How Foreign Entity Could Set-up Representative Office in Vietnam

A foreign business entity or a foreign trader is allowed to establish Representative Office in Vietnam according to the Commercial Law.

Representative office of a foreign business entity in Vietnam (referred as “Representative Office”) means a subsidiary unit of the foreign business entity, established in accordance with the law of Vietnam in order to survey markets and to undertake a number of commercial enhancement activities permitted by the law of Vietnam. Representative Office will need to apply and obtain the establishment license; and have a seal bearing the name of the representative office.

Setting up a Representative Office is less complicated than setting up company in Vietnam. The Vietnam Department of Trade will be approving the establishment of Representative Office in Vietnam while Vietnam Ministry of Planning and Investment will be the State agency that coordinate the setting up a company in Vietnam. The time duration to establish a Representative Office is shorter than to establish a company. There are fewer conditions to meet than conditions in setting up company in Vietnam. The main difference between a Representative Office and a company in Vietnam is that the Representative Office could not directly conduct profit making activities.

Rights of the Representative Office:

-To operate strictly in accordance with the purposes, scope and duration stated in the license for establishment of such representative office;

-To rent offices and to lease or purchase the equipment and facilities necessary for the operation of the Representative Office;

To recruit Vietnamese and foreign employees to work for the Representative Office in accordance with the law of Vietnam;

-To open accounts in foreign currency and in Vietnamese Dong sourced from foreign currency at banks which are licensed to operate in Vietnam, and to use such accounts solely for the operation of the Representative Office.

Obligation of the Representative Office:

-Not to directly conduct profit making activities in Vietnam;

-Not to enter into commercial contracts of the foreign business entity or to amend or supplement such contracts already signed except where the head of the Representative Office has a valid power of attorney from the foreign business entity;

-To pay taxes, fees and charges and to discharge other financial obligations in accordance with the law of Vietnam;

-To report on the operation of the Representative Office in accordance with the law of Vietnam

A foreign company which has effectiveness business activities will be allowed to open the Representative Office in Vietnam if this company has real demand to open the market in Vietnam and meet conditions as below:

-Being a business entity or trader recognized by the law of the country or the territory (hereinafter referred to collectively as the country) where it has been lawfully established or made its business registration;

-Having been operating for at least one year after its lawful establishment or business registration in its country.

The issuing period will be within 20 working-days after the date of submitting the full valid documents as requested.

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Challenges in Preparing Documents for Representative Office Application

The representative office (RO) is a popular foreign investment vehicle which investors utilize when wishing to enter the Vietnamese market without committing too much investment. The representative office could help the foreign entity to hire local employee to carry out market research, business promotion.

A foreign company wishes to establish a representative office in Vietnam must submit an application dossier for a license to the Provincial Department of Industry and Trade (DIT).

However, there are cases which the government agencies receiving the application would be different from department of industry and trade depending on the business lines carried out by the foreign entity.

Firstly, the trade service is bound in Vietnam’s Commitment in trade service in WTO but there are no existing specialized legislative documents:

When the trade service which the foreign entity provides does not fall under areas prescribed by specialized legislative documents in Vietnam, the licensing agency shall submit a written request for directions to the relevant ministries for opinions. The foreign entity shall wait for at least 15 working days for receiving a written notice of whether the license for establishment of the representative office is granted or rejected. This process not only extends duration of establishment of representative office but also rises risk of rejection.

Secondly, the trade service is not yet bound in Vietnam’s Commitment:

Where the scope of operation of the representative office is inconsistent with Vietnam’s commitments or the foreign trader is not located in the country or territory being party to treaties to which Vietnam is a signatory, there is an extra process in registration of representative office. The representative office shall be approved by relevant ministers, heads of ministerial agencies for establishment of the representative office.

Thirdly, trade services are supplied in foreign countries, but such does not exist in Vietnam:

The foreign entity has to apply codes as following to Vietnam standard industrial classification system or CPC. If the foreign entity can not define a code, it is merely impossible to register the representative office.

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KMH Group - Korea Proposed to Invest in Developing High-Tech Industrial Cluster in Thua Thien Hue | ANT Consulting

Chairman of Thua Thien Hue Provincial People’s Committee has just had a meeting with Chairman of the Board of Directors of KMH Group – Korea, seeking opportunities to invest in Vietnam and exchanging information to expand investment projects in tourism, relaxation and high-tech industry in Thua Thien Hue.

At the meeting, according to Chairman of the Board of Directors of KMH, the implementation of investment projects of resorts and golf courses associated with entertainment services in Chan May – Lang Co Economic Zone with the total investment capital of 100 million USD of the Group is on schedule. KMH Group is looking forward to expanding investment cooperation in this area in some coastal areas of the province, at the same time linking with major Korean corporations to invest in developing high-tech industrial clusters in Thua Thien Hue province.

Also at the meeting, representative of KMH proposed: “The KMH wants the provincial leaders to pay attention and create conditions for the Group to study and implement some investment projects in the province in the shortest time”.

In response to the investor’s proposal, Chairman of the Provincial People’s Committee welcomed KMH Group to invest in Thua Thien Hue, especially in the potential areas of the provinces with policies to attract investment such as tourism, trade, high-tech industry.

Chairman of the Provincial People’s Committee also affirmed: “Thua Thien Hue province is ready to support KMH Group to research and expand investment, especially to create conditions for KMH Group to cooperate with its partners in establishing Korean high technology parks in Hue”.

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Set-up Branch Office in Vietnam

Foreign entity is allowed to set up branch office in Vietnam to conduct business activities according to the law.
The branch of a foreign business entity in Vietnam (referred as “The Branch”) means a subsidiary unit of the foreign business entity, established in accordance with the law of Vietnam in order to enter into contracts in Vietnam and conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

The Branch will need to apply and obtain the establishment license; and have a seal bearing the name of the Branch.

The Branch is permitted to conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

It should be noted that the liability of the Branch is the liability of the foreign entity.  The business activity of the Branch has to be consistent with the business activity of the foreign entity. The Branch has to has office address.

Therefore the investor should consider its investment strategy when setting up its Branch in Vietnam.

Readmore : http://www.antconsult.vn/services/set-up-branch-office-in-vietnam.html 

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