Representative office has always been a type of company formation chosen by foreign traders wishing to explore opportunities or expand their business in Vietnam due to its convenience in management and avoidance of the risks arising from local compliance procedures. However, foreign traders should carefully consider restricted activities applied to a representative office in order to avoid legal risks when operating.
Comercial Law No. 36/2005/QH11 dated 14/06/2005
Decree 07/2016/NĐ-CP dated 25/01/2016
Decree 98/2020/NĐ-CP dated 26/08/2020
II. What is a representative office of foreign investor in Vietnam?
A representative office of a foreign investor in Vietnam means a dependent unit of the foreign trader, which is established under the provisions of Vietnamese law to conduct market surveys and several commercial promotion activities permitted by Vietnamese law.
III. Permitted activities of representative office
Under Vietnamese law, though the representative office is a dependent unit of its foreign trader, it only plays a supportive role in researching market trends and conducting a number of commercial promotion activities. The representative office does not have actual “business” function; therefore its permitted activities are limited, including:
- Acting as a liaison office;
- Operating for researching and marketing surveys;
- Seeking for and conducting commercial promotion activities, business partners such as entering into contracts with traders conducting commercial advertising activities; directly organizing or participating in trade fairs and exhibitions for the traders that they are representing with valid letters of authorization from foreign traders;
- Renting offices, renting and purchasing equipment and facilities necessary for their operations;
- Recruiting Vietnamese and expatriate employees to work for them; and
- Opening accounts in foreign currencies or foreign currency-based Vietnam dong at banks licensed to operate in Vietnam and to be allowed to use those accounts solely for their operations.
IV. Restricted activities of representative office
Besides conveniences in market research activity, the representative office is forbidden to engage in the following activities:
- Directly conducting profit-generating activities in Vietnam;
- Conducting sale promotions themselves or hiring other traders to conduct sale promotions in Vietnam for the traders that they are representing;
- Directly conducting commercial advertising activities; directly organizing or participating in trade fairs and exhibitions;
- Directly displaying and introducing goods and/or services of traders they are representing, apart from displaying and introducing at representative office.
- Entering into contracts, amending or supplementing contracts already entered into by foreign traders, except where chief representatives obtain valid letters of authorization from foreign traders or other cases such as Renting offices, renting and purchasing equipment and facilities necessary for their operations; Recruiting Vietnamese and expatriate employees to work for them; Opening accounts in foreign currencies for their operations;
- Issuing invoices;
- Providing after-sale-services concerning a service or product provided by foreign traders; and
- Carrying out activities as an agent between a client and foreign traders.
In light of the information above, foreign traders should be cautious when conducting activities through their representative office in Vietnam, especially avoiding letting the representative office carry out profit-generating activities. Carrying out former restricted activities may lead to revocation of the right to use Representative office Establishment license.
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