Representative Office in Vietnam – What you need to know

Opening a Representative Office (RO) in Vietnam can have its advantages and disadvantages, depending on your business goals and needs. Here are some reasons why you might consider opening a RO in Vietnam.

The advantages of the Representative Office

Simple Operations

Operating a Representative Office is less complex compared to managing a business. Representatives are exempt from adhering to tax regulations since they are not authorized to conduct commercial operations. Consequently, a Representative Office in Vietnam is not obligated to file regular tax reports, financial statements, or tax payments.

The RO only becomes subject to Personal Income Tax (PIT) when it enters into employment agreements with its staff. Annually, representative offices in Vietnam are required to submit a single Operational report summarizing their activities throughout the year.

Low cost

Setting up a representative office in Vietnam generally incurs lower costs compared to establishing a company. Additionally, due to the small-scale and straightforward nature of a RO’s operations, its ongoing operational expenses are significantly reduced.

Be able to hire

A representative office is a legally recognized business entity with the authority to enter into labor contracts and employ individuals, both Vietnamese and foreigners, for various non-sales tasks. Therefore, if your goal is to establish an entity primarily for the purpose of hiring staff for non-sales roles, a representative office is a cost-effective and straightforward option to consider for business setup in Vietnam.

The disadvantages of the Representative Office

Limit in the scope of operation

A Representative Office in Vietnam is strictly prohibited from engaging in any commercial activities. It cannot generate revenue, issue invoices, or employ individuals with job titles related to sales or sales-related activities.

Short License Validity

The license for a Representative Office (RO) in Vietnam is valid for a period of 5 years. After this initial period, an extension is required if the RO wishes to continue its operations. This duration is considerably shorter compared to the 50-year term available for companies in Vietnam.

RO small size

Under the Labor Law in Vietnam, a representative office (RO) has the legal authority to enter into labor contracts and hire employees. Typically, ROs operate on a small scale, employing around 10-15 people. However, if the number of employees exceeds this range, it may attract scrutiny from the authorities.

It’s important to note that there are restrictions on certain job titles within a RO. Positions related to sales, field force, account executives, business development, and similar roles should not be hired under a RO. Additionally, a RO is allowed to have only one Chief Representative, who serves as the legal representative of the office.

Only one legal representative for RO

To open a Representative Office (RO) in Vietnam, there are specific conditions and requirements that must be met:

1. The parent company must be at least 01 year old.

2. The primary business of the parent company must be eligible to open a Representative Office in Vietnam.

3. The parent company must provide an audited financial statement or tax return for the last 01 year.

4. The Head of the Representative Office in Vietnam cannot be the owner or legal representative of other business entities.

Additionally, the legal representative of the RO must obtain resident status in Vietnam, which means they must reside in the country for at least 183 days per year.

The timeline to set up a RO in Vietnam is approximately 4-6 weeks. It’s important to note that not every company is allowed to open a representative office in Vietnam, and the eligibility is determined by the parent company’s business line.

During the registration process, the RO can use a virtual office as a temporary arrangement, but it is recommended to move to a proper address after the office is successfully established.

Read more about: The Differences Between A Company Vs. A Representative Office Vs. A Branch In Vietnam

For more detailed information about the process and assistance in opening a Representative Office in Vietnam, you can contact Iris International’s professional consultant.