Under the Law on Commerce, foreign business entities are entitled to establish a representative office or a branch in Vietnam.

Recently, the Government issued Decree 72/2006-ND-CP implementing the provisions of the Law on Commerce on branches and representative offices.

The local trade department is assigned by the Ministry of Trade to manage the licensing of branches and representative offices of foreign business entities in Vietnam. Foreign business entities shall be liable before the law of Vietnam for all of the operations of their representative offices and branches in Vietnam.

1. Branches

Unlike the representative office, branches of foreign business entities are allowed to conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the laws of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

A branch of foreign business entities shall have the following rights and obligations:

• To rent offices and to lease or purchase the equipment and facilities necessary for the operation of the branch;
• To recruit Vietnamese and foreign employees to work for the branch in accordance with the laws of Vietnam.
• To enter into contracts in Vietnam in accordance with the activities stated in the license for establishment of such branch and in accordance with this Law.
• To open Vietnamese Dong and foreign currency accounts at banks that are licensed to operate in Vietnam.
• To remit profits abroad in accordance with the laws of Vietnam.
• To have a seal bearing the name of the branch in accordance with the laws of Vietnam.
• To adopt the accounting system stipulated by the laws of Vietnam; where it is necessary to adopt a different commonly used accounting system, approval from the Ministry of Finance of the Socialist Republic of Vietnam must be obtained.
• To report on the operations of the branch in accordance with the laws of Vietnam.

2. Representative Offices

Representative offices of foreign business entities are not allowed (i) to directly conduct profit making activities in Vietnam except for carrying out commercial promotional activities within the scope permitted by its license and the law, (ii) to enter into commercial contracts of the foreign entity or to amend or supplement such contracts already signed except where the chief of representative office has a valid power of attorney from the foreign business entity. The representative offices of foreign business entities have the following rights and obligations:

• To operate strictly in accordance with the purposes, scope and duration stated in the license for establishment of such representative office.
• To rent offices and to lease or purchase the equipment and facilities necessary for the operation of the representative office.
• To recruit Vietnamese and foreign employees to work for the representative office in accordance with the laws of Vietnam.
• To open accounts in foreign currency and in Vietnamese Dong sourced from foreign currency at banks that are licensed to operate in Vietnam, and to use such accounts solely for the operation of the representative office.
• To have a seal bearing the name of the representative office in accordance with the laws of Vietnam.
• To pay taxes, fees and charges and to discharge other financial obligations in accordance with the laws of Vietnam.
• To report on the operation of the representative office to a local department of trade in accordance with the laws of Vietnam.

3. Conditions for Issuance of License for Establishment of Representative Office and Branch

3.1. Representative Offices

A foreign business entity that satisfies all of the following conditions shall be issued a license for establishment of a representative office in Vietnam:

• It is a business entity that is legally recognized by the law of the country or territory where such business entity was established or has business registration;
• It has been operating for at least 1 year as from the date on which it was legally established or obtained business registration in the country of such business entity.

A dossier of application for a representative office establishment permit comprises, among others, an application for representative office establishment permit, signed by the foreign trader’s competent representative; copies of the foreign trader’s business registration or papers of equivalent value certified by the competent authority of the locality where the foreign trader has been established; and an audited financial statement or other documents of equivalent value proving the actual existence and operation of the foreign trader on the latest fiscal year.

3.2. Branches

A foreign business entity that satisfies all of the following conditions shall be issued a license for establishment of a branch in Vietnam:

• It is a business entity that is legally recognized by the law of the country where such business entity was established or has business registration;
• It has been operating for at least 5 years as from the date on which it was legally established or obtained business registration.

A dossier of application for a branch establishment permit comprises, among others, an application for branch establishment permit signed by the foreign trader’s competent representative; a copy of the branch’s operation charter, clearly stating the scope of authorization for the branch’s head; and an audited financial statement or other documents of equivalent value proving the actual existence and operation of the foreign trader in the latest fiscal year.

4. Term of Establishment License of Representative Office or Branch of Foreign Entity

A license for establishment of a representative office or branch of a foreign business entity in Vietnam shall have a duration of 5 years, but in the case where foreign law stipulates the duration of the business registration certificate of the foreign business entity, the duration may not exceed the residual term of such business registration certificate or certificate of equivalent validity of the foreign business entity.