Tiếng Việt
中文 (中国)
日本語
Vietnam is an increasingly attractive market for foreign companies looking to expand their regional presence. Many business with oversea investment initiative begins by opening representative office in Vietnam, which allows them to explore opportunities, conduct research, and build connections before committing to a full-scale business.
A representative office is one of the simplest forms of market entry in Vietnam. However, it also comes with limitations and legal obligations that foreign investors must understand clearly. Choosing this model without proper preparation can lead to compliance risks or missed opportunities of doing business in Vietnam.
1. Procedures for Establishment
Application for License
Foreign companies must apply for a Representative Office License from the Department of Industry and Trade in the province or city where the office will be located.
Required Documents
- Application form for establishment
- Parent company’s business registration certificate (legalized and translated into Vietnamese)
- Parent company’s audited financial statements or confirmation of existence for at least one year
- Appointment letter for the Chief Representative
- Lease agreement for office premises
Timeline
The licensing process usually takes between 7 to 15 working days once all documents are submitted correctly.
2. Limitations of a Representative Office
A representative office in Vietnam is strictly limited in scope. It cannot generate revenue, issue invoices, or sign commercial contracts. Its permitted activities include:
- Market research
- Promotion of parent company products or services
- Acting as a liaison between the parent company and Vietnamese partners
Because of these restrictions, a representative office is best suited for businesses testing the Vietnamese market or managing non-commercial functions.
3. Legal Obligations
Annual Reporting
Representative offices must submit annual reports on their activities to the Department of Industry and Trade.
Labor and Employment Compliance
Employment contracts must comply with the Vietnamese Labor Code. The office must register employees for social insurance, health insurance, and unemployment insurance where applicable.
Tax Responsibilities
Although representative offices are not subject to corporate income tax, they must comply with personal income tax obligations for their employees.
Office Premises
Representative offices must maintain a physical office address under a valid lease contract. Virtual offices are not accepted.
FAQs
1. Can a representative office conduct sales or generate revenue in Vietnam?
No, it is strictly prohibited from profit-generating activities. Its functions are limited to research, promotion, and liaison.
2. What is the validity of a representative office license?
The license is typically valid for five years and can be renewed.
3. Can a representative office hire local staff?
Yes, but it must comply with Vietnamese labor laws, including contracts and insurance contributions.
4. Is a representative office required to pay corporate income tax?
No, but it must fulfill tax obligations related to employees, such as personal income tax.
5. What happens if a representative office operates beyond its permitted scope?
It may face administrative penalties, fines, or even revocation of its license.
Conclusion
Representative office establishment in Vietnam is a practical first step for foreign companies exploring the market. While it offers ease of establishment and minimal risk, its non-commercial nature means it cannot substitute for a full business presence. By understanding the procedures, limitations, and legal obligations, business with oversea investment initiative can use a representative office effectively as a bridge to future expansion in Vietnam.
ASL Law is a leading full-service and independent Vietnamese law firm made up of experienced and talented lawyers. ASL Law is ranked as the top tier Law Firm in Vietnam by Legal500, Asia Law, WTR, and Asia Business Law Journal. Based in both Hanoi and Ho Chi Minh City in Vietnam, the firm’s main purpose is to provide the most practical, efficient and lawful advice to its domestic and international clients. If we can be of assistance, please email to [email protected].
ASL LAW is the top-tier Vietnam law firm for doing business in Vietnam. If you need any advice, please contact us for further information or collaboration.
