En.antlawyers.com –
Following the trend of international economic integration, foreigners have been
attracted by the benefits of doing business in Vietnam through setting up representative office, 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 in establishing a representative office in Vietnam.
The foundation of
representative office of foreign entity in Vietnam is governed under Vietnam
Commercial Law 2005 and Decree 07/2016 / ND-CP dated 25 May, 2016.
Advantages of
establishment of a representative office:
Establishing a
representative office 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. 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.
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 foreign currencies or Vietnam dong at commercial banks, and to be
allowed to use those accounts solely for their operations.
According to the laws of
Vietnam, the establishment of representative offices does not require the
investor’s capital. Instead, setting up a company in Vietnam, an economic
organization requires capital contribution as per business plan, ranging from
USD 50 k to million USD. Sometime, if the investment fall under conditional
areas, setting up company seems more challenging. This relieves the
foreign trader from advancing too much to achieve the purpose of expanding the
market before the business plan has been proved to materialize.
Further, the
establishment of representative office follows more simple procedures for
licensing in Vietnam than establishing entity
in Vietnam. Accordingly, the
process has been taken less time which is more favorable for foreign traders.
Challenges of the
establishment of representative office in Vietnam?
Vietnam law provides
that, in order to establish a representative office in Vietnam, foreign traders
have 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.
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.
ANT
Lawyers – A Law firm in Vietnam has
law offices in Hanoi, Ho Chi Minh City and Da Nang. The lawyers at each
law offices in Vietnam have consistently made valuable and important
contributions to our profession through the cases we handled on daily basis to
facilitate business transaction or represented our clients to access justice.
