Representative office allows foreign company to have presence in the market without having to incorporate a foreign invested company. While easy to set up it also has some key restrictions such as it cannot conduct commercial activities
Under the Commercial Law, most of foreign companies can open their representative offices in Vietnam. The Ministry of Industry and Trade is responsible for the issuance of licenses of establishing Representative Office of foreign company.
The Representative Office is an effective tool for foreign company to monitor Vietnamese market trends and engage in cooperation with local company.
According to Sophie Dao, Partner at GBS, an investment consulting firm in Vietnam, it is typically a dependent unit of its parent company, forbidden to generate its own profits and enter directly into contracts unless a legally authorized power of attorney is granted. Representative Office is strictly forbidden to issue invoices, easing the accounting and tax compliance burden for foreign traders. A Representative Office is permitted to recruit local and foreign employees directly or through an agency, lease office space – restricted to only one office in a province or city, equip itself with facilities necessary for its operation, obtain its own company seal and open its local bank accounts for operational purposes.
The Ministry of Industry and Trade shall grant, re-grant, amend, supplement, extend or withdraw permits for establishment of branches and provincial/municipal trade or trade-tourism services shall grant, re-grant, amend, supplement, extend or withdraw representative office establishment permits.
For a permit to establish in Vietnam, the first and foremost condition is that the law of the foreign company’s country or territory must be recognized. For a representative office, a further requirement is the foreign company have been operated for at least one year after the office’s establishment or registration.
Permits for establishment of Vietnam-based representative offices of foreign company will be valid for five years of maximum with an option for renewal.
Sophie Dao told Vietnam Insider that, a dossier of application for a representative office establishment permit must comprise: (1) An application for the representative office establishment permit, made according to a form set by the Trade Ministry and signed by the foreign company’s competent representative; (2) Copies of the foreign company’s business registration or papers of equivalent value certified by the competent authority of the locality where the foreign company has been established. In case that an operation duration for foreign company is specified in such business registration or papers of equivalent value, such operation duration must remain valid for at least one year;
An audited financial statement or other document of equivalent value proving the actual existence and operation of the foreign company’s in the latest fiscal year; and (3) A copy of the foreign company operation charter, for those belonging to business entities.
The license shall be issued within 15 working days of receipt of valid application documents, excluding any time spent amending or supplementing the application.
Within 45 days of the issue date of the RO license, it is compulsory that the new RO announces its establishment publicly by publishing on either a newspaper or electronic media authorized for publication in Vietnam. Also, the RO shall announce its official commencement date to the licensing authority.
Chief representative office shall be responsible for the operations of representative office in Vietnam.