In requesting the issuance of licences to set up Vietnam-based branches of Foreign traders.
As the Vietnamese market continues to evolve and garners increasing interest from investors, numerous foreign enterprises contemplate establishing branches in Vietnam. This serves as a preliminary measure to pilot operational strategies before formalising investments or founding entities in compliance with Vietnamese legal regulations. Consequently, how does a foreign company’s branch operate within Vietnam, and what key considerations should be noted when managing such an entity?
What does it mean by branches of Foreign traders?
Vietnam-based branches of Foreign traders means a dependent unit of the foreign trader, which is established and conducts commercial activities in Vietnam under the provisions of Vietnamese law or treaties to which the Socialist Republic of Vietnam is a contracting party.
Relevant legal documents:
- Commercial Law (revised 2005);
- Decree No. 07/2016/NĐ-CP detailed regulations on establishment of representative offices or branches of foreign traders in vietnam under laws on commerce.
- Circular No. 11/2016/TT-BCT providing Forms for the Implementation of Decree No. 07/2016/NĐ-CP.
The rights of branches of a foreign trader in Vietnam include:
- To rent offices, rent and purchase equipment and facilities necessary for their operations.
- To recruit Vietnamese and expatriate employees to work for them according to Vietnamese law.
- To enter into contracts in Vietnam in compliance with their operation contents specified in them establishment licences and the provisions of this Law. It’s noteworthy that the branch is limited to operating in service industries.
- To open Viet Nam dong (VND) accounts and foreign-currency accounts at banks licensed to operate in Vietnam.
- To transfer profits overseas according to the provisions of Vietnamese law.
- To have seals bearing their own names according to the provisions of Vietnamese law.
- To conduct activities of goods purchase and sale and other commercial activities in compliance with their establishment licences according to the provisions of Vietnamese law and treaties to which the Socialist Republic of Vietnam is a contracting party.
- To have other rights provided for by law.
The obligation of branches of a foreign trader in Vietnam include:
- To observe the accounting regime provided for by Vietnamese law; in cases where it is necessary to apply another commonly used accounting system, the approval by the Finance Ministry of the Socialist Republic of Vietnam is required.
- To report on their operations according to the provisions of Vietnamese law.
- To have other obligation provided for by the Law – especially tax and fee obligations (corporate income tax, value-added tax, business licence tax, personal income tax for employees, etc.) must be observed. It is crucial to note that the repatriation of profits abroad (if applicable) can only be carried out after fulfilling all tax obligations as per the regulations.
Requirements for grant of Licences for Establishment of branches:
- The foreign trader must operate legally in a country or territory that is a member of international conventions to which Vietnam is a party.
- The foreign trader must have operated for a minimum of 5 years, calculated from the date of establishment or registration. If the Business Registration Certificate (or equivalent valid document) specifies an operational term, such term must have at least 1 year remained from the date of submission of the application.
- The activities of the branch must align with Vietnam’s commitments under international conventions. If not, the establishment of the branch must obtain approval from the Minister in charge of the relevant sector.
Application for Licences for Establishment of branches:
- Request form for the issuance of a branch establishment licence according to the provided template.
- Certified copy of the Business Registration Certificate or equivalent valid document of the foreign trader (certified by the consulate or legalised by the consulate as required).
- Document appointing/approving the head of the branch.
- Certified copy of audited financial statements or a document confirming tax or financial obligations for the most recent fiscal year. Alternatively, equivalent valid documents or confirmations demonstrating the existence and activities of the foreign trader in the most recent fiscal year.
- Certified copy of the branch’s operating regulations.
- Certified copy of personal documents of the head of the branch, such as a passport or national identification card.
- Documentation regarding the planned location of the branch’s headquarters, including:
- Certified copy of the memorandum of understanding or lease agreement for the location or certified documents proving the trader’s right to operate and use the location for the branch’s headquarters.
- Certified copy of documents specifying the planned location of the branch’s headquarters as required.
- It is important to note that foreign documents need to be translated into Vietnamese and authenticated according to legal regulations.
Procedures for Licences for Establishment of branches of foreign traders:
- The foreign trader shall submit their application to the licensing agency where the representative office is expected to be located directly or by post or online (where applicable).
- The licensing agency shall examine such application within 03 working days and send the notification:
- If the application is invalid: The request for supplementation to the application shall be made only once during the processing of such application.
- If the application is valid: The licensing agency shall send the applicant a written notification of whether the licence or establishment of the branch is granted or not within 07 working days from the date of receipt of the valid application.
- In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.
- In case the licensing agency is in need of consultation from the relevant Ministry. Within 05 working days from the date of receipt of the notification from the relevant Ministry, the licensing agency shall send the applicant a written notice of whether the License for Establishment of the branches is granted. In case of rejection, the licensing agency shall send the applicant a written notice in which reasons for rejections shall be specified.
Cases ineligible for Licences for Establishment of branches:
- Apply for the licence or establishment of branches within 02 years from the date of revocation of the licence or establishment of branches
- Be subject to restrictions from the establishment of branches for reasons of national defence and security, social order, social ethics and community health.
Notes on establishing a foreign company branch in Vietnam:
- A foreign trader is not allowed to establish more than one branch with the same name within the jurisdiction of a province or centrally governed city.
- The head of the branch of a foreign trader is prohibited from concurrently holding the following positions:
- Head of the representative office of another foreign trader.
- Head of the representative office of the same foreign trader.
- Legal representative of an economic organisation established under Vietnamese law.
- The branch’s name must be written in Vietnamese alphabet letters, the letters F, J, Z, W, numbers, and symbols. It must include the name of the foreign trader along with the term “branches” (Branch) and must be displayed at the branch’s headquarters.
If there are any further questions, please do not hesitate to contact An Luật Việt Nam. Our company, with an experienced team of lawyers and consultants, will provide advice to clients to choose the best options for establishing a commercial presence in Vietnam, complete relevant documents, and procedures, and ensure legal safety and legitimate benefits for all client activities.