Vietnam has become an attractive destination for foreign investors due to its stable political environment, growing economy, and strategic location in Southeast Asia. With the increasing number of foreign companies looking to expand their presence in Vietnam, setting up a representative office has become a popular option.

A representative office serves as a liaison between the parent company and its customers or partners in Vietnam, without engaging in any profit-generating activities. In this blog post, we will provide a comprehensive guide on how to set up a representative office Vietnam.

Vietnam has become an attractive destination for foreign investors

Advantages of Setting up a Representative Office Vietnam

Before diving into the legal requirements and procedures, it is important to understand the advantages of setting up a representative office in Vietnam.

• Market research: A representative office allows foreign companies to conduct market research and gather information about the local market before making any major investments.
• Establishing a presence: A representative office serves as a physical presence for the parent company in Vietnam, which can help build trust and credibility with potential customers and partners.
• Cost-effective: Setting up a representative office is a cost-effective option compared to establishing a branch or subsidiary in Vietnam.
• Limited liability: As a representative office is not allowed to engage in any profit-generating activities, the parent company’s liability is limited to the activities of the representative office.

Legal Requirements and Procedures

To set up a representative office Vietnam, foreign companies must fulfill certain legal requirements and follow specific procedures.

Eligibility

According to the Law on Enterprises, foreign companies that are eligible to set up a representative office in Vietnam include:

• Foreign companies that have been operating for at least one year from the date of establishment or registration.
• Foreign companies that have a good financial standing and have not violated any laws in their home country.
• Foreign companies that have a legitimate reason to set up a representative office in Vietnam, such as conducting market research or promoting their products or services.

Registration and Licensing

The first step in setting up a representative office in Vietnam is to obtain an Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI). The application must include the following documents:

• Application form for setting up a representative office.
• Notarized copy of the parent company’s Certificate of Incorporation or Business Registration Certificate.
• Notarized copy of the parent company’s financial statements for the last two years.
• Letter of appointment of the Chief Representative in Vietnam.
• Lease agreement for the office space in Vietnam.

After obtaining the IRC, the representative office must then apply for a Business Registration Certificate (BRC) from the DPI. The BRC is valid for five years and can be renewed upon expiration.

Setting up a representative office Vietnam can be a strategic move for foreign companies

Tax Implications and Obligations

As a representative office is not allowed to generate any profits, it is not subject to corporate income tax. However, it is still required to fulfill certain tax obligations, such as:

• Value-added tax (VAT) on goods and services purchased in Vietnam.
• Personal income tax (PIT) on salaries and benefits paid to employees in Vietnam.
• Withholding tax on payments made to individuals or organizations outside of Vietnam.

Recruitment and Employment

A representative office is allowed to hire local employees in Vietnam to carry out its activities. However, it is important to note that the Chief Representative must be a foreigner and cannot be a Vietnamese citizen. The representative office must also comply with the labor laws and regulations in Vietnam, such as obtaining work permits for foreign employees and paying social insurance for local employees.

Operational Considerations

Once the representative office is set up and operational, there are certain considerations that must be taken into account to ensure its smooth functioning:

• Reporting requirements: A representative office is required to submit an annual report to the DPI, which includes information on its activities and financial statements.
• Office space: The representative office must have a physical office space in Vietnam, which can be either leased or owned by the parent company.
• Bank account: The representative office must open a bank account in Vietnam to conduct its financial transactions.
• Business activities: A representative office is not allowed to engage in any profit-generating activities, such as signing contracts or conducting sales transactions.

It is important to understand the legal requirements, tax implications, ect.

Conclusion

Setting up a representative office Vietnam can be a strategic move for foreign companies looking to establish a presence in the country. However, it is important to understand the legal requirements, tax implications, and operational considerations before proceeding with the registration process. By following the steps outlined in this guide, foreign companies can successfully set up a representative office in Vietnam and reap the benefits of this cost-effective and low-risk option.

>>> Read more: Setting up a Representative Office Vietnam: A Comprehensive Guide