A representative office (RO) in Vietnam allows foreign companies to put people on the ground and nurture the local relationships without engaging in commercial activities or generating revenue. It is generally a low-risk and a very cost-efficient way before companies commit to setting up a company in the country.
In this article, we will explore what a Representative Office can and cannot do, who is eligible to set one up, requirements, and the step-by-step registration process in Vietnam.
Understanding a Representative Office (RO) in Vietnam
Under Decree 07/2016/ND-CP, a Representative Office (RO) in Vietnam is a non-commercial presence established by a foreign company. What it means is that you cannot sell products or services, sign any commercial contracts, or generate direct revenue in Vietnam through a representative office.
RO acts as an extension of the parent company. This allows the parent company to manage specific activities on the ground without establishing a legal entity or paying corporate taxes.
However, before you move forward and set up a representative office in Vietnam, you need to understand its defined scope of operations.
Activities allowed through a foreign-owned Vietnam Representative office
A representative office in Vietnam is allowed to conduct supporting business activities for the parent company. These include:
- Conduct market research to understand your target audience.
- Promote your parent company’s brand, services, or products.
- Monitor the progress of contracts signed by the parent company.
- Act as a local liaison between your headquarters and Vietnamese contacts.
If you are unsure whether your intended activities are permitted through a representative office, Emerhub’s local advisors can help. Our team can also provide you with key insights on the most suitable legal entity for your operations.
What a Representative Office cannot do
An Representative office is strictly prohibited from:
- Selling products or services directly in Vietnam.
- Issuing VAT invoices.
- Signing contracts or entering into commercial agreements on behalf of your parent company.
Therefore if your goal is to earn revenue, you should set up a limited liability company or a joint stock company.
Who is Eligible to Set Up a Representative Office in Vietnam?
To be eligible for setting up a representative office in Vietnam, your company must already be legally established in another country. Moreover, the article. 7(1)(b), Decree 07/2016/ND-CP requires that your business has been operating for at least one year. This provides evidence that you’re a real business, not a shell enterprise.
In addition to that, your Business line should fit Vietnam’s WTO commitments. While most sectors qualify for this, if your business operates in a restricted sector, you will need additional approvals.
Key Requirements for Setting Up A Representative Office in Vietnam
As a foreign company opening a representative office, there are a few key requirements that must be met. The goal is to ensure your business is legitimate, well-established, and operating in a permitted industry.
When compared to setting up a standard Limited Liability Company (LLC) in Vietnam, a representative office does not have any capital requirements. As the parent company has unlimited liability towards the representative office, it will also be held responsible in case of any debts or liabilities incurred by the representative office.
Here are the key requirements and documents you need to prepare to register a representative office in Vietnam:
- Parent company’s valid business registration certificate with a minimum of 1 year of operations. It must be legalized by a Vietnamese embassy or consulate abroad.
- Proposed office address in Vietnam (must be non-residential and compliant with local zoning laws)
- Chief Representative appointment letter
- Financial statements from the parent company to prove financial stability
- Identification documents for the appointed Chief Representative
How to Register A Representative Office in Vietnam
Since a representative office in Vietnam is an extension of an existing overseas legal entity, registration is generally straightforward due to the simplified business structure. Here are the key steps to register your representative office in Vietnam:
1. Document Preparation and Legalization
This initial stage involves compiling all the necessary documents for your application. These include your parent company’s business license, its financial statements, and other necessary documents as mentioned above.
Please note that any documents issued outside Vietnam, such as your parent company’s business license, must be legalized by a Vietnamese embassy or consulate in your home country.
Our experts ensure all documents are correctly prepared, translated, notarized, and legalized to meet Vietnamese legal standards.
2. Submit RO License Application to the DPI
Once your documents are ready, the next step is the submission of a complete application dossier to the Department of Planning and Investment (DPI) in the city or province where your Representative Office will be based. For certain regulated industries such as banking, education etc, you might also need approvals from relevant ministries.
Emerhub manages the full application submission on your behalf. Our experts ensure all forms are correctly filled and your supporting documents are included in the application. Furthermore, we will liaise with the DPI as needed.
3. Receive Representative Office License
Once the application is approved by the DPI, you will receive your official Representative Office License. This license is valid for 5 years. However, if the validity period of your parent company’s business license in the home country is less than 5 years, your RO license will also be for a shorter duration.
4. Post-License Registration
As the representative office does not have permission to issue invoices, it also has fewer compliance requirements compared to other legal entity types. Below you will find the main obligations required from a representative office to ensure corporate and fiscal compliance:
- Registering your tax code with the local tax authority and declaring PIT
- Opening a corporate bank account for operational expenses
- Quarterly Personal Income Tax (PIT) reporting and annual settlements
- Business License Tax (not Corporate Income Tax, VAT)
- Setting up an accounting system
- Submission of an Internal report to the foreign parent company
- Annual reports on Industrial and Commercial facilities and operations
- Registering labor contracts and social insurance for employees
- Renewing your business license on time. You apply for license renewal at least 30 days before the expiry. However, it is advisable to start the renewal process at least 2-3 months before expiry.
Emerhub can help you ensure compliance with tax and payroll regulations in Vietnam. Our local financial team can also provide you with key insights on deadlines and potential benefit eligibility.
Common scenarios for opening a Vietnam representative office
It can at times be difficult to determine whether or not it is more beneficial to set up a representative office in Vietnam versus a different type of legal entity. Below, we’ve compiled some of the most common scenarios leading foreign-owned companies to establish this type of legal entity:
- Finding Distributors: If you are setting up a trading company or import operations in Vietnam, a representative office is an efficient way to establish partnerships with local distributors and set up a supply chain for bringing your products to the Vietnamese consumer market.
- Setting up a trial team: It is common for foreign companies to set up a representative office for a trial before launching commercial operations, as it allows you to hire employees and open a Vietnamese bank account.
- Sourcing goods for export: Besides conducting market research, a representative office helps the parent company find products suitable for export. In addition to that, representative offices often manage quality control for products that are being exported.
Setup Your Representative Office in Vietnam with Emerhub Experts
If you have a parent company abroad that has been active for at least one year, Emerhub can help you navigate the entire company registration process for setting up a representative office in Vietnam.
You can request a free consultation by filling out the form below.
It is important to keep in mind the specific scope of your planned business will determine how best to set up your legal entity in Vietnam. If you’re interested in first conducting preliminary market research for your overseas company, then Emerhub can help you determine the best means of market entry.
Thinking of setting up a representative office in Vietnam? Contact Emerhub via the form below to get started!
FAQs on Representative Offices in Vietnam
It is possible for a representative office to hire both local Vietnamese and foreign employees. However, but only for internal roles, non-commercial roles such as research, marketing, and administrative functions. The RO cannot engage employees for direct commercial activities.
Since a rep office is not allowed to generate revenue, it is not liable to pay corporate income tax and VAT in Vietnam. However, if you are hiring employees, the representative office is responsible for withholding and paying Personal Income Tax (PIT) for its employees, as well as contributing to Social Insurance, Health Insurance, and Unemployment Insurance for Vietnamese employees as per Vietnamese labor and tax laws.
It is not possible to convert a representative office into a limited liability company or any other form of legal entity. If you decide to start commercial, revenue-generating operations later, you must register a new legal entity (such as a limited liability company or joint-stock company) in Vietnam. During that process, you will also close your representative office.
Representative offices are strictly prohibited from engaging in importing, exporting, or trading activities. Their functions are limited to non-commercial activities like market research and promotion.
A rep office is mainly used by companies either planning on expanding into Vietnam or have global presence but would like to strengthen their local relations.
It basically allows you to establish your local presence and understand the market before making a full investment. Other benefits include low setup and maintenance costs compared to a limited liability company and no corporate income tax.
