Thứ Ba, 8 tháng 12, 2020

REPRESENTATIVE OFFICE IN VIETNAM – TYPICAL RIGHTS AND OBLIGATIONS

REPRESENTATIVE OFFICE IN VIETNAM – TYPICAL RIGHTS AND OBLIGATIONS - lookoffice.vn

Vietnam-based representative office of foreign investors may be a dependent unit, which is established under the provisions of Vietnamese law to conduct a market survey and variety of economic promotion activities permitted by Vietnamese law.

Typical benefits of Representative office

Typical benefits of Representative office

  • With a representative office, foreign investors can found out a lawful office in Vietnam, recruit staff to manage and promote sale contracts with local business partners, research and develop products, seeking opportunities for the purchase or sale of goods, and provision of services… The expatriate employees who work for representatives can obtain a work permit and two years multiple visa (temporary residence card) for themselves and their family in Vietnam. The license of the representative office is renewed after every two or five years. This means you can perform your investment activities in Vietnam form of a representative office.
  • Although a representative office can enhance and support tons for business of the parent company like it’s very easy to manage and save cost and avoid risky things from local compliance procedures: No add valued tax, no corporate tax, no accounting books, no budget, no independent audit required… and it’s easy to pack up a representative office also. This means, operating a representative in Vietnam can help to perform your investment in the most economical option.

Typical challenges of Representative office

  • A representative office of foreign companies isn’t allowed to perform profit-making activities, and their activities are limited to plug research and other non-profit activities. In case you are doing not have sufficient information to form a choice to take a position in Vietnam yet, it might be an appropriate foothold in Vietnam. Generally speaking, the initial and operating expense of a representative office is far less than the value of getting a subsidiary. On the contrary, having a subsidiary in Vietnam within the sort of either a Joint Stock Company or an indebtedness Company may be a better sort of investment for an investor who intends to manufacture products in Vietnam or to conduct sales activities. As long as you follow the regulations in Vietnam, establishing a corporation in Vietnam gives you more flexibility in business activities.
  • A representative office shall suits labor, social welfare regulations by register for labor use and pay monthly insurance. The compulsory payable amount of social welfare may up to 34,5% on the salary budget. Expats working for more than 3 months shall be granted a work permit.
  • A representative office shall comply with personal income tax regulations by register tax code numbers for every staff and declare for monthly personal income tax, prepare and submit annual settlement reports. The personal income tax rate for none resident is 20% on the income earned inside Vietnam, for resident is from 5 to 35% on global incomes.
  • A representative office shall suits other regulations like anti-money laundering law, other law, mercantile law for any activity in Vietnam. In particular, the representative should collect and manage all the business records related to any query or question from competent authorities. After every 3 to five years of operations, the tax department will perform inspection procedures to verify the truth, fairness, and lawful of every transaction…
  • A representative office shall prepare and submit an annual report for the Licensing Department.
  • The operation term of a representative office is 5 years at maximum and may be extended.

According to the highest current local regulations,

  • Commercial Law 36/2005/QH11 dated Flag Day, 2005 (Basic regulation)
  • Decree No. 07/2016/ND-CP (Detailed regulation)

Typical rights of representative office

Typical rights of representative office

  • To operate for the needs, within the scope and duration stipulated within the establishment licenses.
  • To rent offices, rent and buy equipment and facilities necessary for its operations.
  • To recruit Vietnamese and expatriate employees to figure for the office consistent with the provisions of Vietnamese law.
  • To have seals bearing its name consistent with the provisions of Vietnamese law.
  • To open accounts in foreign currencies or foreign currency-based Vietnam dong at banks licensed to work in Vietnam, and to be allowed to use those accounts solely for his or her operations.

Do be noted that:

#001, In theory, option1, the parent company can pay directly to the local vendors for office expenditures but may have to pay for withholding tax for every transaction and lots of international bank charges.
#002, A better option is to transfer a lump sum amount as a monthly budget to the local bank account of the office, and the office will pay to local vendors with local bank charge rates without withholding.
#003, After every 3 to 5 years of office operation, the tax department will ask the office to provide bank statements, cashbook, petty cash, lawful vouchers for inspection based on tax laws and money anti laundry regulations, with the choice 1, you’ll face some troubles in providing the paid records.
And #004, consistent with a replacement regulation, from March 1st, 2018, foreign representative offices won’t be allowed to open an area checking account directly but become a private account or authorize a person to act as holder account (under a power of attorney).

Typical obligations of representative office

Typical obligations of representative office

  • Not to directly conduct profit-generating activities in Vietnam.
  • To conduct commercial promotion activities within the scope permitted by this Law.
  • Not to enter into contracts, to not amend or supplement contracts already entered into by foreign traders, except where chief representatives obtain valid letters of authorization from foreign traders or other special cases.
  • To pay taxes, fees, and charges, and fulfill other financial obligations provided for by Vietnamese law.
  • To report on its operations consistent with Vietnamese law.

Source: Vivabcs

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