What is a Representative Office and How to Set Up One in Vietnam?

A Representative Office Vietnam is a vital tool for foreign companies entering a new market. It acts as a liaison between the parent company and potential clients, providing essential services like market research and client support. While cost-effective, it comes with limitations, such as the inability to generate income or issue invoices. Understanding the advantages, limitations, and necessary procedures is crucial for a successful establishment in Vietnam.

Owning a representative office is a crucial necessity for businesses

What is a Representative Office?

A representative office is a type of business entity that is established by a foreign company in a different country. It serves as a liaison between the parent company and potential clients or partners in the host country. Representative offices are not allowed to engage in any profit-making activities, but they can conduct market research, promote the parent company’s products or services, and provide support to clients.

In Vietnam, representative offices are governed by the Law on Enterprises and the Law on Investment. They are a popular choice for foreign companies looking to establish a presence in Vietnam without committing to a full-scale operation.

Advantages and Limitations of Setting Up a Representative Office

There are several advantages to setting up a representative office Vietnam, including:

Low cost: Compared to other business entities, setting up a representative office in Vietnam is relatively inexpensive. This makes it an attractive option for small and medium-sized enterprises (SMEs) looking to expand their business in Vietnam.
Market research: Representative offices are allowed to conduct market research, which can help foreign companies gain a better understanding of the Vietnamese market and its potential.
Easy to set up: The process of setting up a representative office is straightforward and does not require a large amount of paperwork.
Limited liability: Representative offices are not allowed to engage in any profit-making activities, which means they have limited liability. This can protect the parent company from any potential financial risks.

However, there are also limitations to setting up a representative office in Vietnam, such as:

Cannot generate income: As mentioned earlier, representative offices are not allowed to engage in any profit-making activities. This means they cannot generate income, which can be a disadvantage for companies looking to expand their business in Vietnam.
Cannot issue invoices: Representative offices are not allowed to issue invoices, which can make it difficult to conduct business transactions in Vietnam.
Cannot hire local employees: Representative offices are not allowed to hire local employees directly. They must go through a third-party agency to hire local staff, which can be costly.

It always comes with limitations and conveniences.

Requirements and Procedures to Set Up a Representative Office in Vietnam

To set up a representative office in Vietnam, foreign companies must meet the following requirements:

Have a valid business registration certificate or equivalent document issued by the competent authority in the country where the parent company is located.
Have been in operation for at least one year from the date of establishment or registration.
Have a financial report for the last fiscal year certified by an independent auditing organization or a competent authority in the country where the parent company is located.
Have a valid office lease agreement in Vietnam.

The procedures for setting up a representative office in Vietnam are as follows:

Step 1: Submit an application for a representative office establishment to the Department of Planning and Investment (DPI) where the representative office will be located.
Step 2: Obtain a business registration certificate from the DPI.
Step 3: Register for tax and social insurance with the local tax department and social insurance agency.
Step 4: Obtain a seal and a seal registration certificate from the local police department.
Step 5: Open a bank account for the representative office.

It is important to note that the procedures may vary depending on the location of the representative office and the specific requirements of the local authorities. Therefore, it is recommended to seek professional assistance to ensure a smooth and efficient process.

Responsibilities and Rights of a Representative Office in Vietnam

As a business entity in Vietnam, representative offices have certain responsibilities and rights, including:

Representing the parent company in Vietnam and promoting its products or services.
Conducting market research and providing support to clients in Vietnam.
Complying with all relevant laws and regulations in Vietnam.
Reporting to the DPI and other relevant authorities on the activities of the representative office.
Having the right to open a bank account, sign contracts, and hire local staff through a third-party agency.

Which option to choose for establishing a representative office?

To choose the ideal destination for establishing a representative office for businesses, OneHub Saigon is the optimal choice. It is a complex project comprising apartments, office spaces for rent, shopping centers, gyms, etc., located in the Ho Chi Minh City High-Tech Park – an area that is currently and will be one of the economic centers of Ho Chi Minh City. With high-quality Grade A offices equipped with modern facilities, this is a very reasonable choice for businesses looking to set up a representative office with rental prices much lower than those in the current market.

OneHub Saigon – An ideal destination to establish a representative office Vietnam

Conclusion

It is important for representative offices to understand and fulfill their responsibilities in order to operate legally and successfully in Vietnam.In conclusion, setting up a representative office Vietnam can be a cost-effective and efficient way for foreign companies to establish a presence in the country.

However, it is crucial to understand the advantages and limitations, as well as the requirements and procedures, to ensure a smooth and successful process. Seeking professional assistance from a reputable business consultancy firm, such as OneHub Saigon, can also help foreign companies navigate the complexities of setting up a representative office in Vietnam.