In recent years, Vietnam has emerged as an attractive market for both small investors and large businesses. One of the key factors contributing to this attractiveness is the country’s stable and sustainable business environment. Even during challenging economic periods like the 2008 financial crisis and the COVID-19 pandemic, Vietnam’s economy remained relatively resilient and continued to expand.
Moreover, the Vietnamese government has been actively encouraging international investors and businesses to invest in the country. They have implemented measures such as reducing entry barriers in various sectors, improving public services, and investing in logistics and infrastructure development.
This presents a unique opportunity for businesses to establish a presence in Vietnam. There are several options available, including setting up a company, a branch office, or a representative office. This article aims to provide insights into the differences, advantages, and disadvantages of each form to help you make an informed decision about your business expansion in Vietnam.
The differences between companies vs. representative offices vs. branches
If you are an individual investor without an existing business and you wish to establish an offshore business presence in Vietnam, your primary choice would be to establish a company. However, if you are looking for alternatives, you can also consider setting up either a Representative Office or a Branch in Vietnam. These options offer different structures and have their own advantages and disadvantages depending on your specific business needs and objectives.
What is the difference between these three types of business entities? Look at the table below.
| A Representative Office | A Branch | A Company | |
| Scope of operation | Unable to engage in commercial activities or generate sales. | Allowed to generate revenue through business operations but must stay within the scope of the parent company’s activities. | Can engage in any business activities permitted for foreign investment (maximum flexibility). |
| General requirements to open | The business address must adhere to specific criteria, making it unlikely for a virtual office to be accepted. The parent company must be in operation for a minimum of one year. The parent company’s registered business must be eligible to establish a Representative Office. The Representative Office can have only one Director, referred to as the Chief Representative. | The parent company should have a minimum of five years of operation. The parent company’s license should not encompass any business activities prohibited by Vietnamese law. The branch can only have one Director, known as the Branch Manager. | A physical or virtual business address is acceptable. Ownership can be either individual or corporate, with single or multiple owners. Paid-up capital investment is obligatory. Multiple Directors are permitted, but at least one Legal Representative must reside in Vietnam. |
First, a Representative Office (RO) is designed to represent the parent firm in Vietnam; it operates without engaging in commercial activities or generating sales, functioning on a limited scale. To qualify for RO registration, the parent company must have been established for at least one year. Additionally, the parent company’s registered business activities must align with Vietnamese regulations permitting ROs. Each RO can have only one Director, referred to as the Chief Representative, who cannot hold ownership or legal representation positions in the parent company or any other business entity in Vietnam. The process of establishing an RO typically takes approximately one month from the submission date and requires thorough document preparation by the parent company.
Second, a Branch in Vietnam serves as an extension of an international company and is allowed to engage in business activities that can generate sales. However, it must operate within the scope of activities defined by the parent company and cannot venture beyond these boundaries. The parent company must have been in existence for at least five years, and its license should not encompass business lines prohibited by Vietnamese law. A branch is considered a dependent entity of the parent company and must adhere to the parent’s documents and procedures. Each Branch can have only one Director, known as the Branch Manager, who cannot hold ownership or legal representation roles in the parent company or any other business entity in Vietnam. The licensing process for establishing a Branch is more complex than for other business types, involving ministry approval and potentially taking several months to complete.
Third, a Company offers the most flexibility to its shareholders. It is permitted to operate in all sectors authorized by the government, allowing it to go beyond the scope of the parent firm’s activities, if applicable. A company can be owned by either individuals or corporate entities and can have multiple owners and directors. Unlike ROs and Branches, there are no restrictions on the ownership or directorship of the company. The Company is treated as an independent business entity separate from the parent company, making it an ideal choice for those looking to conduct business in Vietnam.
Each business entity has distinct advantages and disadvantages. The following sections provide an analysis of each business form to assist companies and investors in selecting the most suitable option for registration in Vietnam.
Pros – The advantages of each type
| A Representative Office | A Branch Office | A Company |
| – Straightforward operation procedures. – Minimal operational costs. – Not subject to Vietnamese business taxes. – Easy to close down | – Engages in a wide range of commercial activities, including trading, production, services, inventory management, etc., within the parent company’s business lines. – Can independently register for and issue VAT invoices. – Can maintain both dependent and independent accounting records. – Can enter into contracts autonomously, change or supplement terms. | – Multiple shareholders allowed (up to 50). – Flexible structure: Can transfer wholly or partially the shares. – No restriction on Owners or Directors. – Long-term license validity (up to 50 years). |
Cons – The disadvantages of each type
| A Representative Office | A Branch Office | A Company |
| – Cannot engage in profit-generating activities. – Cannot issue invoices and it lives on the fund from the parent company. – Small scale, cannot hire certain positions such as Sales. – Short license lifetime (5 years) | – More difficult initial setup procedure. – Long registration process. – Subject to full taxation of Vietnam. – Cannot go beyond the parent firm’s scope of business | – Registration process can be complicated belong to Vietnam’s regulation. – Subject to full taxation of Vietnam. – Audited financial statements every year. – Operational cost is higher than the other two entities. |
When opening, operating, and closing a representative office, branch, or company in Vietnam, each business form will have its own advantages and disadvantages. Instead of focusing on these characteristics, it is more important to consider your organization’s goals, objectives, and resources when choosing the most appropriate business form for your future operations.
How can Iris International support you?
At Iris International, our expertise spans business entity options in Vietnam. Through comprehensive consultations, we assess your needs and explain the pros and cons of each structure – company, branch, representative office. Our goal is to help you determine the optimal model for your goals.
We streamline licensing, registration, and launch processes to accelerate your Vietnam market entry. Our Employer of Record services go beyond incorporation – we assist with hiring, tax compliance, payroll, and day-to-day operations as well.
With thousands of satisfied clients and partners over 4 years, Iris International is proud to enable success as the top provider of Vietnam business solutions. Our team has earned trust through effective incorporation, compliant operations, and tailored guidance.
Please fill out the form below and reach out to our consultant for more details.
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