Legal Update: Establishment of Vietnam Representative Office of Foreign Business Entity – What you need to know

The article provides guidance on establishing a Representative Office in Vietnam for foreign businesses, covering its scope of activities, licensing conditions, and permit duration. Additionally, ALTAS LAW offers legal support services and cash flow management to ensure regulatory compliance. Investors are advised to consult a lawyer to ensure legal compliance.

INTRODUCTORY

Establishing a Representative Office in Vietnam is an effective market entry strategy, allowing foreign entities to gain firsthand knowledge of the local market. This presence enables them to employ staff, develop targeted strategies, and ultimately pave the way for establishing a fully foreign-owned company. Vietnamese law restricts the activities of Representative Offices to encourage commercial operations through taxable entities.

The foreign representative office in Vietnam functions as a dependent entity, providing support to the business operations of the parent company. Its permitted activities encompass establishing a physical presence, recruiting employees, managing and promoting local business contracts, and conducting market research, among others. Representative offices are frequently serving as a general point of contact between the head office and international operations. It's easier to set up a representative office than a branch or a full company because they don't actually "do business" (like sales activities), so they're not regulated as much.

PROCEDURES FOR ESTABLISHMENT OF VIETNAM REPRESENTATIVE OFFICE OF FOREIGN BUSINESS ENTITY

1.1. Scope of Operation of Representative Office (The “R.O”)

Foreign business entity is entitled to establish its R.O in Vietnam in order to mainly conduct the following works:

- Performing as a liaison office, doing market-research, promotion activities;

- Developing co-operative investment opportunity for the foreign business entity;

- Other activities in accordance with Vietnamese law.

Please kindly be noted that R.O is not permitted to conduct any business operation, service and other directly profit-generating activities on its behalf in Vietnam.

1.2. Conditions For Establishment of Representative Office

1.2.1. Conditions Applicable To Foreign Business Entity

License for establishment of R.O in Vietnam is granted if foreign business entity satisfied the following conditions:

- Having business registered according to the law and commitments in international agreements that the country is a member or being recognized by the law of these countries or terrtories;

- Having operated for no less than 01 year since legal establishment or valid business registration;

- If business registration certificate (or similar documents) of foreign business entity states its expiration date, the valid time should remain at least one year since the submission of the dossiers;

- The operation content of R.O must be in accordance with commitments of Vietnam in international agreements that the country is a member;

- If the operation content of R.O is not accordance with commitments of Vietnam or foreign business entitys are not from countries, territories participating in international agreements that Vietnam is a

member, the establishment of R.O must be approved by the Minister, heads of specialized agencies (hereinafter referred to as the Minister of specialized management).

1.2.2. Conditions Applicable To Operation of R.O And Chief of R.O

Furthermore, R.O itself and Chief of R.O (the “CRO”) is obliged by applicable Commercial Law and the following regulations:

· R.O of one foreign business entity cannot be represented for other foreign business entity concurrently, and the R.O is not permitted to lease out its office;

· CRO is not allowed to concurrently hold the following positions:

- Head of branch(es) of the same foreign business entity in Vietnam;

- Head of branch(es) of other foreign business entity in Vietnam;

- Legal representative of the same foreign business entity or other one;

- Legal representative of business entity established under the law of Vietnam.

· If foreign business entity authorizes the Chief of R.O to engage to contract or supplement/modify signed contract, the authorization must be in written. Each authorization is for one time of engaging/supplement/modifying only.

1.3. Term Of License

License for establishment of R.O of foreign business entity in Vietnam shall be valid up to 05 years but it should not be exceeding the remaining time of business registration certificate or equal documents of foreign business entity if there are regulations on the expiration date. The license can be multiply renewed.

WHAT WE CAN OFFER?

From setup to wind-down, ALTAS provides comprehensive support for foreign businesses in Vietnam. The services cover:

(i) Establishment of representative office of Foreign Business Entity, including registration and amendment to any content of the establishment license;

(ii) Legal retainer services: ALTAS offers ongoing legal counsel for a fixed monthly retainer including access to all lawyers across the firm's various practice departments, ensuring comprehensive support throughout the retainer period;

(iii) Management of all tax-related matters, from planning to reporting and settlement;

(iv) Accounting services, including bank account management and cash book maintenance;

(v) Handling employment relations, payroll, compulsory insurance, and personal income tax;

(vi) Supporting foreign employees with work permits, labor contracts, and residence cards;

(vii) Providing secretarial services such as obtaining Judicial Records, consular legalization, translating documents, and managing property, etc.;

(viii) Providing regulatory compliance services such as annual operation reports submission. This is a mandatory legal requirement to ensure transparency and compliance under laws of Vietnam;

(ix) Assisting in dissolution process, or transformation into a subsidiary;

(x) Consulting, drafting necessary forms/documentation on personal data protection in according to the applicable laws of Vietnam.

D. DO’S AND DON’T IN RESPECT OF CASHFLOW MANAGEMENT OF REPRESENTATIVE OFFICE

The Investors should carefully draw attention to compliance requirements, including regulations pertaining to local bank accounts, currency exchange, and investment; the permissible scope of activities for a foreign representative office; employment relations; compulsory insurance obligations; and personal income tax considerations.

Understanding the allowed scope of operations of representative office helping the Investors have a good idea of how money moves in and out of a foreign representative office, and what you need to do to stay legal, e.g. funds from its overseas principal shall be injected to the Vietnam representative office and to be used for allowed transactions such as office rent/labor cost … not for other transactions like purchasing goods/services for profit-gaining purposes or buying stock/shares/financial instruments for financial investment purposes.

Furthermore, in compliance with VAT invoice regulations, sellers are required to issue lawful invoices for all goods and services rendered, and buyers bear the responsibility to collect and maintain these invoices.

CONCLUSION

ALTAS offers comprehensive assistance to ensure compliance with Vietnamese regulations, encompassing the preparation of essential documentation, the acquisition of necessary permits, and the navigation of post-licensing requirements. Please contact our Partner Mr. Chris Luong via email chris.luong@altas.vn for further information.

Written by: Luong Van Chuong - Partner Lawyer at ALTAS Law

Date: 12.02.2025 

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