Procedures to establish representative offices in VN

Question (a Chinese mechanic company): We want to set up a representative office in Hà Nội to boost trade exchanges with local and foreign enterprises in Việt Nam. What are the registration procedures and fee; management apparatus of the RO? And do we have to pay tax when our RO engages in profit-making activities.

Answer:

1. Procedures to set up ROs

According to Articles 3, 4, 5 and 7 of the Government’s Decree 72/2006/NĐ-CP dated on July 25, 2006 on the enforcement of the Trade Law and Circular 11/2006/TT-BTM issued by the Ministry of Trade (now the Ministry of Industry and Trade) on September 28, 2006 stipulating the implementation of the said Decree, foreign businesses can set up their ROs in Việt Nam if:

- They are recognized by authorities of the countries/territories where they are originally set up or register business activities;

- They maintain their operation at least 1 year since their establishment or legal business registration.

The required documents to attain the License for RO establishment include:

- An application form, which issued by the Ministry of Industry and Trade, signed by the legal representatives of the business;

- Copies of the business registration certificate (BRC) or papers of equal value granted and authenticated by the competent agencies in the country/territory where foreign enterprises are originally set up. In case the BRC or the like defines operation duration, the remaining term must be at least one year long.

- Audited financial reports or other documents of the same value showing real performance and activities in the latest fiscal year;

- Copies of the business charter (required for economic organizations).

All these documents are submitted to the provincial Departments of Industry and Trade. Within 15 days since the full reception of valid documents, the Departments shall assess and grant the License for RO establishment. Copies of the License will be sent to the Ministry of Industry and Trade, provincial People’s Committees, tax offices, statistics offices, and police of the provinces where the RO to be located.

According to Circular 73/1999/TT-BCT of the Ministry of Finance, dated on June 14, 1999, on charging for licensing resdient ROs of foreign economic organizations in Việt Nam, the fee is fixed at VND 1,000,000 per license.

 2. Organizational and personnel apparatus of ROs

Article 9 of Decree 72/2006/NĐ-CP stipulates: The management and personnel apparatus in ROs is decided by foreign business. The number of foreigners working in each RO must be in line with Việt Nam’s laws and international conventions that Việt Nam is a party to.

During their operation in Việt Nam, if there is any personnel change, the ROs must send reports and copies of related documents to the license-granting bodies within 10 working days (Point 2, Section IV of Circular 11/2006/TT-BTM).

3. Tax on ROs’ profit

According to Article 18 of the Trade Law, ROs are not allowed to directly engage in profitable activities in Việt Nam. They can only conduct trade promotion activities permitted by the Trade Law. They are not permitted to sign contracts or amend/supplement the contracts singed by foreign businesses unless heads of the ROs are legally authorized in writting by foreign businesses.

So, ROs are not profit-making entities, thus Việt Nam does not impose tax on their operation. However, ROs must enumerate and pay income tax for their employees.