Establishing representative offices in Vietnam is considered as a safe initial step before the traders conduct a series of complex legal procedures with high cost for the establishment of wholly foreign-owned enterprises.
The initial primary purpose of any new foreign traders entering the Vietnamese market might be promoting the brand, connecting and examining the market while preparing for the official business. Therefore, many fresh investors establish a representative office in here.
Compared with the establishment of a commercial presence in Vietnam in other forms, such as business co-operation contracts, establishing foreign-invested enterprises or establishing a branch, the procedures for establishing the representative offices are considered as the least complex procedures.
To establish representative offices, the foreign traders only need to meet the following conditions:
• Being established and registered (or recognised) in compliance with the laws of territories and nations being members to international treaties to which Vietnam is also a member;
• Having operated for at least 1 year from the date of establishment or registration, the remaining operation term must be at least 1 year from the date of submission of the application for a Certificate of establishment of the representative office.
Certificate of representative office establishment is provided relatively rapidly. Within approximately 7 working days from the date of submission of sufficient and valid dossier at the licensing agency, a representative office can be licensed to operate.
When establishing a wholly foreign-owned enterprise in Vietnam, the traders will need to go through a lot of stages with lots of procedures, documentation and especially the cost of such tasks can be up to several thousand dollars. On the other hand, spending a large cost on establishing a wholly foreign-owned enterprise without a real clear comprehension on Vietnam market is an insecure and risky move.
Another benefit of establishing the representative offices is that it would not be subject to other taxes due to not being pure business activities, but only personal income tax for the office staffs.
Pre-step to establish foreign invested enterprises
Although the representative offices of foreign companies are not allowed to perform the business operation or other profitable activities as prescribed by the laws, representative offices will perform the function of liaison office, market research, and promotion of the business investment opportunities, etc. for foreign traders in Vietnam.
Once the image and brand of the foreign traders have become familiar and popular with clients in Vietnam market, they can be assured to establish wholly foreign-owned enterprises and officially perform commercial activities in Vietnam.