Posted 21.10. 2019 by Cekindo
In accordance with Commercial Law in Vietnam, a foreign investor or legal entity is allowed to establish a representative office in the country. Currently, more than 10,000 foreign representative offices can be seen in Ho Chi Minh City and almost the same numbers of can be found in Hanoi, Dong Nai, and Binh Duong. Representative offices in Vietnam are nothing new for foreign investors as some of them have been in operation since 1995.
Starting a representative office in Vietnam is one of the legal ways for a foreign investor to do business in Vietnam. A Vietnam-based foreign representative office is considered a dependent unit established under Vietnam Law to conduct permitted promotion or market survey activities.
With the purpose of offering foreign investors assistance to have deeper insights into the establishment of a representative office in Vietnam, Cekindo will share all relevant information regarding its benefits, challenges, rights and obligations.
The main benefits for foreign investors are the reasons representative offices are thriving:
Foreign representative offices do come with challenges and one of them being they are forbidden to participate in any profit-generating activities. They can only perform non-profit activities such as market research and product or service promotion.
Therefore, unless you do not have enough information on the Vietnam market yet, it is always better for form a Vietnamese subsidiary in the form of Limited Liability Company or Joint Stock Company to maximise your investment options. These two forms of legal entities allow foreign entities or individuals to conduct profit-making sales activities and manufacture products in Vietnam.
Other than the limited business activities, representative offices in Vietnam must adhere strictly to local social insurance, labor, and personal income tax regulations. It means that they need to pay social insurance of up to 34.5% to their employees; and they need to register tax number, declare monthly personal income tax, prepare and submit annual settlement reports for employees. The personal income tax rates vary:
Furthermore, representative offices in Vietnam must make sure they are in compliance with commercial law, anti-money laundering law, and other relevant tax laws. All business records for law compliance shall be kept and managed properly as the relevant authorities such as tax department will perform audit or inspection every 3 to 5 years.
Other challenges include submission of annual report to the licensing department and a limited operation term of 5 years only. However, the validity can be extended.
When you set up a representative office in Vietnam, you should know your rights, which include the following:
With rights come obligations. The following obligations are to be fulfilled by representative offices in Vietnam:
Cekindo has far-reaching experience across a multitude of business models, markets, and company sizes. Our business consultation expertise allows us to help you identify business opportunities and set up a representative office in Vietnam.
Ready to get more out of your business in Vietnam? Let’s make it happen, start by filling in the form below.