Vietnam representative office vs branch: which to choose

Vietnam representative office vs branch comes down to one question: do you need to earn money in Vietnam, or only to be present? A representative office may not earn revenue. It can study the market and promote your head office to partners. A branch of a foreign trader can do business, but Vietnam allows it only in a narrow set of sectors.

Many foreign traders that enter Vietnam begin with a representative office. This guide explains the difference in plain terms, so you can pick the right first step.

Sources: Commercial Law 36/2005/QH11; Decree 07/2016/ND-CP of 25 January 2016 on representative offices and branches of foreign traders.

What a representative office may do

A representative office is a dependent unit of the foreign company. It is not a separate legal entity. The head office stays responsible for what it does.

Its role is limited by law. It may act as a contact point and promote the parent company. It may research the market. Decree 07/2016/ND-CP removed the older task of monitoring and speeding up contracts, so do not plan on that.

It may not run a business. It may not sign sales contracts in its own name. It may not invoice customers or take payment for goods or services. If your plan needs any of that, an office alone will not work.

Sources: Commercial Law 36/2005/QH11, provisions on representative offices; Decree 07/2016/ND-CP; Vietnam Briefing, "Establishing a representative office in Vietnam" (vietnam-briefing.com).

What a branch may do

A branch of a foreign trader is also a dependent unit. The difference is scope. A branch may provide services in Vietnam, within the scope of what its parent company does.

That sounds attractive, but the door is narrow. Vietnam lets foreign traders open branches only where the plan fits its treaty commitments and the trader's own business lines. The trader must also have operated for at least five years. Many firms cannot use this route.

If you want to sell and invoice in your own right in a sector that is open to foreign investors, the usual answer is a different structure. That is a locally registered company with foreign capital, which is a separate topic. Check which route fits your sector before you apply for anything.

Sources: Commercial Law 36/2005/QH11, provisions on branches; Decree 07/2016/ND-CP, provisions on conditions for branches of foreign traders.

License, term and who approves it

Both forms need a license before they open. The foreign company must be properly registered in its home country. It applies with documents from its home country, which normally need legalization and translation into Vietnamese.

A representative office license lasts up to five years. It can be renewed. The provincial Department of Industry and Trade handles representative office applications. A branch license is a different file. The Ministry of Industry and Trade grants it, and only when the sector is open to foreign traders.

Decree 07/2016/ND-CP is the main rulebook for both forms, and it is read together with the Commercial Law. After the license is issued, there are follow-up steps, such as announcing the opening. Ask your adviser for the current list.

Sources: Decree 07/2016/ND-CP; Vietnam Briefing, "Establishing a representative office in Vietnam" (vietnam-briefing.com).

Tax and accounting

A representative office does not earn revenue, so it does not pay corporate income tax in Vietnam. It still has duties. It pays value added tax on goods and services it buys from Vietnamese suppliers when it receives a VAT invoice. It must declare personal income tax for its employees. It cannot issue its own invoices.

A branch that does business is different. It earns income in Vietnam, so its tax picture is wider and it needs more accounting work from day one. Ask a tax adviser how your own case would be treated.

Both forms must also report to the licensing authority on a regular schedule. Plan time and budget for this.

Sources: Vietnam Briefing, "Establishing a representative office in Vietnam" (vietnam-briefing.com); Decree 07/2016/ND-CP.

Staffing and the head of the office

A representative office has no legal cap on staff. It can hire Vietnamese and foreign employees. Foreign staff other than the chief representative generally need work permits.

The chief representative can be Vietnamese or foreign. This person cannot also head a branch of a foreign trader or be the legal representative of a Vietnamese enterprise. Choose someone you trust. The head office must give written authorization for each contract signing.

A branch has a manager appointed by the parent company. Staffing rules are broader because the branch is a working unit, so check any sector-specific limits.

Sources: Vietnam Briefing, "Establishing a representative office in Vietnam" (vietnam-briefing.com); Decree 07/2016/ND-CP.

How to choose

Use a simple test. If your goal is to meet customers, study the market and promote your head office, choose a representative office. It is cheaper to run and simple to close.

If your goal is to sell and book revenue in Vietnam, an office is not enough. Then ask whether your sector allows a foreign branch. If it does not, look at a locally registered company instead.

Before you file, write down three things: what you will do in the first year, who will sign contracts, and how money will flow. The answers usually point to the right form. This article is general information only and is not legal advice. Talk to a licensed Vietnamese lawyer before you apply.

Sources: Commercial Law 36/2005/QH11; Decree 07/2016/ND-CP.

Sources

• Commercial Law 36/2005/QH11 of 14 June 2005.
• Decree 07/2016/ND-CP of 25 January 2016, detailing the Commercial Law on representative offices and branches of foreign traders.
• Vietnam Briefing, "Establishing a representative office in Vietnam": https://www.vietnam-briefing.com/news/establishing-representative-office-vietnam.html/