Opening a Representative Office in Vietnam 2024

Opening a Representative Office in Vietnam 2024

Opening a Representative Office in Vietnam is a practical solution for foreign companies exploring business opportunities in the country at a lower cost and with minimal risk. It is a great alternative to a subsidiary company or a branch.

What is a Representative Office in Vietnam?

A Representative Office (RO) is a subsidiary unit established in Vietnam by a foreign company. It is allowed to conduct market research and carry out certain permitted trade promotion activities.

Here are 4 key benefits of having a representative office in Vietnam:

  1. Market Entry: It provides an initial, temporary, low-risk business presence in the Vietnamese market, allowing foreign companies to understand local market conditions, consumer behavior, and business culture before committing to larger investments.
  2. Enhanced Brand Presence: It allows for targeted promotional activities, brand building, and building relationships with local businesses, suppliers, and potential customers in Vietnam.
  3. Cost-Effective: it requires no investment capital, incurs no taxes, and involves lower setup and operational expenses.
  4. Simplified Setup & Compliance: It eliminates the need for complex ongoing compliance procedures, unlike FDI companies

Invest in Vietnam

4 Features of a Vietnam RO

Limited Activities: An RO in Vietnam is only permitted to conduct liaison work, market research, and promote business opportunities. It can hire local and foreign employees.

No Profit-Generating Activities: The RO is not allowed to enter into business contracts, receive business payments, issue invoices or receipts, provide any services for a fee, and open or receive letters of credit.

Dependence on Foreign Company: The RO has no independent legal status and financially and operationally depends on its parent company.

Temporary Structure: The operation duration of an RO in Vietnam is 5 years and can be extended afterward.

Representative Office (RO) Vietnam

How to Open a Representative Office in Vietnam

Setting up a representative office in Vietnam involves 4 steps:

  • Step 1. Check parent company qualifications
  • Step 2. Appoint a local Chief Representative
  • Step 3. Prepare required documents
  • Step 4. Register the representative office

Let’s take a closer look at each step.

Step 1. Check parent company qualifications

A foreign company can establish a Representative Office in Vietnam if it:

  • is legally established in a country or territory participating in the international treaty of which Vietnam is a member;
  • has been in business operation for at least 1 year; 
  • operates in the manufacturing, trading, IT, consulting, construction, logistics, or other service sectors.

Step 2. Appoint a local Chief Representative

The Chief Representative is an individual, either a foreigner or Vietnamese, appointed by the foreign company to lead the Vietnam RO.

Learn more: Requirements for a Chief Representative in Vietnam

Step 3. Prepare required documents

The following required documents will be prepared and submitted:

  • Application for Issuance of Representative Office Establishment License (Form MD-01)
  • A legalized Business Registration License of the foreign company
  • An audited financial statement of the latest fiscal year of the foreign company
  • A letter of appointment for a Chief Representative
  • A certified true copy of passport/ID card of the Chief Representative
  • A lease agreement and legal documents for the RO’s headquarters

Step 4. Register the representative office

The foreign company must submit the application to establish an RO to the Department of Industry and Trade. Afterward, the RO must register for a red seal at the Police Department and apply for a Tax Code at the Tax Department. These procedures typically take 17 to 25 working days to complete.

Sample of a license of a Vietnam representative office
Sample License for Establishment of a Representative Office in Vietnam

Post-Registration Management

Here’s a checklist of tasks a RO in Vietnam needs to complete after establishment to ensure compliance with local regulations and smooth operations:

1. Affix and maintain a RO’s sign in front of the office

The sign should include at least the representative office’s name

2. Opening bank accounts for the RO (optional)

The purpose of the RO bank accounts is to conduct financial transactions, for example: receiving funds from the mother company, making payments for expenses of the RO in Vietnam such as office rent, salaries, office supplies, etc.

3. Submitting Reports

The RO must prepare reports regarding its activities throughout the year and submit the report to the Department of Industry and Trade before January 30th of the following year.

4. Tax Obligations

In case the representative office hires employees, the RO is obligated to contribute to social insurance for employees and settle personal income tax for employees.

In case the RO does not incur any salary expenses, it is not required to fulfill tax obligations.

FAQs

It costs VND 3,440,000 in government fees to set up a representative office (RO) in Vietnam, in which:

  • RO registration fee: VND 3,000,000
  • Red seal carving fee: VND 440,000

A comparison between Company and Representative Office

CompanyRepresentative Office
FunctionA fully functioned entity, capable of conducting any business within the registered business scope Performs the functions of liaison offices, market research, promote the business opportunities on behalf of its foreign trader.
Not allowed carrying out any profit-making business activities.
Licensing AuthorityDepartment of Planning and Investment; or
Management Board of Industrial Zone
Department of Industry and Trade
EmploymentFully capable of hiringCan hire employees, as long as employees don't perform profit-making business activities
TaxSubject to taxes related to business activities:
- Value Added Tax
- Corporate Income Tax
- Personal Income Tax
- Compulsory Insurances
- Import and Export Duties
Due to no business activity, the tax scheme of RO is very simple:
- Personal Income Tax for employees
- Compulsory Insurances for employees
Entity statusFully functioned legal entityCannot sign any contract for profit-making purposes under its name (since this will not be a legally recognized entity status)
Bank accountFully functioned bank account, capable of receiving and sending payment to oversea’s or domestic account Can open bank accounts to receive payments from the parent company to maintain its operation
Operation DurationNormally 10 years for service companies
(Can be extended afterwards)
5 years
(Can be extended afterwards)

A Vietnam Representative Office can’t be converted into a local company. Should you wish to make sales or provide services for a fee, you will need to consider a Subsidiary Company

To Sum-up

Setting up a Representative Office in Vietnam is a great option for foreign companies to assess the business potential in Vietnam. However, the scope of activities of the RO is limited.

If you believe a Representative Office is the right structure for your business, Nova Law can assist you in setting it up. From initial registration to ongoing governance and compliance needs, Nova Law is here with responsive, professional, and tailored support.

Contact Nova Law today to register your Representative Office in Vietnam.

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Denise ko
Denise ko
10 months ago

Who should be the chief representative of the RO
Any requirements

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