of appointment of the head of the representative office;
• Copies of audited financial statements or certificates of fulfillment of tax liabilities or financial obligations of the last fiscal year or equivalent documents as proof of existence and operation of the foreign trader issued or certified by competent authorities where such foreign trader is established;
• Copies of the passport or ID card (for Vietnamese) or copies of the passport (for foreigners) of the head of the representative office;
• Copies of documents on the proposed location of the representative office’s head office including:
  • Copies of memorandum of understanding (MOU) or leasing agreements or documents as proof of the right to use a location as the representative office;
  • Copies of documents on the expected location of the representative office, which (i) satisfies requirements for security, occupational hygiene and safety and others stipulated in laws of Vietnam and (ii) not lend or sublet their offices.

Except specific regulations as above, documents (for foreigners) shall be translated into Vietnamese and certified true in accordance with laws of Vietnam.

Order and procedures for granting licenses for the establishment of representative offices

Step 1: Prepare and submit a dossier

• Prepare 01 application for the License to establish a representative office of a foreign trader in Vietnam.
• The entire application for a license to establish a representative office shall be signed and stamped by the parent company.
• Foreign traders submit dossiers directly or by post or online (if applicable) to the licensing agency where the representative office is expected to be located.

Step 2: Receive applications and issue Establishment Licenses 

• Within 03 working days from the date of receipt of the dossier, the licensing agency shall examine and request supplementation if the dossier is incomplete or invalid. The request for additional records is made at most once during the processing of the application.
• Within 07 working days from the date of receipt of complete and valid dossiers, the licensing agency shall grant or not grant a license to establish a representative office for the foreign trader. In case of refusal, there must be a written explanation clearly stating the reason.

In case the contents of the representative office’s operations are inconsistent with the commitments of Vietnam or foreign traders who are not part of the countries or territories participating in international treaties to which Vietnam is a member and in case the establishment of a representative office has not been specified in specialized legal documents:

• The licensing agency shall submit a written request for directions to the relevant Ministry within 03 working days from the date of receipt of a complete and valid application.
• Within 05 working days from the date of receipt of the request for directions from the licensing agency, the relevant Ministry shall submit the licensing agency a written notification of whether or not they approve for the application.
• Within 05 working days from the date of receipt of the notification from the relevant Ministry, the licensing agency shall send the applicant a written notice of whether the License for Establishment of the representative office is granted . In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.

Step 3: Engrave a round mark and register the representative office’s mark template

The marking procedure shall be carried out at the Administrative Management Department of social order and safety of the provincial/municipal police where the head office of the representative office is located.

The inscription of the record includes:

• Certified copy of the license for establishment of a representative office;
• Certified copy of ID card/passport of the head of the representative office;
• Power of attorney for Viet An Law on behalf of the procedure. A power of attorney must be certified or legalized by Diplomatic Representatives of Overseas Vietnamese and Consular Officers by Vietnamese law.

Completion time limit: 05 working days.

Step 4: Register to issue tax identification numbers to the Trader’s Representative Office

Dossiers for issuing tax identification numbers to representative offices must be submitted to tax authorities within ten days from the date of issuance of the Certificate of establishment of representative offices.

Applications for tax identification numbers include:

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

Tax identification time limit: 05-07 working days from the date the tax authority receives all valid dossiers.

Authority to grant License for establishment of representative office

• The Department of Industry and Trade of the province where the representative office is expected to be located outside industrial parks, export-processing zones, economic zones or hi-tech zones shall grant, re-grant, adjust, extend or revoke the License for Establishment of the representative office and shall have the power to have such representative office shut down in case the establishment of the representative office has not been prescribed by specialized legislative documents.
• Management Boards of industrial parks, export-processing zones, economic zones or hi-tech zones shall grant, re-grant, adjust, extend or revoke the License for Establishment of the representative office and shall have the power to suspend the operation of such representative offices located in industrial parks, export-processing zones , economic zones or hi-tech zones in case the establishment of such representative offices has not been prescribed by specialized legislative documents.

Advantages of foreign trader representative office in Vietnam

• The establishment of a representative office in Vietnam helps foreign investors to have a legitimate office in Vietnam, recruit employees to manage and promote sales contracts with local business partners, find and develop products, look for opportunities for the sale of goods and the provision of services…
• Foreign workers working for a representative office may be granted a work permit and a temporary residence card of 2 (two) years equivalent to a multiple-entry visa for themselves and their family members.
• The representative office can support many business activities for foreign traders but it is easy to manage, save costs and avoid risks arising from local administrative procedures such as not being subject to tax, not having to make accounting books or carrying out independent audit procedures.

Disadvantages of the Representative Office of Foreign Traders in Vietnam

• The representative office does not have a business function so there is no profit.
• Operating time is limited to 5 years, which can extended equal to that of the current license but not exceeding the remaining effective period of the Certificate of Enterprise Registration or the equivalent (for documents having expiry date).
• No contracts may be concluded, no arrangements have been amended or supplemented signed by foreign traders.
• Only spent within the budget from foreign traders moving in, without receiving additional income from any other source.

Customers wishing to set up a representative office of foreign traders in Vietnam, please contact Viet An Law Firm for the best support!