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Establishing Representative Offices and Branches of Foreign Traders in Vietnam

 

Under the Commercial Law, foreign traders can open their representative offices and branches in Vietnam and also establish foreign investment-funded enterprises in Vietnam. Then the Ministry of Planning and Investment is responsible for managing the issuance of licenses to allow foreign traders to invest in Vietnam. The Ministry of Industry and Trade is responsible for the issuance of licenses of establishing representative offices and branches of foreign traders in Vietnam.

 

Representative offices of foreign traders are not authorized to perform direct profitable business in Vietnam but carry out trade promotion activities within the constraints of the Law only.

 

Branches of foreign traders in Vietnam are allowed to (i) perform goods' trading business and other commercial activities in accordance with their establishment licenses under the laws of Vietnam, and (ii) open accounts in Vietnam and transfer their profits abroad.

Decree 72/2006/ND-CP details Commercial Law regarding the establishment, operation, rights and obligations of Vietnam-based representative offices and branches of foreign traders who specialize in goods' sale and purchase and activities directly related to goods' sale and purchase. Representative offices and branches of foreign-invested enterprises established in Vietnam shall not be governed by this Decree.

1) Which agencies are responsible for granting establishment permits?

The Trade Ministry shall grant, re-grant, amend, supplement, extend or withdraw permits for establishment of branches and provincial/municipal trade or trade-tourism services shall grant, re-grant, amend, supplement, extend or withdraw representative office establishment permits.

 

2) What conditions need satisfied for establishment permits?

For a permit to establish in Vietnam, the first and foremost condition is that the law of the businessperson's country or territory must recognize her or him. For a representative office, a further requirement is the foreign businessperson having been operating for at least one year after the office's establishment or registration, five years for branches.

Permits for establishment of Vietnam-based representative offices or branches of foreign businesspersons shall each have a valid term of five years, which must, however, not exceed the remaining valid term of such businessperson's business registrations or papers of equivalent value in case foreign laws specify valid terms of business registrations of foreign traders.

3) What documents need prepared in the dossier of application for establishment permits?

* A dossier of application for a representative office establishment permit must comprise:

 

  • An application for the representative office establishment permit, made according to a form set by the Trade Ministry and signed by the foreign businessperson's competent representative;
  • Copies of the foreign businessperson's business registration or papers of equivalent value certified by the competent authority of the locality where the foreign businessperson has been established. In case that an operation duration for the foreign businessperson is specified in such business registration or papers of equivalent value, such operation duration must remain valid for at least one year;
  • An audited financial statement or other document of equivalent value proving the actual existence and operation of the foreign businessperson in the latest fiscal year; and
  • A copy of the foreign businessperson's operation charter, for those belonging to business entities.

 

 

* A dossier of application for a branch establishment permit must have:

 

  • An application for a branch establishment permit, made according to a form set by the Trade Ministry and signed by the foreign businessperson's competent representative;
  • A copy of the branch's operation charter, clearly stating the scope of authorization for the branch's head;
  • Copies of the foreign trader's business registration or paper of equivalent value certified by the competent authority of the locality where the foreign businessperson has been established or made its business registration. In case whereby an operation duration for the foreign trader is specified in such business registration or papers, such operation duration must remain valid for at least three years; and
  • An audited financial statement or other equivalent document substantiating the actual existence and operation of the foreign businessperson in the latest fiscal year.
  • Copies of the foreign businessperson's business registration, audited financial statement or equivalent documents, and a copy of the branch's operational charter must be translated into Vietnamese and certified and legalized by Vietnam's foreign-based diplomatic missions or consular offices.

 

 

4) When will representative or branch establishment permits not be granted?

The agencies competent to grant permits for establishment of a representative office or branch shall not grant such permits to foreign businesspersons when:

Such foreign businessperson: (i) fails to have the proper dossier of application or trading in goods and/or services, (ii) is on the list of goods and services banned from business, or (iii) applies for permits within two years after the law has withdrawn their permits.

There appears evidence that the establishment of such foreign businessperson's representative offices or branches may cause harm to Vietnam's: defense, security, social order and safety, history and culture, ethics, fine customs and practices, people's health, sustaining of natural resources, or preserving the environment.

 

5) How long it takes to obtain an establishment permit?

Within 15 days after receiving complete and valid dossiers, the provincial/municipal Trade Services (for establishment of a representative office) and Trade Ministry (for establishment of a branch) shall grant permits to foreign businesspersons. If the dossier is invalid, the permit-granting agencies shall, within three working days after receiving such dossiers, notify such in writing to foreign businesspersons so that the latter can supplement and complete the dossiers.

Upon the expiration of the time limits, if the competent agencies refuse to grant a representative office or branch establishment permits, they shall have to notify such in writing to the concerned foreign businessperson, clearly stating the reason for the action.

 

6) How shall representative offices or branches make known their operations in Vietnam?

Within 45 days after being granted a permit, a representative office or branch shall have to publish on three consecutive issues of a printed or online newspaper licensed in Vietnam: the name and address of the head office in Vietnam; name and address of the foreign businessperson and head of the representative office or branch; the serial number, date of issue and valid term of the representative office or branch establishment permit and the permit-granting agency; and operations of the representative office or branch.

At the same time, the foreign businessperson must officially commence operations and notify, in writing, the permit-granting agency that operations have commenced.

 

7) What shall operations of representative offices cover?

Operations of representative offices shall cover performance of the function of liaison offices; the formulation of cooperation projects of foreign businesspersons in Vietnam; studies of the market in order to promote opportunities to buy or sell goods, provide and use commercial services of traders they represent; and monitoring and control of the performance of contracts signed with Vietnamese partners or related to the Vietnamese market by foreign businesspersons they represent...

 

8) What shall operations of branches cover?

Operations of branches shall cover activities that are allowed in their establishment permits and compliant with Vietnam's law and International laws to which Vietnam is a contracting party.

Branches must satisfy conditions where a branch operates in conditional domains. These conditions are expressed in form of business licenses, certificates of satisfaction of business conditions, practice certificates, certificates of professional liability insurance, requirements on legal capital, or other requirements set forth by the Enterprise Law.

 

9) What accounts shall be opened for operations of representative offices and branches?

Representative offices are allowed to open expenditure accounts in foreign currencies and expenditure accounts in Vietnam dong of foreign-currency origin at banks licensed to operate in Vietnam and use such accounts only for their operations.

Branches are allowed to open settlement accounts in foreign currencies or in Vietnam dong at banks licensed to operate in Vietnam in service of their operations.

In special cases, branches are allowed to open accounts at overseas' banks after obtaining consent of the State Bank of Vietnam. Branches shall have to report to the State Bank of Vietnam on the use of accounts opened overseas.

The opening, use, and closure of accounts of representative offices or branches shall comply with the regulations of the State Bank of Vietnam.

 

10) How shall representative offices and branches report their operation?

Annually, before the last working day of January, representative offices and branches shall send written reports on their operations of the preceding year to the agencies having granted representative office or branch establishment permits.

Branches shall have to observe the regime of financial statements and statistical reports.

In case of necessity as specified by Vietnamese law, representative offices and branches shall have to report, supply documents on, or explain matters related to, their operating at the request of competent state management agencies.

 

11) What are rights and obligations of representative offices and their heads?

Representative offices and their heads shall exercise their rights and perform their obligations in accordance with the Commercial Law and the following guidance:

 

  • Representative offices must neither act as representative for other businesspersons nor sub-lease their head offices.
  • The head of a representative office of a foreign businessperson must not concurrently hold the following posts:
  • The head of a Vietnam-based branch;
  • The representative at law of the foreign trader for signing contracts without the latter's letter of authorization; and
  • The representative at law of the enterprise establishment under Vietnamese law.

 

In case foreign businesspersons authorize heads of their representative offices to sign contracts, amend or supplement already signed contracts, they shall have to effect the authorization in writing for each contract signing or each amendment or supplementation of a signed contract.

 

12) What are rights and obligations of branches and heads of branches?

Branches and heads of branches shall exercise their rights and perform their obligation in accordance with the provisions of the Commercial Law and the following guidance:

Branches must neither perform the function of acting as representative for other businesspersons nor sub-lease their head offices.

Heads of branches of foreign businesspersons must not concurrently hold the following posts:

 

  • Heads of representative offices of the same foreign businesspersons in Vietnam
  • Heads of representative offices or branches of other Vietnam-based foreign businesspersons.

 

 

13) In which cases shall representative offices or branches terminate their operation?

Representative offices or branches shall terminate their operation in the following cases:

 

  • It is so requested by foreign businesspersons and approved by competent agencies;
  • Foreign businesspersons terminate their operation under laws of countries where such businesspersons have been established or accomplished business registrations;
  • Foreign businesspersons do not apply for extension of representative office or branch establishment permits upon the expiration of operation duration stated therein;
  • The permit-granting agencies refuse to extend the representative office or branch establishment permit upon the expiration of operation duration stated therein; and
  • The representative office or branch establishment permit are withdrawn by related agencies.

 

 

14) What are the obligations of the foreign businessperson towards their representative office or branch?

Foreign businesspersons shall be held responsible before Vietnamese law for all operations of their Vietnam-based representative offices or branches.

Heads of representative offices or branches shall be responsible for their activities and the operations of their representative offices or branches before Vietnamese law in cases whereby they conduct operations beyond the scope of authorization.

Ref: Circular No.11/2006/TT-BTM of the Ministry of Trade guiding the implementation of the Government's Decree No.72/2006/ND-CP detailing the Commercial Law regarding Vietnam-based representative offices and branches of foreign traders

 

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