The conditions of establishing a representative office in Vietnam
Thứ ba - 01/09/2020 15:10As a result of globalization, many countries around the world have benefited significantly and Vietnam is no exception. In Vietnam particularly, many regional and international cooperation platforms are proliferating, which also means that there are more opportunities for the nation to promote activities in many sectors such as trade or investment. These days, foreign investors start to consider Vietnam as an ideal place to make a huge profit as well.
However, running a business in Vietnam has never been an easy task for foreign companies. They have to comply with many limited regulations followed by series of order and procedures before officially conducting their investing activities in Vietnam. That is why establishing a representative office (referred as “RO”) is a common way which investors use when entering the Vietnamese market. By this form of commercial presence, non-Vietnamese companies could carefully investigate the business environment, carry out a number of commercial promotion activities permitted by Vietnamese law and pursue business opportunities for the overseas parent company.
Unlike the establishment of joint ventures or 100 percent foreign-owned enterprises, RO requires less procedures with shorter time as well as eliminates few obligations such as paying taxes or making financial report. In this article, the conditions to set up a representative office in Vietnam shall be analyzed and relevant issues might be discussed as well.
I/ Legal requirements for setting up representative offices
However, running a business in Vietnam has never been an easy task for foreign companies. They have to comply with many limited regulations followed by series of order and procedures before officially conducting their investing activities in Vietnam. That is why establishing a representative office (referred as “RO”) is a common way which investors use when entering the Vietnamese market. By this form of commercial presence, non-Vietnamese companies could carefully investigate the business environment, carry out a number of commercial promotion activities permitted by Vietnamese law and pursue business opportunities for the overseas parent company.
Unlike the establishment of joint ventures or 100 percent foreign-owned enterprises, RO requires less procedures with shorter time as well as eliminates few obligations such as paying taxes or making financial report. In this article, the conditions to set up a representative office in Vietnam shall be analyzed and relevant issues might be discussed as well.
I/ Legal requirements for setting up representative offices
1| Procedures to be granted RO licenses
In the first stage of setting up a RO, foreign traders must satisfy the requirements prescribed in the Commercial Law and other detailed regulations to be granted Licenses for Establishment of representative offices, specifically[1]:
1. The foreign trader is incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties in treaties to which Vietnam is a signatory or is recognized by the aforesaid countries or territories;
2. The foreign trader has come into operation for at least 01 year from the date of establishment or registration;
3. The Certificate of Business Registration or the equivalent document is valid for at least 01 more year from the date of submission of the application;
4. The operational scope of the representative office is consistent with Vietnam’s Commitments in treaties to which Vietnam is a signatory;
5. Where the operational scope of the representative office is inconsistent with Vietnam’s Commitments or the foreign trader is not located in the country or territory being party in treaties to which Vietnam is a signatory, the representative office can be established only if relevant Ministers, Heads of ministerial agencies (hereinafter referred to as “relevant Ministers”) have given approval for establishment of the representative office.
2. Applications for Licenses
After all of the conditions mentioned above are satisfied, a foreign company wanting to establish a representative office in Vietnam must submit an application dossier for a license to the Provincial Department of Industry and Trade, including[2]:
1. The foreign trader is incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties in treaties to which Vietnam is a signatory or is recognized by the aforesaid countries or territories;
2. The foreign trader has come into operation for at least 01 year from the date of establishment or registration;
3. The Certificate of Business Registration or the equivalent document is valid for at least 01 more year from the date of submission of the application;
4. The operational scope of the representative office is consistent with Vietnam’s Commitments in treaties to which Vietnam is a signatory;
5. Where the operational scope of the representative office is inconsistent with Vietnam’s Commitments or the foreign trader is not located in the country or territory being party in treaties to which Vietnam is a signatory, the representative office can be established only if relevant Ministers, Heads of ministerial agencies (hereinafter referred to as “relevant Ministers”) have given approval for establishment of the representative office.
2. Applications for Licenses
After all of the conditions mentioned above are satisfied, a foreign company wanting to establish a representative office in Vietnam must submit an application dossier for a license to the Provincial Department of Industry and Trade, including[2]:
a. An application form for License for representative office establishment using the form promulgated by the Ministry of Industry and Trade and signed by a competent representative of the foreign trader;
b. Copies of the Certificate of Business Registration or equivalent documents of the foreign trader;
c. A letter of appointing the head of the representative office;
d. Copies of audited financial statements or certificates of fulfillment of tax liabilities or financial obligations of the last fiscal year or equivalent documents as proof of existence and operation of the foreign trader issued or certified by competent authorities where such foreign trader is established;
e. Copies of the passport or ID card (for Vietnamese) or copies of the passport (for foreigners) of the head of the representative office;
f. Documents on the expected location of the representative office including:
- Copies of memorandum of understanding (MOU) or leasing agreements or documents as proof of the right to use a location as the representative office;
- Copies of documents on the expected location of the representative office in accordance with provisions of Article 28 of Decree 07/2016 and related laws.
As regards documents specified in point b, c, d and e (for the head of the representative office being foreigners) shall be translated into Vietnamese and authenticated in accordance with laws of Vietnam. Documents specified in point b shall be certified or legalized by oversea diplomatic missions or Consulates of Vietnam under laws of Vietnam.
3.Procedures for grant of Licenses for representative offices establishment
The foreign trader shall submit the application to the licensing agency where the representative office is expected to be located directly or by post or online (where applicable).
Within 03 working days from the date of receipt of the application, the licensing agency shall examine such application and request the applicant to complete the application (if the application is incomplete).
The request for supplementation to the application shall be made only once during the processing of such application.
Apart from those specified below, the licensing agency shall send the applicant a written notification of whether the license or establishment of the representative office is granted or not within 07 working days from the date of receipt of the valid application. In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.
Note: For those specified in clause 5, Article 7 Decree 07/2016 and the establishment of representative offices that has not prescribed by specialized legislative documents, the licensing agency shall submit a written request for directions to the relevant Ministry within 03 working days from the date of receipt of the valid application. Within 05 working days from the date of receipt of the request for directions from the licensing agency, the relevant Ministry shall submit the licensing agency a written notification of whether or not they approve for the application. Within 05 working days from the date of receipt of the notification from the relevant Ministry, the licensing agency shall send the applicant a written notice of whether the License for Establishment of the representative office is granted or not. In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.
II/ Cases ineligible for Licenses for Establishment of representative offices
The licensing agency shall refuse to grant the License for Establishment of the representative offices or branches to those that[3]:
- Failing to satisfy one of requirements stipulated in Articles 7 Decree 07/2016 ( for applications for licenses or establishment of representative offices).
- Applying for the license or establishment of the representative office within 02 years from the date of revocation of the license or establishment of the representative office under Article 44 Decree 07/2016.
- Being subject to restrictions from the establishment of representative offices for reasons of national defense and security, social order, social ethics and community health.
- Being restricted by provisions of laws.
- Copies of documents on the expected location of the representative office in accordance with provisions of Article 28 of Decree 07/2016 and related laws.
As regards documents specified in point b, c, d and e (for the head of the representative office being foreigners) shall be translated into Vietnamese and authenticated in accordance with laws of Vietnam. Documents specified in point b shall be certified or legalized by oversea diplomatic missions or Consulates of Vietnam under laws of Vietnam.
3.Procedures for grant of Licenses for representative offices establishment
The foreign trader shall submit the application to the licensing agency where the representative office is expected to be located directly or by post or online (where applicable).
Within 03 working days from the date of receipt of the application, the licensing agency shall examine such application and request the applicant to complete the application (if the application is incomplete).
The request for supplementation to the application shall be made only once during the processing of such application.
Apart from those specified below, the licensing agency shall send the applicant a written notification of whether the license or establishment of the representative office is granted or not within 07 working days from the date of receipt of the valid application. In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.
Note: For those specified in clause 5, Article 7 Decree 07/2016 and the establishment of representative offices that has not prescribed by specialized legislative documents, the licensing agency shall submit a written request for directions to the relevant Ministry within 03 working days from the date of receipt of the valid application. Within 05 working days from the date of receipt of the request for directions from the licensing agency, the relevant Ministry shall submit the licensing agency a written notification of whether or not they approve for the application. Within 05 working days from the date of receipt of the notification from the relevant Ministry, the licensing agency shall send the applicant a written notice of whether the License for Establishment of the representative office is granted or not. In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.
II/ Cases ineligible for Licenses for Establishment of representative offices
The licensing agency shall refuse to grant the License for Establishment of the representative offices or branches to those that[3]:
- Failing to satisfy one of requirements stipulated in Articles 7 Decree 07/2016 ( for applications for licenses or establishment of representative offices).
- Applying for the license or establishment of the representative office within 02 years from the date of revocation of the license or establishment of the representative office under Article 44 Decree 07/2016.
- Being subject to restrictions from the establishment of representative offices for reasons of national defense and security, social order, social ethics and community health.
- Being restricted by provisions of laws.
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