Establishing branches or representative offices for foreign traders in Vietnam

Legal situation: Hello lawyer, our company is based in Canada and we plan to establish a branch or a representative office in Vietnam. I would like to be advised on the differences between a branch and a representative office according to Vietnamese law, as well as the conditions for obtaining a license to establish them. Thank you very much.

Answer:

Thank you for trusting and sending your question to FDVN Law Firm (“FDVN”). After researching the legal regulations, FDVN has the following information to exchange:

Firstly, the difference between a branch and a representative office.

A branch of an enterprise is its dependent unit which has some or all functions of the enterprise, including authorized representative. The business lines of a branch shall match those of the enterprise. (Clause 1, Article 44 of the Enterprise Law 2020).

A representative office of an enterprise is its dependent unit which acts as the enterprise’s authorized representative, represents and protect the enterprise’s interests. A representative office shall not do business. (Clause 2, Article 44 of the Enterprise Law 2020).

The Representative offices’ accounting can only be dependent while branches’ accounting can be dependent or independent.

These are the fundamental differences between a Branch and a Representative Office, you can choose the appropriate type of entity depending on your purposes.

Secondly, the conditions for granting a license to establish a branch or a representative office for foreign traders in Vietnam are as follows:

a) Conditions for issuance of License for establishment of Representative Office

According to Article 7 of Decree 07/2016/ND-CP dated January 25, 2016 [detailing the regulations on establishment of representative offices or branches of foreign traders in vietnam under laws on commerce], foreign traders are granted a License for establishment of Representative Offices when they meet the following conditions:

– The foreign trader 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;

– The foreign trader has come into operation for at least 01 year from the date of establishment or registration;

– The Certificate of Business Registration or the equivalent document is valid for at least 01 more year from the date of submission of the application;

– The scope of operation of the representative office is consistent with that in Vietnam’s Commitments to treaties to which Vietnam is a signatory;

– Where the scope of operation of the representative office is inconsistent with Vietnam’s Commitments or the foreign trader is not located in the country or territory being party to treaties to which Vietnam is a signatory, the representative office can be established only if relevant Ministers, Heads of ministerial agencies (hereinafter referred to as “relevant Ministers”) have given approval for establishment of the representative office.

b) Conditions for granting a License to establish a Branch

According to Article 8 of Decree 07/2016/ND-CP dated January 25, 2016, foreign traders are granted a License to establish a Branch when they meet the following conditions:

– The foreign trader 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;

– The foreign trader has come into operation for at least 05 year from the date of establishment or registration;

– In case the Business Registration Certificate or equivalent documents of a foreign trader specify a valid term, the Certificate of Business registration or equivalent document is valid for at least 01 more year from the date of submission of the application;

– The scope of operation of the branch is conformable with Vietnam’s Commitments to market access stipulated in treaties to which Vietnam is a signatory shall be consistent with lines of business of the foreign trader;

– Where the businesses of the representative office is inconsistent with Vietnam’s Commitments or the foreign trader is not located in one of countries or territories being parties to treaties to which Vietnam is a signatory, the representative office can be established only if they obtain a prior consent of the relevant Minister for establishment of the representative office.

The above is FDVN’s legal advice related to your consulting request based on the legal regulations.  We hope this advice will be useful to you.

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