Important Remarks before establishing a representative office in Vietnam

Representative offices are the trend of many domestic and foreign enterprises in the market economy with the current competitive environment aimed at maximizing the business market and improving sales. . However, many individuals and businesses do not have a specific concept of representative offices – What are the specific functions ?. This is really dangerous because it can bring risks to businesses.

Therefore, this is the necessary knowledge for businesses before establishing a representative office to ensure business efficiency as well as “withdraw” if that market is not effective.

1.Legal basis

  • Commercial Law 2005
  • Enterprise Law 2014
  • Decree no.07/2016 / ND-CP

2.What is Representative Office ?

According to Clause 2, Article 45, the 2014 Enterprise Law stipulates that: A representative office is a unit dependent on the enterprise and obliged to represent the enterprise’s interests under authorization and protect such interests ”.

It can be understood that Representative Offices are not allowed to do business directly, and may not enter into economic contracts with partners unless authorized by the head office. Head office manage the operations of representative office, so all activities on tax declaration and invoicing will be managed by the head office.

If the owner /Trader only needs a legal address to facilitate transactions with partners without carrying out profitable business, establishing a Representative Office is the most appropriate solution

3.  Main functions of representative offices

  • Not to directly conduct profit-generating activities in Vietnam.
  •  To conduct commercial promotion activities within the scope permitted by this Law.
  • 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 in case regulated by law.
  • 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.Limitation of representative offices

  • Cannot directly implement profit-making activities in Vietnam.
  • Do not perform any lucrative activities (No transactions, no service, no import and export of goods, no inventory, no production operations …)
  • There is no juridical person, no contract, no amendment or supplement to the contract signed by foreign traders.
  • Operation time is limited to every 5 years.
  • Cannot transfer ownership.
  • Can not expand more offices and branches.
  • Parent company only pays for activities at the representative office within a limit amount.
  • VAT, PIT, fees and charges must be declared, and other financial obligations are required in accordance with the laws of Vietnam.

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