Doing business in Vietnam with a foreign entity include branch office and representative office.
The Vietnam branch office
The Vietnam Law on Commerce stipulates that foreign companies can open branch offices in Vietnam, provided they have been doing business abroad for at least five years. The branch office in Vietnam must also
- appoint a resident representative;
- audited financial statements with the companies registrar and
- an annual return with the Industrial and Trade Department office.
Because incorporating a branch office in Vietnam
- follows complex procedures and
- exposes our Clients to unlimited liability, Vinasc recommends to set up a Vietnam limited liability company instead of a branch, excepted in a few industries where branches, but not wholly foreign-owned LLCs, are allowed by the Government.
Registering a branch is usually not recommended, except in regulated industries such as banking, finance, and insurance where registration of a foreign reputable entity instead of a subsidiary can ease up the licensing process.
The Vietnam representative office
The Vietnam Law on Commerce stipulates that foreign companies can open representative offices in Vietnam, provided they have been doing business abroad for at least 1 year. While the Vietnam representative office can be 100% foreign own, it is not allowed to pursue production-relating or commercial activities in Vietnam. Consequently, this entity can only engage in
- market research and
- promotion of its parent company’s business.
It will also have to
- appoint a resident representative and
- to submit annual returns to with the Industry and Trade Department office.
Registering a representative office is a good option to have a local presence in Vietnam, without being subject to local tax and while benefitting from lower reporting requirements. However, such an entity is not allowed to trade or conduct manufacturing operations in Vietnam.
The Vietnam free zone company
Foreigners can register a company in a Vietnam free zone provided they plan to manufacture and export a majority of their products. The company can then be registered within an industrial park or a special economic zone after review and approve by the relevant authority.
Criteria for free zone registration will significantly vary according to the project. They usually include a minimum investment (at least US$200,000 recommended) and at least some job creations in Vietnam. Project eligible for free zone registration and also usually eligible for tax benefits.
The nominee Vietnam company (local limited liability company)
A nominee Vietnam company is a limited liability company with a local nominee appointed as the sole shareholder. Such an entity is used mainly to
- reduce capital requirements and/or
- provide services and products in industries closed to foreign ownership.
To limit legal risk and protect our Client’s interest, we usually do not recommend to set up such entity except in a very limited range of cases when this is the only legal solution for our Client’s business plan.