Representative office in Vietnam
Last updated
Last updated
Vietnam has become an attractive destination for foreign businesses looking to expand into Southeast Asia. One of the most common ways for international companies to establish a presence in Vietnam is through a Representative Office (RO). This article provides a comprehensive guide to setting up and operating a , including its functions, legal requirements, benefits, and limitations.
A Representative Office (RO) is a legally recognized entity that allows foreign businesses to establish a presence in Vietnam without engaging in direct profit-making activities. The primary purpose of an RO is to conduct market research, liaise with local partners, and promote business activities on behalf of its parent company.
Unlike a foreign-owned enterprise or a joint venture, an RO cannot engage in direct trade, manufacturing, or service provision. However, it serves as a strategic gateway for foreign businesses to explore the Vietnamese market before committing to a full-fledged investment.
The legal framework for establishing a Representative Office in Vietnam is governed by:
Commercial Law No. 36/2005/QH11 issued by the National Assembly of Vietnam.
Decree No. 07/2016/ND-CP, which provides specific regulations on establishing Representative Offices of foreign traders.
Circular No. 11/2016/TT-BCT, detailing the licensing and operational procedures for ROs.
These laws and regulations define the rights, responsibilities, and restrictions of Representative Offices operating in Vietnam.
A Representative Office in Vietnam can perform the following activities:
Market Research: Conduct studies on Vietnam’s market, industry trends, and consumer behavior.
Business Liaison: Act as a bridge between the parent company and Vietnamese partners, suppliers, and customers.
Promotion and Branding: Organize promotional activities and marketing campaigns for the parent company’s products or services.
Support and Supervision: Assist local partners in implementing business strategies and ensuring compliance with corporate policies.
Administrative Operations: Oversee and coordinate non-commercial activities, such as attending trade fairs, exhibitions, and industry networking events.
While ROs provide a foothold in Vietnam, they have strict operational restrictions, including:
No Direct Business Activities: An RO cannot generate revenue, sign contracts, or engage in trade transactions.
No Manufacturing or Distribution: The office cannot produce goods or distribute products on behalf of the parent company.
Limited Financial Transactions: ROs can only receive funds from their parent company to cover operational expenses.
Restricted Employment Scope: Hiring foreign employees is subject to work permit regulations, and the number of local employees is often limited to administrative and support roles.
Foreign companies looking to set up a Representative Office in Vietnam must meet the following criteria:
The parent company must have been legally operating for at least one year in its home country.
The parent company must appoint a Chief Representative to oversee the RO’s activities.
The company must submit a complete application dossier to the Department of Industry and Trade (DOIT) in the province where the RO will be located.
The application dossier typically includes:
A Letter of Request for establishing the RO.
A Certified Copy of the Parent Company’s Business Registration Certificate.
A Financial Statement proving the company’s legal existence and financial stability.
A Lease Agreement for the RO’s office location in Vietnam.
A Chief Representative’s Passport or ID Copy.
The licensing process for an RO in Vietnam follows these steps:
Preparation and Submission: The foreign company prepares and submits the required documents to the DOIT.
Review and Approval: The DOIT evaluates the application, which typically takes 7-10 working days.
License Issuance: If approved, the DOIT issues an RO Establishment License, valid for five years, with the possibility of renewal.
Post-Licensing Compliance: The RO must register its office address, obtain a tax code, and comply with labor and reporting regulations.
Although an RO does not engage in commercial activities, it must fulfill certain compliance obligations:
Tax Registration: Obtain a tax identification number from the Tax Department.
Annual Reporting: Submit an annual activity report to the DOIT.
Employee Taxes: If hiring staff, the RO must comply with personal income tax (PIT) and social insurance contributions.
Setting up an RO in Vietnam offers several benefits:
Low Investment Cost: No capital requirements make it an affordable option.
Market Exploration: Provides a low-risk way to study the Vietnamese market before making larger investments.
Brand Presence: Enables foreign businesses to build relationships and establish brand visibility.
Legal Protection: Allows foreign firms to have a formal presence under Vietnamese law.\
If an RO’s limitations do not align with your business objectives, consider these alternatives:
Wholly Foreign-Owned Enterprise (WFOE): Allows full control over business activities and revenue generation.
Joint Venture: Partnering with a local company to access the Vietnamese market.
Branch Office: A foreign entity with broader operational rights than an RO but still subject to Vietnamese business laws.
A Representative Office in Vietnam is a strategic option for foreign companies looking to explore the market without committing to full-scale investment. While it offers various benefits, including brand promotion and market research opportunities, businesses should be aware of its operational limitations. Understanding the legal requirements, licensing process, and compliance obligations will help foreign firms establish and manage their RO effectively in Vietnam.
For expert guidance on setting up a Representative Office in Vietnam, consult a professional legal or business advisory firm to ensure a smooth and compliant process.
