Foreigners across the globe have been flocking to Vietnam since the 1990s to invest in the country. For many entrepreneurs, now is the best time to set up a business in Vietnam because the purchasing power in the country has gone up; and the Vietnamese are ready to spend their money on products and services.
Therefore, according to the World Bank’s report, among the 190 countries in the world, Vietnam was ranked the 70th for doing business in 2020. The report also mentioned that significant improvement has been observed in doing business in the country. For example, as of October 2019, the foreign direct investment grew by 7.4% year-on-year.
Since foreign investors’ confidence has improved tremendously, the business registration in Vietnam has also increased substantially.
Most of the investors opt for a foreign limited liability company. However, if you’re an investor seeking a more convenient option or would like to test the water in the Vietnamese market first, a branch office or a representative office could be your option.
The Differences between Representative Office and Branch Office in Vietnam
There are considerable differences between a representative office and a branch office for business registration in Vietnam.
Below, Cekindo is sharing the pros and cons of both types of legal entities in Vietnam:
Plus Points of a Representative Office
- The licensing procedure is simpler
- The license tax is not applicable
- It has a separate bank account and stamp
- Much easier to terminate the entity if the business doesn’t work out
- Foreigners can run the office legally with no restriction on the number of employees
Minus Points of a Representative Office
- No issuance of the invoice
- No profit-generating business activities are permitted
- Not allowed to sign contracts or agreements on its own without the authorisation from the parent company
Plus Points of a Branch Office
- Issuance of VAT invoice on its own
- Full business activities are permitted. For instance, inventory, manufacturing, and trading
- Accounting and financial records can be kept together or separated from the headquarter
- Entry into and amendments to contracts or agreements are allowed
Minus Points of a Branch Office
- More complex setup procedure and business registration in Vietnam
- The annual license tax is applicable
- The accounting system and tax declaration must be set up separately. Monthly, quarterly, annual reports for compliance are required as well
- All tax obligations or final tax settlement must be clear before the termination of a branch
The Best Option for Business Registration in Vietnam
Between the representative office and the branch office, a foreigner’s best option for business registration in Vietnam could be either of them – depending on your business goals in Vietnam.
If you wish to participate in income-generating business activities such as trading in Vietnam, a branch office will be more ideal.
On the other hand, you should consider setting up a representative office if your key purpose is to make a presence in Vietnam and do market research. This is because a branch office setup needs more time and expenses.
How Cekindo can Assist
At Cekindo, we understand it well that starting a new business in Vietnam can be a tough task when there’s a steep learning curve for foreigners to grasp the country’s laws and regulations.
The specific procedure for business registration in Vietnam may seem complicated, or even confusing.
However, if you follow the guided process with the right, professional support, it is far simpler than you may think. That’s why entrepreneurs are recommended to conduct business registration in Vietnam with an experienced consultant.
Cekindo will handle the whole procedure on your behalf, and take the hassle out of your business registration in Vietnam. Get in touch with us now by filling in the form below.