What Are Tax Obligations of a Representative Office in Vietnam? 4 Matters

As Vietnam integrate into the world’s economy, many foreign traders find Vietnam as attractive market to expand to.  Before committing full resources to set up a company in Vietnam for commercial and business activities, they might try to set up representative office in Vietnam and research the market, promote the products or services in Vietnam as a starting point and part of the compliance processes is tax obligations of a representative office in Vietnam.

By having a representative office in Vietnam, which require minimum compliance in compared to full fledged corporate, the foreign traders would still need to ensure it complies with the local regulations to a certain extent hence it is necessary to engage with professional companies to provide compliance services in Vietnam to take care of compliance on the tax obligations of a representative office in Vietnam.

What is a Representative Office in Vietnam?

Vietnam-based representative office of a foreign trader means a dependent unit of the foreign trader, which is established under the provisions of Vietnamese law to conduct market survey and a number of commercial promotion activities permitted by Vietnamese law.

Representative office of foreign trader in Vietnam has the rights and obligations in accordance with the law of Vietnam.

Foreign trader is responsible before the law of Vietnam for all operations of its representative office in Vietnam.

What Can A Representative Office Do?

Accordingly, representative office in Vietnam is not allowed to conduct business activities, nor carry out other activities for profit-generating purposes.

The representative office in Vietnam only performs the activities for the right purposes, scope and duration specified in the certificate to establish the representative office.

Besides, the representative office in Vietnam has the following rights:

• to rent the head office,
• rent and buy the facilities and materials necessary for the operation of the representative office;
• to recruit Vietnamese and foreign employees to work at the representative office in accordance with the provisions of Vietnamese law;
• to use an account in foreign currency, in Vietnam dong of foreign currency origin opened by a foreign trader at a bank licensed to operate in Vietnam and only use this account for the operation of the representative office;
• to have a seal bearing the name of the representative office according to the provisions of Vietnamese law.
• to sign contracts, perform transactions with partners when authorized by the enterprise.

What Are Not Tax Obligations of a Representative Office in Vietnam?

Hence, due to the limited scope of activities, the tax liability of a foreign representative office in Vietnam is narrower than that of an enterprise.  

As the representative office does not produce or trade in goods and services, it is not required to pay license fees as prescribed.

Representative office of foreign trader in Vietnam is dependent unit of foreign trader, established to research the market and carry out some trade promotion activities permitted by Vietnamese law, does not carry out production and business activities, so it is not required to pay license fees.

What Are Tax Obligations of a Representative Office in Vietnam?

The fact that the representative office has the right to recruit Vietnamese or foreign employees to work at the office is the basis for arising personal income tax obligation in Vietnam.

At the same time, representative office of foreign organization is subject to personal income tax registration.

For employees working at foreign representative office in Vietnam, the taxable incomes are based on salaries and wages.

Declaring, withholding, paying taxes and settling personal income tax of employees working at foreign representative office is the responsibility of such representative office.

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.