Operation Scope of Foreign Company Branch in Vietnam

Foreign company branches in Vietnam play an increasingly important role in promoting economic growth and international integration of the country. With the diversity of industries and scale, these branches have contributed significantly to technology transfer, job creation, and improving the competitiveness of the Vietnamese economy. However, unlike branches of domestic companies, foreign traders must meet specific conditions when carrying out procedures to open a branch in Vietnam according to separate legal regulations. In addition, the operations of foreign company branches also pose many legal and management issues that need to be resolved. To support our customers, Viet An Law would like to present the following article on the operation scope of foreign company branch in Vietnam.

Conditions for establishing a foreign company branch in Vietnam

Pursuant to Article 8 of Decree 07/2016/ND-CP, the conditions for granting a license to establish a  foreign company branch are as follows:

• Foreign traders are established and registered to do business in accordance with the law;
• Foreign traders have been operating for at least 05 years since their establishment or legal enterprise registration;
• Enterprise registration certificate or equivalent documents valid for at least 01 year from the date of the request for establishment;
• The operation of a foreign company branch in Vietnam must be consistent with Vietnam’s commitments in international treaties to which Vietnam is a member and consistent with the business lines of the foreign trader;
• In case the branch’s operations are not consistent with Vietnam’s commitments or the foreign trader is not from a country or territory participating in an international treaty of which Vietnam is a member, the establishment of a branch must be approved by the Minister or Head of the specialized ministerial-level agency.

Vietnam’s commitment to operations of branch

Currently, Vietnam has participated in many international trade commitments and opened almost all service sectors to foreign investors. However, these are only applied according to the nationality of the countries participating in the commitments. Therefore, the WTO commitments with the widest scope of application are still the documents that are frequently applied.

Vietnam’s WTO Schedule commitments do not currently commit to the establishment of branches unless otherwise specified in each specific industry and sub-industry. Since 2010, several industries have been allowed to open branches according to Vietnam’s commitments under the WTO framework, including the following industry codes:

Rights and obligations of foreign company branches in Vietnam

Pursuant to Article 19 of Commercial Law 2005, the rights of  foreign company branches in Vietnam are specifically regulated as follows:

• Rent headquarters, rent and purchase necessary equipment and supplies for the operation of the
• Recruit Vietnamese and foreign employees to work at the branch following Vietnamese law.
• Enter into contracts in Vietnam following the operation scope specified in the license to establish a branch and under the provisions of this Law.
• Open an account in Vietnam Dong or foreign currency at a bank licensed to operate in Vietnam.
• Transfer profits abroad following Vietnamese law.
• Have a seal bearing the branch name according to the provisions of Vietnamese law.
• Carry out activities of buying and selling goods and other commercial activities under the establishment license as prescribed by Vietnamese law and international treaties to which the Socialist Republic of Vietnam is a member.
• Other rights as provided for by law.

The obligations of foreign company branches in Vietnam are specifically stipulated in Article 20 of Commercial Law 2005 as follows:

• Implement the accounting regime according to the provisions of Vietnamese law; in case it is necessary to apply another common accounting regime, it must be approved by the Ministry of Finance of the Socialist Republic of Vietnam.
• Report on the operation of the branch under Vietnamese law.
• Other obligations as prescribed by law.

Foreign company Branches must comply with Vietnamese laws on security, order, labor safety, health conditions, and other conditions as prescribed by law. Branches are not allowed to lend or sublease their headquarters.

Operation scope of foreign company branch in Vietnam

According to Article 31 of Decree No. 07/2016/ND-CP, the specific contents of branch operations are as follows:

• Branches operating in the provision of services in service sectors, excluding service sectors in which the establishment of branches in that sector is regulated in specialized legal documents.
• In case a branch operates in industries or professions that are required by law to have conditions, the branch may only operate when it meets the prescribed conditions.

According to Vietnam’s Schedule of Specific Commitments in Services when joining the WTO, Commercial Law 2005, Decree No. 07/2016/ND-CP, the Ministry of Industry and Trade has announced the fields of operation of foreign investors allowed to establish branches in Vietnam as follows:

Some notes when establishing a foreign company branch in Vietnam

Regarding the establishment of a branch

According to Article 14 of Decree 07/2016/ND-CP, the Licensing Authority has the right to refuse to grant a license to establish a foreign company branch in the following cases:

• Not meeting one of the conditions specified in Article 8 of this Decree for the case of requesting a License to establish a branch;
• Foreign traders register to establish a new branch within 02 years from the date of revocation of the previous License;
• Foreign traders are restricted from establishing branches for reasons of national defense, national security, social order and safety, social ethics, and public health;
• Other cases as prescribed by law

In addition, according to Clause 2, Article 3 of Decree 07/2016/ND-CP, each foreign trader is only allowed to establish a maximum of one branch within a province or centrally run city of Vietnam.

Regarding the Head of a foreign branch

According to Clause 8, Article 33 of Decree 07/2016/ND-CP, the head of a branch is not allowed to concurrently hold the following positions:

• Head of Representative Office of another foreign trader;
• Head of Representative Office of the same foreign trader;
• Legal representative of an economic organization established under the provisions of Vietnamese law.

In addition, according to Article 4 of Decree 07/2016/ND-CP, foreign traders must be responsible under Vietnamese law for all activities of their branches in Vietnam.

Above is all the information about the operation scope of foreign company branch in Vietnam. If you have any related questions or need legal support about foreign company branches, please contact Viet An Law via hotline (+84) 9 61 67 55 66 (WhatsApp, Viber, Zalo, Wechat) for the best support!