TERMINATION OF OPERATION OF FOREIGN REPRESENTATIVE OFFICES
Operating in the form of a Representative Office in Vietnam is a common form of commercial presence that foreign enterprises choose selected for the early stage of the investment process – with the function of a liaison office, market research, and research to promote investment opportunities. Although the Representative Office greatly supports the business activities of foreign traders and simultaneously avoids the risks and costs of tax and accounting system… but in reality, because of the “limited characteristics” of Representative Offices, which currently have many. Representative Offices face administrative fines for failing to comply with regulatory compliance procedures.
With many years of experience in accompanying representative offices of many foreign traders in Vietnam, LawPlus would like to send. Customers important information on procedures and necessary documents to terminate the operation of a representative office in Vietnam. TERMINATION OF OPERATION OF FOREIGN REPRESENTATIVE OFFICES
Table of Contents/Mục lục
1. Specific restrictions that the representative office of foreign traders (“representative office”) must comply
- Not to conduct profitable activities directly in Vietnam; TERMINATION OF OPERATION OF FOREIGN REPRESENTATIVE OFFICES
- Not to enter into contracts, to amend or supplement signed contracts of foreign traders, unless. the Chief of the representative office has a lawful power of attorney from the. foreign trader or in other cases prescribed by law permission;
- Do not promote or hire other traders to conduct sales promotions in Vietnam for the traders they represent;
- Not directly conduct commercial advertising activities;
- Not to instantly display and introduce goods and services of the trader they represent, except. for display and introduction at the head office of such representative office; TERMINATION OF OPERATION OF FOREIGN REPRESENTATIVE OFFICES
Not be allowed to directly organize or participate in trade fairs and exhibitions.
2. Specific limitations for the Chief of Representative Office
The Chief of a representative office of a foreign trader can not concurrently hold the following positions:
- Chief of Branch of the same foreign trader;
- Heads of Branches of other foreign traders;
- The legal representative of that foreign trader or other foreign traders;
- The legal representative of an economic organization is established by the laws of Vietnam.
3. Cases of dissolution of representative offices of foreign traders in Vietnam
- It is requested by its head office;
- The foreign trader ceases to operate according to the laws of the country or territory in which such foreign trader is established or registered.
- The License for the Establishment of the representative office or branch is expired but its head office does not apply for an extension of the license.
- Expiry of operation period under the license for establishment of representative office without. being approved to extend by the License-issuing agency.
- The License for Establishment of the branch or representative office is revoked as prescribed in Article 44 hereof.
- Foreign traders and representative offices no longer satisfy one of the following conditions:
- Foreign traders may not establish or register their business by the laws of countries. or territories participating in international treaties to which Vietnam is a contracting party. recognized by the laws of these countries and territories take;
- Foreign traders operating for less than 1 year from date of establishment or registration;
- In case the business registration certificate or equivalent document of the foreign trader has a term. of operation that is less than 01 year from the date of application submission;
- Contents of the representative office’s activities are not consistent with Vietnam’s commitments. to international treaties to which Vietnam is a signatory;
4. Cases of revocation of a Representative Office
The License for Establishment of representative offices or branches shall be revoked if such representative offices or branches :
- Do not operate for 01 years and fail to enter into transactions with licensing agencies;
- Fail to submit reports on the operation of the representative office or branch for 02 consecutive years;
- Fail to submit reports stipulated in clause 2, Article 32 hereof to the. licensing agency within 06. months from the deadline of submission or at the written request of the licensing agency;
- Be governed by provisions of laws.
5. Procedures for terminating Representative Offices and obligations after termination
5.1. Procedures for termination
Step 1: Issue a decision to terminate operation and pay obligations to employees:
- Foreign traders make decisions decide to terminate the operation of the representative office, notify the employees and settle the labor regime with the office staff;
- Notify the management agency that the Office will cease to operate.
Step 2: Carrying out procedures for invalidation of Tax Identification Number the Representative Office:
- The representative office shall carry out procedures for applying TIN deactivation, which has been granted at the Tax Department of Ho Chi Minh City;
- A dossier of TIN deactivation includes:
+ A written request for TIN deactivation;
+ Decide to terminate the operation of the representative office for the above reasons;
+ A copy of the representative office establishment license;
+ The original Notice of tax identification number;
The tax authority shall finalize the tax of the representative office and concurrently complete the personal income tax for the Chief of the foreign representative office and the staff working at the representative office.
Step 3: Close the representative office’s bank account
After the tax authority finalizes and issues, a notice noting that the representative office has terminated its tax identification number, the representative office will close the opened bank account.
Step 4: Return the seal to the provincial/municipal police office
Foreign traders return the seal to the seal-issuing agency. A representative office seal return dossier includes:
+ The representative office’s seal return official letter;
+ Seal of the representative office;
+ Certificate of seal sample registration;
+ A copy of the representative office operation license;
+ Decide to terminate the operation of the representative office for the above reasons;
+ A copy of the tax authority’s document on invalidation of the tax identification number;
The police agency receives the seal return dossier and issues a Notice of seal cancellation from the representative office within 3 -5 working days.
Step 5: Apply to the licensing agency to set up an office
- After completing the procedures mentioned in the above steps, the foreign trader applies to terminate. the representative office operation directly, by post, or in person (if applicable) to the Licensing Authority.
- The application includes:
- A notification of shutdown of the representative office or branch using the form issued by. the Ministry of Industry and Trade and signed by a competent representative of the foreign.trader, excluding cases specified in clause 5, Article 35 hereof.
- Copies of written refusals of the grant of extension of the license or establishment of the representative. office or branch (for those specified in clause 4, Article 35 hereof) or a copy of the decision on revocation. of the license for establishment of the representative office or branch released. by the licensing agency (for those specified in clause 5, Article 35 hereof);
- Lists of creditors and the number of debts, including outstanding taxes and social insurance premiums;
- Lists of employees and their current benefits;
- The original License for the Establishment of the branch or representative office
Within 03 working days from the date of receipt of the dossier, the licensing agency shall examine and request supplementation if the dossier is incomplete or invalid. The request for additional records is made at most once during the processing of the application.
Within 05 working days from the receipt of complete and valid dossiers, the licensing agency is responsible for announcing on its website the termination of the representative office’s operation.
5.2. Obligations of Representative Offices after terminating operation
- In addition to carrying out procedures for operation termination as prescribed in Articles 36 and 37 of Decree No. 07/2016/ND-CP, foreign traders and representative offices must list publicly announce the termination of operations at the head office of the representative office and perform other obligations as prescribed by law when the representative office ceases to operate.
- Foreign traders whose representative offices have ceased to operate shall be responsible for performing contracts, paying debts, including tax debts, and settling all legal benefits for employees who have worked at the representative offices by regulations under the law.
- The foreign trader and the Chief of the representative office that terminates the operation are jointly responsible for the truthfulness and accuracy of the dossier for the termination of the representative office’s operation.
- In case of the representative office terminates its operation in a province or city directly, under the Central Government or geographical area under the jurisdiction of a Management Board to move the location of the representative office’s headquarters to another province, or city directly under the Central Government or geographical area under the jurisdiction of a. For other management boards, the dossier for terminating the representative office’s operation only includes a Notice of Termination of Representative Office according to the form and the current List of employees and their respective benefits. TERMINATION OF OPERATION OF FOREIGN REPRESENTATIVE OFFICES
Note: Records are valid when the office fulfills all obligations related to tax declaration and payment then certified by the tax authority tax obligations have been fulfilled. Based on regulations on tax administration and anti-money laundering, tax authorities can arrears and penalties for unaccountable amounts, with cumulative data years, resulting in the office may have to pay some taxes and huge fines before getting a certificate of completion of tax obligations.
The above is detail and specific regulations on procedures for terminating the operation of representative offices of foreign traders in Vietnam. With the current preferential policies for foreign investment in Vietnam. A representative with simple operation functions will not generate many risks. Still, the risks to tax declaration and payment procedures and other compliance procedures in operation are significant obstacles for foreign traders when carrying out procedures for terminating the process of representative offices. To understand the applicable regulations, practices, and avoid unforeseen risks, contact us. We are sure to give detailed advice and support for your office as well as foreign traders, don’t hesitate aa via email at email@example.com or phone number +84 2862 779 399; +84 3939 30 522