HOW TO SET UP A REPRESENTATIVE OFFICE OF A FOREIGN COMPANY IN VIETNAM?

Investment consulting

In the economic integration and digital transformation, investors have a wonderful opportunity to develop their businesses outside the territory by establishing representative offices in potential vibrant economic markets around the world. It would be remiss if we did not mention Vietnam - one of the countries with a vibrant and dynamic economic market which is suitable for foreign investors to set up representative offices to promote trade activities, investigate the market before deciding to establish an entity. However, many investors are still confused and wonder “how to set up a representative office of a foreign company in Vietnam?”. In this post, Phong & Partners provides an overview of what is needed to set up a representative office of a foreign company in Vietnam, including requirements, orders and procedures.

Legal basises:

Law on Enterprises 2020;
Law on Commerce 2005;
Decree 07/2016/ND-CP detailed regulations on the establishment of Representative Offices or Branches of foreign traders in Vietnam under Law on Commerce.

Overview of Representative Office (RO)

Under Clause 2, Article 44 of Law on Enterprises 2022, a representative office of an enterprise is its dependent unit which acts as the enterprise’s authorized representative, represents and protects the enterprise’s interests. A representative office is not allowed to do business.

Clause 6, Article 3 of Law on Commerce 2005 provides that representative office of a foreign trader in Vietnam means a dependent unit of the foreign trader, which is established under the provisions of Vietnamese law to conduct market survey and a number of commercial promotion activities permitted by Vietnamese law.

Therefore, ROs are permitted to engage in the following activities:

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

Representative offices are dependent on their parent company and are not allowed to generate their own profits or enter directly into contracts. They are also not allowed to issue invoices.

Requirements for grant of Licenses for Establishment of RO

Foreign trader shall be granted Licenses for Establishment of RO if they satisfy the following requirements:

The foreign trader is incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties to treaties to which Vietnam is a signatory or is recognized by the aforesaid countries or territories.
The foreign trader has come into operation for at least 01 year from the date of establishment or registration;
The Certificate of Business Registration or the equivalent document is valid for at least 01 more year from the date of submission of the application;
The scope of operation of the RO is consistent with that in Vietnam’s Commitments to treaties to which Vietnam is a signatory. In case, the operation is not in accordance with the commitments of Vietnam or the foreign trader does not belong to a country or territory participating in an international treaty to which Vietnam is a contracting party, the establishment of a representative office must be approved by the Ministers, Heads of specialized management ministerial-level agencies.

Up to now, Vietnam has committed to fully open its doors for foreign traders to open representative offices in Vietnam in both WTO, TPP and EVFTA commitments. Foreign traders note that Vietnamese law allows a representative office of a foreign trader to rotate managers, executives or experts from elsewhere to Vietnam, to work in the representative office that foreign traders have established in Vietnam. These managers, executives or experts must have been recruited by foreign traders 1 year before coming to Vietnam. The requirement that “at least 20% of the total number of managers, executives or experts must be Vietnamese citizens” was introduced to encourage foreign transfer of management technology to Vietnamese. In all cases, however, each foreign commercial presence is entitled to a minimum of three non-Vietnamese managers, executives or specialists.

Applications for Licenses for Establishment of RO

An application form for License for Establishment of RO signed by a competent representative of the foreign trader.
A copy of the business registration certificate or equivalent document of the foreign trader.
A letter of appointment of the head of the representative office.
A copy of the audited financial report of the company for the latest fiscal year.
A copy of the passport or ID card (for Vietnamese) or copy of the passport (for foreigners) of the head of the representative office.
Documents on the expected location of the representative office including:

Copies of Memorandum of Understanding (MoU) or leasing agreements;
Copies of documents on the expected location of the representative office.

Documents from section 2 to 5 must be translated into Vietnamese and notarized in accordance with Vietnamese law. Documents specified in section 2 must be certified or legalized by Vietnamese diplomatic missions or consular offices abroad in accordance with Vietnamese law.

Orders and procedures for grant of Licenses for Establishment of RO

Step 1: Submit the application

The foreign trader shall submit the dossiers to the licensing agency where the representative office is expected to be located directly (Department of Industry and Trade or Management Board of industrial zone, export processing zone, economic zone, high-tech zone) or by post or online (where applicable).

Step 2: Receive and examine the application

Within 03 working days from the date of receiving the dossiers, the licensing agency shall examine such application and request the applicant to complete the application (if the application is incomplete). The request for supplementation to the application shall be made only one time during the processing of such an application.

Step 3: Grant of Licenses for Establishment of RO

Within 07 working days from the date of receiving the complete and valid dossiers, the licensing agency shall grant or refuse to grant a license to establish a representative office for the foreign trader. In case of rejection, there must be a written explanation clearly stating the reason.