Should a foreign company open branch or representative office?

Foreign companies have the right to establish branches or representative offices in Vietnam.

In accordance with Clause 6, Clause 7, Article 3 of the 2005 Commercial Law, the representative offices and branches are defined as follows:

6. Vietnam-based representative office of a foreign trader means a dependent unit of the foreign trader, which is established under the provisions of Vietnamese law to conduct a market surveys and a number of commercial promotion activities permitted by Vietnamese law.

7. Vietnam-based branch of a foreign trader means a dependent unit of the foreign trader, which is established and conducts commercial activities in Vietnam under the provisions of Vietnamese law or treaties to which the Socialist Republic of Vietnam is a contracting party.

*Should a foreign company open branch or representative office? (Illustration)*

Referring to the rights and obligations of representative offices and branches to get more understanding on the problem mentioned in this article.

Criteria	Branches	Representative office
Rights	- To rent offices, rent and purchase equipment and facilities necessary for their operations. - To recruit Vietnamese and expatriate employees to work for them according to the provisions of Vietnamese law. - To enter into contracts in Vietnam in compliance with their operation contents specified in their establishment licenses and the provisions of 2005 Commercial Law. - To open Vietnam dong accounts and foreign-currency accounts at banks licensed to operate in Vietnam. - To transfer profits overseas according to the provisions of Vietnamese law. - To have seals bearing their own names according to the provisions of Vietnamese law. - To conduct activities of goods purchase and sale and other commercial activities in compliance with their establishment licenses and treaties to which Vietnam is a contracting party. - To have other rights as defined by law (Article 19, 2005 Commercial Law)	- To operate for the purposes, within the scope and duration stipulated in their establishment licenses. - To rent offices, rent and purchase equipment and facilities necessary for their operations. To recruit Vietnamese and expatriate employees to work for them according to the provisions of Vietnamese law. - To open 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. - To have seals bearing their names according to the provisions of Vietnamese law. - To have other rights as defined by law. (Article 17, 2005 Commercial Law)
Obligations	- To observe the accounting regime provided for by Vietnamese law; it is necessary to apply another commonly used accounting system, the approval by the Finance Ministry is required. - To report on their operations according to Vietnamese law. - To have other obligations as defined by Vietnamese law. (Article (Article 20, 2005 Commercial Law)	- 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, not to amend or supplement contracts already entered into by foreign traders, except where chief representatives obtain valid letters of authorization from foreign traders or other cases specified in Clauses 2, 3, and 4, Article 17 of 2005 Commercial Law. - To pay taxes, fees, and charges, and fulfill other financial obligations provided for by Vietnamese law. - To report on their operations according to Vietnamese law. - To have other obligations as defined by Vietnamese law. (Article 17, 2005 Commercial Law)
Conditions of establishment	- The foreign trader has been established or has registered its operation under the law of a country or territory being a member to a treaty to which Vietnam is a contracting party or recognized by the law of such country or territory. - Have been operating for at least 5 years since its establishment or business registration. If the foreign trader’s business registration certificate or equivalent paper indicates its term of operation, the remaining term must be at least one year by the date of submission of the application. - Contents of operation of the branch must comply with Vietnam’s commitments to market access in treaties to which Vietnam is a contracting party and with the business lines of the foreign trader. - If the contents of operation of the branch fail to comply with Vietnam’s commitments or the foreign trader is not located in a country or territory being a member to a treaty to which Vietnam is a contracting party, the establishment of a such branch shall be approved by the minister of the line ministry concerned. (Article 8, Decree No. 07/2016/ND-CP)	- The foreign trader has been established or has registered its operation under the law of a country or territory being a member of a treaty to which Vietnam is a contracting party or recognized by the law of such country or territory. - The foreign trader has been operating for at least one year since its establishment or business registration. - If the foreign trader’s business registration certificate or equivalent paper indicates its term of operation, the remaining term must be at least one year by the date of submission of the application. - Contents of operation of the representative office must comply with Vietnam’s commitments in treaties to which Vietnam is a contracting party. In case the contents of the operation of the representative office fail to comply with Vietnam’s commitments or the foreign trader is not located in a country or territory being a member to a treaty to which Vietnam is a contracting party, the establishment of such representative office shall be approved by the minister of the ministry or the head of the ministerial level agency performing the specialized management of the sector concerned (below referred to as the minister of the line ministry). (Article 7, Decree No. 07/2016/ND-CP)