Representative office allows a foreign company to have a presence in the market without having to incorporate a company. While easy to set up it also has some key restrictions such as it cannot conduct commercial activities.
In this article we will give you an overview of why and how to set up a representative office in Vietnam and what are some of the common use cases.
What is a representative office
A representative office is an office established by a foreign company in order to conduct marketing and other non-financial activities.
However, a representative office is not allowed to conduct commercial activities (earn revenue) in Vietnam. Therefore if you plan to earn revenue then you should set up a limited liability company or a joint stock company.
What can you do with a representative office in Vietnam
With the representative office in Vietnam you can have supporting roles towards the parent company to:
- Conduct market research
- Find investment partners
- Find investment opportunities
- Promote parent company
- Supervise the contract signing process with Vietnamese partners
Your business line opportunities in Vietnam depend on the purpose it will serve. Anything related to promoting the parent company is acceptable.
The license of a representative office is given out for 5 years (unless stipulated otherwise due to the expiry date of parent company´s business license or establishment certificate).
Requirements for setting up a representative office
Setting up a representative office in Vietnam can be considered a legally convenient process due to its somewhat simple structure. However, even with this dependable entity form there are a few restrictions for the applicant to consider, for example the parent company must have been operating for at least one year before it is possible to set up a representative office.
Benefits of a representative office
Watch Kadri Lahi, country manager of Emerhub Vietnam, compare different legal entity types in Vietnam.
Unlike limited liability companies and joint-stock companies, a representative office does not have any capital requirements. As parent company has unlimited liability towards the representative office it will also be held responsible in case of any unsuccessful activities of the representative office.
Compliance of a representative office
As representative office does not have a permission to issue invoices it has less compliance requirements compared to other legal entity types.
What should be reported:
- Personal Income Tax (PIT) quarterly, settlement of PIT annually, Business License Tax (not Corporate Income Tax, VAT)
- Apply a dependent accounting system
- Internal report to the parent company abroad
- Operation annual report to Industrial and Commercial facilities
Common use cases for representative office in Vietnam
Search for distributors
As an example of a representative office – imagine an import business whose main interest is to enter Vietnamese market, handle their field of expertise and find distributors. This is a candidate who should consider setting up a representative office.
As well as a company looking to bring online products to the market. This is a great profile for a representative office alongside with the help of an agent, who knows the market. Once the setup of a rep. office is ready, agent can help with finding suitable distributors.
In similar situations, the help of an agent comes in handy as they will be an extra pair of hands when promoting the parent company and will carry out the representative office goals efficiently.
Putting together initial team
If you want to hire initial team in Vietnam before launching commercial operations then a representative office allows you to open bank account, hire both local and foreign employees and promote your company.
If your main purpose is to just hire a few people then you should also consider our staff augmentation service which allows you to have local team without any bureaucracy.
Besides conducting market research, representative office helps the parent company find products suitable for exporting. In addition to that, rep. offices often follow through quality control for products that are being exported. For example if cooperation is taking place between a foreign company accepting goods from a local partner.
In addition to the above, there are plenty of other business lines that can successfully manage a representative office in Vietnam. To get all your papers prepared legally correct and on a timely manner, fill in the form below or go to representative office registration page.