Benefits to Open Representative Office in Vietnam

Following the trend of international economic integration, foreigners have been attracted by the benefits to open representative office in Vietnam with minimal investment instead of of doing business in Vietnam through  setting up company, acquiring shares in Vietnam enterprise through M&A activity.

At the initial stage, foreign entity would try to research market, undertake due diligence on its clients, buyers, clients, or other business partners therefore many will be interested to open representative office in Vietnam.

The foundation of representative office of foreign entity in Vietnam is governed under Vietnam Commercial Law.

Benefits to Open Representative Office in Vietnam

1.Open Representative Office in Vietnam is a Tool to Research the Market.

For the first time, foreign enterprises entering the Vietnam market, the primary purpose is understanding the market, undertaking research on clients, or due diligence on their business partners, distributors, monitoring the performance of buyers and being familiar with the Vietnam market.

2.The Establishment of Representative Office in Vietnam Turns Out to Be the Most Effective Option Both of Cost and Time.

The representative office in Vietnam is an effective tool to promote commercial activity, seeking partners, and increasing opportunities to expand business market in Vietnam. Further, the representative office in Vietnam follows more simple procedures for licensing in Vietnam than establishing entity in Vietnam. The cost to open representative office in Vietnam is less than to set up a company in Vietnam. Accordingly, the process has been taken less time which is more favorable for foreign traders.

3.The Representative Office in Vietnam Can Recruit and Pay People

Representative office form in Vietnam has allowed foreign entity to receive benefits such as recruiting Vietnamese employees, foreign employees working in offices whom could apply for work permit in Vietnam, then temporary residence card in Vietnam, opening bank accounts in Vietnam in foreign currencies or Vietnam currency at commercial banks, and to be allowed to use those accounts solely for their operations.

4.The Representative Office in Vietnam Does Not Require Charter Capital

According to the laws of Vietnam, the to open representative office in Vietnam does not require the investor’s capital. Instead, setting up a company in Vietnam, an economic organization requires capital contribution as per business plan. Sometime, if the investment fall under conditional areas, setting up company seems more challenging. This relieves the foreign trader from advancing too much capital to achieve the purpose of expanding the market before the business plan has been proved to materialize.

The analysis on benefits to open representative office in Vietnam is not complete without mentioning the challenges to open representative office in Vietnam.

Challenges to Open Representative Office in Vietnam

Vietnam law provides that, in order to open representative office in Vietnam, foreign trader has to prove the fulfillment of the financial responsibility in their country.

In practice, the foreign entity is expected to provide audited financial statements.

In some countries, the financial audited report is not available according to laws.

The Vietnam Department of Trade and Commerce, which state authority would grand representative office operation certificate would require documents showing the fulfillment of tax liabilities or financial obligations of the last fiscal year, or equivalent documents as proof of existence and operation of the foreign trader issued or certified by competent authorities where such foreign trader is established.

This provision may initially be difficult. However, if the foreign trader has been established and operated legally in their country, the implementation of this provision is not a major obstacle to open representative office in Vietnam.

As a large potential market such a Vietnam, as well as the current rapid reform in administrative procedures, Vietnam Government has been more flexible to encourage foreign traders doing business in Vietnam, hence the establishment of representative offices is an optimal method to consider for market research, trade promotion and a stepping stone to penetrate the Vietnam market successfully.

About ANT Lawyers, a law firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.