ESTABLISHMENT OF REPRESENTATIVE OFFICE OF FOREIGN TRADERS

 

Representative office is the most chosen form.of commercial presence for foreign traders who do not have a clear understanding of.the market in foreign countries. It is the same in Vietnam. When foreign traders enter the.Vietnamese market, they usually set up representative offices instead of.branches of foreign traders or subsidiaries – Foreign Invested Enterprise because of.the advantages of establishment costs, establishment procedures, related tax and accounting.reporting regimes, etc. this commercial presence brings.

To help you better understand the regulations and.procedures related to the.establishment of representative.offices of foreign traders in Vietnam, Law Plus would like to present some main.points of law.

I. REPRESENTATIVE OFFICE OF FOREIGN TRADERS – RIGHTS AND OBLIGATIONS

1. Definition

– A representative office of an enterprise is its dependent unit which acts as the enterprise’s authorized representative, represents and protect the enterprise’s interests. A representative office shall not do business (Clause 2 of Article 44 of Law on Enterprise).

– Vietnam-based representative office of a foreign trader.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 (Clause 6 of Article 3 of Commercial Law 2005).

2. Rights of representative offices

According to Article 17 of Commercial Law 2005, representative offices is entitled:

– To.operate for the purposes, within the scope and duration stipulated in their establishment licenses;

– To rent.offices, rent and purchase equipment and facilities necessary for their operations;

– To.recruit Vietnamese and expatriate employees to work for themVaccording to the provisions of Vietnamese law;  ESTABLISHMENT OF REPRESENTATIVE OFFICE OF FOREIGN TRADERS

– To.open accounts in foreign currencies or foreign currency-based.Vietnam dong at banks licensed to operate in Vietnam, and to be allowed to use those accounts solely for their operations;

– To have seals bearing their names according to the provisions of Vietnamese law;

– To.have other rights as defined by law. ESTABLISHMENT OF REPRESENTATIVE OFFICE OF FOREIGN TRADERS

3. Obligations of representative offices

According to Article 18  of Commercial Law 2005, the obligations of representative offices are:

– Not to directly conduct profit-generating activities in Vietnam;

– To conduct commercial promotion activities within the scope permitted by Commercial Law 2005;

– Not to enter into contracts, not to amend or supplement contracts.already entered into by foreign traders, except where chief representatives obtain valid letters of authorization from foreign traders.or other cases specified in Clauses 2, 3 and 4, Article 17 of Commercial Law 2005;

– To.pay taxes, fees and charges, and fulfil other financial obligations.provided for by Vietnamese law;

– To report.on their operations according to Vietnamese law;

– To.have other obligations as defined by Vietnamese law.

4. Obligations of the head of a representative office

The head of a representative office may not concurrently hold the following posts:

– Head of a branch of the same foreign trader;

– Head of a branch of another foreign trader;

– At-law representative of the same foreign trader or others;

– At-law representative of an economic organization established under Vietnamese law.

II. CONDITIONS, PROCEDURES, DOSSIERS OF APPLICATION FOR GRANT OF REPRESENTATIVE OFFICE ESTABLISHMENT LICENSES

1. Conditions for grant of representative office establishment licenses

a) To foreign trader:

– The foreign trader has been established or has registered its operation under.the law of a country or territory being a member to a treaty to which Vietnam is a contracting party.or recognized by the law of such country or territory;

– The foreign trader has been operating for.at least one year since its establishment or business registration;

– In case the foreign trader’s business registration certificate or equivalent paper indicates its term.of operation, the remaining term must be at least one year by the date.of submission of the application;

– In case contents of operation of the representative office fail to comply.with Vietnam’s commitments or the foreign trader is not located in a country or territory being member to a.treaty to which Vietnam is a contracting party, the establishment of such representative office shall be approved by the minister of.the ministry or the head of the ministerial- level agency performing the specialized management of the.sector concerned (below referred to as the minister of the line ministry).

b) To representative office:

– Contents of operation of the.representative office must comply with Vietnam’s commitments.in treaties to which Vietnam is a contracting party;

– The location of a representative office complies with Vietnamese regulations;

– The head of the representative office is not prohibited by law.

2. Procedures for grant of representative office establishment licenses

a) Step 1: Submitting the dossier of application for representative office establishment licenses to the licensing agency

According to Article 10 of Decree 07/2016/ND-CP, a dossier shall be made in one set, comprising:

– An application for a representative office.establishment license, made according to a form set by the Ministry of Industry and Trade and signed by the foreign trader’s.competent representative;

– A copy of the business registration certificate or.equivalent paper of the foreign trader;

– The foreign trader’s document on appointment.of head of the representative office;

– Copies of audited financial statements or documents proving.the fulfillment of tax liabilities or financial obligations in the latest fiscal year or equivalent paper issued or.certified by a competent agency or organization of the locality where the foreign trader was established proving the actual existence and.operation of the foreign trader in the latest fiscal year;

– A copy of the passport, people’ identity card or citizen’s identity.card (for a Vietnamese) or a copy of the passport (for a foreigner) of the head of the representative office;

– Documents on the expected location of the representative office, comprising:

  • A copy of the memo of understanding or location.rental agreement or a document proving the right to use the location for opening the representative office;
  •  A copy of the document on the expected location of the.representative office under Article 28 of this Decree 07/2016/ND-CP and relevant laws.

Note: 

The documents mentioned at Points ii, iii, iv and v (for the copy of.the passport of the head of the representative office being a foreigner) must have their Vietnamese translations certified under.Vietnamese law. The documents mentioned at Point ii shall be certified or consularly legalized by an overseas.Vietnamese diplomatic mission or consulate under Vietnamese law.

 Validity periods of representative office licenses: up to five years and.licenses can be re-granted many times.

b) Step 2: Register the sample seal at the sample seal management agency

(i) Establishment decision or operation license.of a competent authority;

(ii) Passport or ID card of the head of the.Representative Office;

c) Step 3: Registering tax identification number (for on corporate income tax declaration of the head of representative office and staff) at the tax administration agency

The dossier consists of: ESTABLISHMENT OF REPRESENTATIVE OFFICE OF FOREIGN TRADERS

(i) Tax registration declaration (Form 01-DK-TCT in Circular 95/2016/TT-BTC);

(ii) Operation registration certificate of .he representative office (Year copy);

(iii) Referral letter for applicants.

d) Step 4: Tasks to be carried out after being licensed for establishment:

– Open bank accounts at commercial banks; ESTABLISHMENT OF REPRESENTATIVE OFFICE OF FOREIGN TRADERS

– Report activities to the Department of Industry and Trade.(according to the form) before January 30 every year;

– Explain the need to use foreign workers and apply for work.permits and temporary residence cards to the Head of Representative Office and foreign employees.

III. ORDER AND PROCEDURES FOR GRANT OF LICENSES FOR ESTABLISHMENT OF REPRESENTATIVE OFFICES

– A foreign trader may submit its dossier directly, by post or online.(if applicable) to the licensing agency of a locality where its representative office is planned to be located.

– Within 3 working days after receiving the dossier, the licensing agency.shall check and request the applicant to supplement its dossier if it is neither complete nor valid.

The request for supplementation to the dossier shall be.made only once during the handling of the dossier.

– Within 7 working days after receiving a complete and valid dossier, the licensing.agency shall grant to the foreign trader a representative office establishment.license or refuse to grant it. In case of refusal, the licensing.agency shall issue a document clearly stating the reason.

– In case contents of operation of the representative office fail to comply with.Vietnam’s.commitments or the foreign trader is not located in a country or territory being member to a treaty to which.Vietnam is a.contracting party and the case in which the establishment of representative offices has not.yet been regulated in any.specialized legal document, within 3 working days after receiving a complete.and valid dossier, the licensing agency.shall send a written request to the.concerned line ministry for opinion.

Within 5 working days after receiving the request of the licensing agency, the.line.ministry shall issue a document stating its opinion on the grant of the license. Within 5 working days after receiving the.line.ministry’s reply, the licensing agency shall grant to the foreign trader a representative office establishment.license or refuse to grant it. In case of refusal, the licensing agency shall issue a.document clearly stating the reason.

IV. OPERATION NOTES OF REPRESENTATIVE OFFICE OF FOREIGN TRADERS

1. Representative office should not:

– Directly conduct profit-generating activities in Vietnam;

– Enter into contracts, not to amend or supplement contracts.already entered into by foreign traders, except where the head representatives obtain valid letters of.authorization from foreign traders or other legal cases;

– Promote or hire other traders to conduct sales promotions in Vietnam for the traders they represent;

– Directly.carry out commercial advertising activities;

– Directly display.and introduce goods and services of the trader they represent, except.for display and introduction at the head office of that representative office;

–  Directly.organize or participate in trade fairs and exhibitions.

2. Representative office must comly with:

– The annual reporting deadline before January 30;

– Regulations related to Personal Income Tax (PIT) such as registration of tax.identification numbers for each individual, monthly PIT declaration, preparation and submission.of decision reports and annual tax payments;

– Regulations on labor and social insurance when employing.workers and paying monthly salaries;

– Relevant regulations such as Prevention of money laundering Law, Tax Laws, Commercial Laws for operations in Vietnam.

Even though the procedure as well as the cost of establishing a representative office of a.foreign trader is simpler and lower than that of establishing other forms of commercial presence.such as a subsidiary or branches of foreign traders, understanding Vietnamese law is still important. Law Plus’s professional and experienced lawyers are always ready.to offer you the best assistance in the establishment of representative offices. To receive the most timely, quality, effective and.cost-effective advice, please contact LawPlus via hotline +84 2862 779 399, +84 3939 30 522 or email info@lawplus. VN

 >>> Procedures for termination of foreign representative office in Vietnam

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