What is a Representative Office? How to Set Up in Vietnam
Heading towards the goal of expanding and developing business operations, many enterprises choose to establish representative offices. So what is a representative office? What are the functions of a representative office? What are the regulations and procedures for establishing a new representative office nowadays? All will be answered in the following article!
Table of Contents
1. What is a Representative Office?
A representative office (RO) is an office established by a company or a legal entity to conduct marketing and other non-transactional operations, generally in a foreign country where a branch office or subsidiary is not warranted.
In principle, representative offices are not allowed to directly engage in production or business activities for profit purposes. Instead, they function to research the market, promote, and support the business activities of the economic entity they represent. This is also the characteristic that distinguishes a representative office from a branch office of an enterprise.
2. Functions of a representative office
Representative offices are divided into 2 groups: (i) Representative Offices for enterprises with commercial presence in Vietnam; (ii) Representative Offices for foreign traders in Vietnam (enterprises without commercial presence in Vietnam). The functions of representative offices for each group will differ based on legal regulations. Specifically:
2.1 Functions of Representative Offices for domestic enterprises
Representative offices of domestic enterprises are legal entities under the enterprise, with the function of representing the enterprise administratively. Specifically, the representative office will perform 10 main functions as follows:
- Implementing the development of business areas and industries that have been licensed by the competent authorities in the operating area according to current legal regulations.
- Submitting reports to local authorities in accordance with the regulations of the state.
- Preparing periodic financial reports for the head office based on the company’s own regulations.
- Reporting business results, growth results, and development strategies of the establishment annually.
- Conducting financial accounting based on independent accounting principles.
- Building and improving the management structure as directed by the Board of Directors.
- Coordinating with the head office and other branches of the enterprise in customer exploitation and personnel transfer.
- Controlling and managing aspects of business activities in the area.
- Drafting legal documents based on legal documents of the enterprise to apply to all office activities.
- Taking care of the lives of employees at the establishment both materially and spiritually.
Thus, the representative office is established as an intermediary office responsible for communication and transactions with partners. At the same time, it also conducts analysis and research activities, supports the enterprise in accessing the market, and seeks new partners. The representative office also has the function of representing the company in litigating against acts that negatively affect the company’s business activities.
2.2 Functions of Representative Offices for foreign traders in Vietnam
The representative office of a foreign trader in Vietnam needs to apply for a Business Operation License at the Department of Industry and Trade, with a round seal and tax code to operate legally. Similarly, the representative office of a foreign trader does not have business functions. Instead, it operates as a dependent unit with specific functions as follows:
- Acting as a contact point, exchanging information between the parent company abroad and customers in the Vietnamese market.
- Studying, analyzing the market to exploit business promotion opportunities within the legal framework.
- Submitting reports according to the Ministry of Industry and Trade’s form on the office’s activities in the previous year.
- Reporting, providing documents, or explaining issues related to the office’s activities as requested by the competent authorities.
- Paying taxes, fees, and fulfilling other financial obligations according to current legal regulations.
3. Procedures for establishing a representative office
To establish a representative office in Vietnam, the enterprise needs to prepare a dossier and carry out procedures according to legal regulations.
3.1 Documentation for establishing a representative office
According to Clause 2, Article 45 of the 2020 Enterprise Law and Clause 1, Article 31 of Decree 01/2021/NĐ-CP, the dossier for registering the establishment of a representative office includes:
- A notice of the establishment of the representative office of the enterprise.
- A written decision on the establishment of the representative office.
- A certified copy of the minutes of the meeting of the Board of Members (for limited liability companies with 2 or more members), the Board of
- Directors (for joint-stock companies).
- A valid copy of the appointment decision of the head of the representative office.
- A certified copy of personal identification documents (ID card/ID card/passport) of the head of the representative office.
- A power of attorney for the person submitting the dossier (if the person submitting the dossier is not the legal representative of the company).
- A certified copy of personal identification documents (ID card/ID card/passport) of the person submitting the dossier.
3.2 Procedure sequence
Below is the procedure sequence for establishing a representative office for an enterprise:
Step 1: Prepare and complete the dossier according to the legal regulations.
Step 2: Submit the dossier to the business registration office of the Department of Planning and Investment where the representative office is located.
Step 3: Receive the result.
Within 03 working days from the date of dossier submission, the Business Registration Office of the Department of Planning and Investment will respond to the result.
– Case 1: If the dossier is valid, the Business Registration Office will issue a certificate of registration of activities for the representative office of the enterprise.
– Case 2: If the dossier is not valid, the Business Registration Office will send a notice of amendment or supplementation of the registration dossier. The enterprise will need to follow the instructions and submit the dossier again following the above steps.
4. Should you set up a Representative Office or a Branch Office in Vietnam
If you wish to participate in income-generating business activities such as trading in Vietnam, a branch office will be more ideal. On the other hand, you should consider setting up a representative office if your key purpose is to make a presence in Vietnam and do market research.
The following section will help you answer questions based on current legal regulations regarding representative offices.
What is the organizational structure of a representative office?
The organizational structure of a representative office is relatively simple, determined by the parent company and operates with the permission of the parent company. The head title is the Head of the Representative Office, appointed and appointed by the company for a term or until there is a change. The head of the representative office can be a director, a contributing shareholder, or a member of the company.
Does a representative office need to register charter capital?
A representative office is a dependent unit of the enterprise. Therefore, it does not have legal personality and does not need to register charter capital when established. Accordingly, the enterprise will be responsible for the entire financial activities of the representative office. In addition, the enterprise also needs to pay business license tax in case the representative office engages in production, trading of goods, or services.
Can a representative office sign contracts?
Although not a legal entity, a representative office can still sign contracts. Based on Article 84, Clause 5 of the 2015 Civil Code, “The head of a branch, representative office performs tasks under the authorization of the legal entity within the scope and duration of the authorization.”
The head of the representative office only has the right to sign contracts when authorized by the legal representative of the company. Therefore, before signing a contract, the head of the representative office needs to present a legally authorized document.
Can a representative office issue invoices?
The representative office is a management unit of the enterprise, not engaged in business functions, so it does not conduct tax declaration. In cases where the representative office incurs expenses (direct payment) to serve its activities, it can issue invoices under the name of the representative office and then transfer them to the head office for tax declaration.
If these expenses are directly paid by the head office, the invoice issued will contain the information of the head office under the buyer’s details.
How many representative offices can a company establish?
According to the provisions of Article 45, Clause 1 of the 2020 Enterprise Law, an enterprise may establish one or more representative offices in a locality within the administrative boundaries. Therefore, there is no limitation on the number of representative offices a company can establish.
Understanding the rights and obligations of representative offices as well as specific regulations on establishment is extremely important. Not only does it help the enterprise quickly engage in effective operations, but it also ensures that all activities comply with legal regulations. We hope this article has provided you with useful information!
Editor and content team manager at Maison Office.
With over 5 years of experience in consulting and extensive content editing in the real estate services and interior design field. Sharing valuable information with customers, partners, and attracting millions of views.
