When foreign enterprises seek to establish a commercial presence in Vietnam, the most common approach used is to establish a foreign owned company in Vietnam as the appropriate vehicle. However, opening a Representative Office can also be used in Vietnam as a suitable structure for establishing a commercial presence in certain situations.
Representative offices are also an effective market entry mechanism, providing a method to create an initial formal presence in Vietnam which can legally employ staff. This allows the foreign entity to gain an understanding of the market, create strategies and use the representative office as a stepping stone to later establishing a foreign-owned company.
Representative offices in Vietnam provide a limited scope of operations, and based upon current laws and practices, are only suited to a restricted range of activities. This is a deliberate approach by the authorities so that commercial activities are undertaken through a taxable entity (usually a company).
Under Vietnamese law, representative offices are permitted to:
It should be noted that changes in March 2016 removed the ability for Vietnam representative offices to “monitor and promote the performance of contracts signed with Vietnamese partners or those relating to the Vietnamese market on behalf of its foreign parent”. The effect of the above is that Representative Offices are not permitted to engage in commercial activities, or support their parent entity with their commercial activities in Vietnam.
However, representative offices have the right to employ staff as necessary to undertake its plans, including foreign individuals (subject to the foreign individuals obtaining appropriate work permits) and to open bank accounts in Vietnam.
In Vietnam, the process of establishing a representative office generally involves the submission of an application file to the Department of Industry & Trade or with other government authorised institutions.
Please note that sufficient time needs to be put aside to gathering appropriate documents from the investor’s current of origin