The representative office (RO) is an effective tool for foreign traders to monitor Vietnamese market trends and engage in cooperation with local companies.
However, an RO offers much more limited functions compared to a fully fledged company. 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. ROs are strictly forbidden to issue invoices, easing the accounting and tax compliance burden for foreign traders.
An RO 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.
Licensing Procedures
RO establishment shall be granted only if the parent company meets requirements of possessing an authorized business registration certificate in its country of incorporation and being in operation for at least one year since the effective date of incorporation. An application dossier for an RO license must be submitted to the Provincial Department of Industry and Trade. An RO license, valid for five years of maximum with an option for renewal, shall be issued within 15 working days of receipt of valid application documents, excluding any time spent amending or supplementing the application.
An application dossier for obtaining the RO license must include:
- An RO application letter and chief representative appointment letter, signed by the legal representative and affixed with the company chop or seal;
- A notarized copy of the Certificate of Incorporation, business registration certificate of the parent company (if any), or another government certified document showing the business lines of the parent company (if the registration documents do not mention business lines);
- A notarized copy of the Company Charter (i.e. Memorandum and Articles of Association);
- A notarized copy and Vietnamese translation of audited financial reports or other legal alternative documents showing the parent company’s latest financial year issued by an independent auditing company;
- An original copy or valid notarized copy of the official lease contract in Vietnamese, from a landlord certified to lease the office
All copies of these documents must be notarized by the Vietnam embassy in the foreign investor’s country. Documents in a foreign language must be translated to Vietnamese, notarized and certified by the Vietnamese competent agencies. If an application is invalid, the parent company shall receive a written notification within three business days of the date such an application is received.
Post-Licensing Procedures
Operating Announcement
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.
Opening Bank Accounts
An RO is allowed to open bank accounts in Vietnamese Dong and foreign currency bank accounts at licensed banks in Vietnam for payment purposes. These accounts shall be used for the RO’s operation activities only. Due to the RO’s legal limited scope of activities, the accounts must not be used for profit-generating activities. In case the RO wants to transfer money abroad, it needs to give a reasonable purpose. Last but not least, all the activities related to the RO’s accounts including opening, use and closure must comply with the stipulations of the State Bank of Vietnam (SBV).
Tax and Reporting
An RO is not subject to Vietnamese corporate income tax (CIT). However, it still has to pay value-added tax (VAT) when consuming goods or services from other Vietnamese enterprises, and is responsible for declaring its employees’ personal income tax (PIT).
Source: Vietnam Briefing
Key words: Setting up, Representative Office, Vietnam
