Representative Offices in Vietnam: Licensing Process, Tax Issues and Other Considerations

Readers are recommended to first read following related posts:

• What Are Major Forms of Commercial Presence in Vietnam?
• Representative Offices in Vietnam: Main Functions, What They Can Do and What Cannot

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Is it easy and straightforward to obtain a license for establishment of a RO (RO License)?

Yes, the licensing process for obtaining the RO License seems pretty simple and straightforward. To establish a RO, the headquarter only needs to submit an application dossier to the Industry and Trade Department of the province (abbreviated as the DOIT) where the RO is located. It is frequently the case that headquarter would choose major commercial hubs of Vietnam like Hanoi, Ho Chi Minh City or Da Nang to locate their ROs.  

In theory, the DOIT would issue the RO License within 07 days from the date of its receipt of the ‘complete’ RO establishment application dossier though the actual process may take a bit longer (e.g. – up to one month). In some special circumstances, the DOIT may seek support opinions of other relevant State bodies for issuing the RO License. The licensing fee for applying a new license is currently VND3,000,000 (equivalent to US$140).

It bears noting that the post-licensing operation notification requirement has been abolished as of 10 March 2016. This means that a RO can commence its operations right after the issuance of a RO License. Though, an annual report of its operations must be filed to the DOIT before 31 January of the next year.

Are there any conditions for setting up a RO?

Yes, the relevant foreign headquarter must ensure that it has met the following regulatory conditions.

1. The headquarter is incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties to treaties to which Vietnam is a signatory or is recognized by the aforesaid countries or territories;
2. The headquarter has come into operation for at least 01 year from the date of establishment or registration;
3. The certificate of business registration or the equivalent document [of the headquarter] is valid for at least 01 more year from the date of submission of the application;
4. The scope of operation of the representative office is consistent with that in Vietnam’s Commitments to treaties to which Vietnam is a signatory;

Among the above conditions, the 1-year operation condition should be taken into consideration. In addition, please be also noted that because some tax heavens (e.g. – the Cayman Islands, the British Virgin Islands) do not join major international treaties (e.g. – WTO), application of headquarter established in these jurisdictions must be ‘approved’ by the relevant ministries of Vietnam on a case-by-case basis.

What is the lifespan of a RO and is it possible to renew the RO License?

05 years from the issuing date but not exceeding the remaining effective period of the headquarters’ certificate of business registration, if any. A RO License can be renewed provided that the headquarter must file for such renewal at least 30 days from the expiry date of the current license.

Is a RO taxed?

Generally, a RO is not subject to common taxes such as value added tax or corporate income tax because it does not engage in revenue-generating activities. Nevertheless, a RO is obliged to declare and pay PIT of its staff on a withholding basis.

What is interesting is that, according to a guidance of the Ministry of Finance, ROs that conduct profit-making activities must pay business registration tax (thue mon bai in Vietnamese language). This is again somewhat weird because as discussed, a RO, as a matter of principle, are strictly prohibited from engaging in such activities.

Any other considerations?

Yes, please take a look at other aspects of operations of a RO as follows.

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[1] According to an investigation by Ho Chi Minh City’s state body, a RO has even used more than 100 employees.