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The most significant difference between branches and representative offices lies in their legal nature and financial responsibilities. In terms of nature, a branch is considered a part of the parent company and can conduct direct business transactions, while a representative office is merely a legal representative without legal status and cannot engage in direct business transactions. The following article will outline some differences between branches and representative offices in Vietnam.
Difference in definition
- Branch: A branch is a dependent unit of the enterprise, tasked with performing all or part of the functions of the enterprise, including the function of representation by authorization. The business sector of the branch must correspond to the business sector of the enterprise (Clause 1, Article 44 of the Enterprise Law 2020).
- Representative Office: A representative office is a dependent unit of the enterprise, tasked with representing the interests of the enterprise by authorization and protecting those interests. The representative office does not perform the business function of the enterprise (Clause 2, Article 45 of the Enterprise Law 2020).
Difference in Scope of Activities
- Branch: Performs all or part of the functions of the enterprise, including both business and representative functions.
- Representative Office: Only performs the task of representing the enterprise by authorization and protecting its interests (the representative office does not have a business function).
Difference in Tax Obligations
- Branch:
- The branch pays business license tax at the Tax Authority where the branch is headquartered.
- The branch still fulfills tax obligations for value-added tax, corporate income tax as prescribed.
- Representative Office:
- The representative office does not engage in business activities, so it does not pay business license tax.
- The representative office in Vietnam must submit tax declaration documents for the taxes that the representative office incurs or must submit on behalf of the enterprise (for taxes incurred, the representative office must submit tax declaration documents).
In summary, while both branches and representative offices serve as extensions of the parent company, they differ significantly in terms of their legal nature, scope of activities, and tax obligations. Branches have a broader scope of functions and tax responsibilities compared to representative offices, which primarily focus on representing the parent company’s interests without engaging in direct business activities.
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