Nowadays, many foreign investors want to set up new business in Vietnam. However, the cost of setting up is relatively high and there might be a lack of understanding local knowledge. Therefore, setting up a representative office in Vietnam, especially in the capital city, Ho Chi Minh City, will be the best solution, as it offers a low-cost entry for investors and can have a better understanding of Vietnam’s business climate. If you have a plan to establish a representative office in Ho Chi Minh City, you can read this article until its end. It provides you information about setting up a representative office in Ho Chi Minh City.

What Are Representative Office(s) Permitted To Do?

The option of setting up a representative office for foreign investors is common, as it is for first-time entrants to the Vietnamese market and precedes a larger presence within the country. In addition, it can save the cost entry for investors and know better about Vietnam’s business. Nonetheless, representative offices are forbidden to earn revenue and their activities are limited to mainly market research, plus acting as a liaison office for their parent companies.

There are things that representative offices are permitted to do. These are:

Conducting market research
Acting as a liaison office for its parent company.
Promoting the activities of its head office through meeting, and other activities, that leads to a business at later stages.

Representative offices are not allowed to generate their profits or enter directly into contracts, because they are dependent on their parent companies. Additionally, they are prohibited to issue invoices.

How To Get The License and What Should You Do After?

Before getting the license, you need to do your checklist for setting up a Representative Office for your new business in Ho Chi Minh City. These are pre-licensing checklist for you:

File an application for setting up an office with company chop or seal.
Appointment letter of Chief of Representative Office with identification documents and company seal.
Power of attorney in favor of consultant to submit the application dossier.
Certificate of Incorporation for the Company and/or Business Registration Certificate of the Company.
Audited financial report of the company for the latest fiscal year.
Memorandum of Understanding (MoU) of leasing office or leasing contract.
Documents providing legal rights of the landlord regarding the right of the leasing office.

Keep it in mind, for steps 1 to 6 the foreign entity would require one notarized and consularized copy of each document and a translated copy in Vietnamese by a Vietnamese competent authority. Plus, a signed leasing contract is required before registering a representative office in Vietnam.

After getting a license, you will need this post-licensing checklist for your next action. These are:

8. Make a seal for the representative office;

License on the establishment of a representative office.
Passport of Chief of representative office if a foreigner or passport/ID card Chief is Vietnamese.

9. Register a tax code;

Declaration to register a tax code.
Power of attorney
Certificate of seal registration
Certificate of a representative office in Vietnam

10. Open a bank account;

License on the establishment of a representative office.
Certificate of seal registration.
Certificate of tax code registration.
Letter of authorization appointing the authorized signatories of the bank accounts.

11. Announcement of the establishment the office of Company.

For steps 8 to 10, your documents need to be notarized and translated to complete the process. Do not forget about this or the process will take a little longer.

How Long Do You Need To Establish a Representative Office?

The representative office can be established between 6 to 8 weeks. We also recommend hiring a professional service to deal with the countless laws and procedures.

The absence of in-country revenue and associated licensing requirements have been given, so the setup process for this option does not involve as many bureaucratic procedures as others. A representative office is valid for 5 years, but can be extended for another 5 years.

Hiring, Tax, and Reporting

After getting the license and ready to establish an office in Ho Chi Minh City, you still need to consider something else, such as hiring, tax and reporting.

When setting up the office is done, you can hire the number of local and expatriate employees as long as their employment is properly documented. All expatriate hires including the chief representative are required to have a work permit. The offices can hire staff directly or use the assistance of recruiting agencies.

A representative office is not subject to Vietnamese Corporate Income Tax (CIT). However, it is responsible for declaring its employees’ Personal Income Tax (PIT). Determining payable tax, representative offices have to initiate a tax audit which checks all revenues and expenses during the tax term to establish grounds for declaring and paying tax.

In addition, the representative office has to send reports of its activities of the previous year to the Department of Industry and Trade before January 30 of each year.

The Tax Risks if Your Representative Office is Permanently Set Up

As mentioned above, the representative office is only permitted to do market research activities and act as a liaison office for its parent company. It cannot engage in commercial activities or support the parent company with its commercial activities in Vietnam.

A Permanent Establishment is described as per local laws as well as the Double Tax Avoidance (DTA) agreement between Vietnam and other countries. In general, the PE definition under a DTA is more necessary than domestic regulations.

If a foreign business wants to convert the office into a permanent establishment, but it has been carrying out activities per local laws, it could activate a licensing risk. Thus, foreign businesses should ensure that their representative office performs activities as per the DTA guidelines. However, if the representative office activity is outside the scope, it may be subject to additional tax in Vietnam.

To avoid any licensing or tax risks in case the office is treated as a permanent establishment, businesses are advised to restrain from getting their offices involved in buying and selling activities between two parties.

Therefore, foreign investors looking to establish a presence in Vietnam should use the services of registered local advisors who can ensure their setup process is accurate while complying with the relevant DTAs and local regulations.

In conclusion, establishing a representative office should be taken into account if you want to enter the foreign market that you have not experienced yet. Despite its low-cost, it can help you to discern the local knowledge about Vietnam’s business. Keep it in mind, if you are unsure or know nothing about the local regulations and laws, you can ask for our help. Viettonkin will always be ready to assist you anytime!

Setting up a Representative Office (RO) is one of the first steps in founding your company in this newly emerged Southeast Asian market. How to set - up a Representative Office in Vietnam, especially in this Covid - 19 situation? This article will provide a cutting - edge starter-pack on how you’re going to set - up your company’s Representative Office.

READ MORE: Viettonkin Trade & Procurement Consulting service to help you set up your Representative Office in Vietnam

What is a Representative Office permitted to do and NOT to do ?

A Representative Office is enabled to engage in the following activities to help promoting its parent company:

Conducting market researches;
Playing as a contact point for its parent company;
Promoting the activities of its head office through meetings and other activities, that leads to business at later stages

Representative offices may not conduct any other profitable business. A RO does not have the right to sign a separate contract on its own. The parent company bears all financial obligations arising from the operations of the Representative Office, so the accounting of the RO is dependent on the enterprise.

Thus, in case of wanting to establish more dependent units only with the function of assisting the business to access customers and partners not performing business functions, you may consider establishing representative offices to avoid having to fulfill complicated tax obligations. In addition, for the service industries not directly implemented at the address of representative offices such as tourism, construction, consulting, etc., the form of setting up one in other provinces is a wise option.

In general, a Representative Office is allowed to perform almost all activities the parent company does except direct trading and profits generating, all types of contracts must be signed by the parent company or the Representative Office. It doesn’t have the authority to sign sale and purchase contracts, all invoices and trading documents must be returned to the head office.

What you need to set up a Representative Office ? (Latest update 2020)

READ MORE: IP laws and protection in Vietnam to find more about Vietnamese law !

Pre - license checklist for setting up a Representative Office

Application for establishment of representative offices of foreign companies in Vietnam;
The legalization of the consular and the public certificate of business registration or the equivalent valuable papers of foreign traders where the foreign trader' s establishment is established;
Written appointment of the parent company;
The notarized translation of the financial statement or the written certification of the fulfillment of the tax liability or financial liability in the latest fiscal year or the equivalent valuable paper issued by the competent agency or organization in the locality where the foreign trader is established or certified or proved;
A notarized copy of the ID card (for Vietnamese) or a copy of the passport (for foreigners) of the Chief representative;
Documents on the expected location, including:

Certified copying office contract;
The certificate of the land use right certificate of the lessor (if the enterprise is hired by the enterprise to provide additional business registration certificates);
In addition, the location of the representative office of the foreign company must conform to the provisions of Vietnamese law on security conditions, order and hygiene and other conditions as prescribed by law.

Note: the entire application dossier for shall be signed and stamped by the parent company. If the parent company in foreign countries has no marks, the whole dossier must be consular legalized.

Post – licenses check-list for establish representative office in Vietnam

Once submitting your application for license, you can start arranging staffs, taxes, annual reports. Apart from those, other basic operations of a representative office, including:

Foreign currency account and VND accounts with foreign currency origin at banks licensed to operate in Vietnam. Only use this account for RO activities;
Annually written report on its activities during the year to the Department of Industry and Trade;
Set up a cash fund to record all revenues and expenditures during the operation of the RO;
Apply for a work permit for the foreign worker at the RO (if any);
Signing labor contracts with the representative and the employees of the RO;
Annually certifying the salary and income for the chief representative and the operations of the representative office;
Pay personal income tax, representative's insurance and representative office employees (if any).
- Note, when submitting all tax returns and tax receipts from state agencies. Plus, annual income tax finalization for the representative and the employees of the representative office;
Other duties in accordance with the current law;

What’s next ?

The Business Registration Office shall issue the RO operation registration certificate to your company. It usually takes 03 working days since receipt of a valid application.
Within 30 days after being granted the RO operation registration certificate, you should publish your RO operation registration information on the National Business Registration Portal.

How long does it take to establish representative office in Vietnam?

It can take from six to eight weeks in total, including getting a main license, operating license and stamp. We recommend hiring a professional service to deal with the laws and procedures.

Thanks to the absence of in-country revenue and associated licensing requirements, the setup process does not entail as many bureaucratic procedures as others.

A Representative Office license is valid for five years but can be extended for another five years.

To sum up, above are the very first guidelines to establish representative office in Vietnam. Once you get the basic principles of the Vietnamese RO establishing process, it can be much more simple. Our Viettonkin legal specialists are always ready to support you with any procedure, license and certification. If you come across any obstacle, feel free to contact us below. Viettonkin will always be ready to give you a helping hand !