⭐ Representative Office Compliance in Vietnam

✅A comprehensive guide to the legal compliance obligations that Representative Offices must observe throughout their operations in Vietnam

Establishing a Representative Office (RO) in Vietnam is only the beginning. Throughout its operation, the RO and its foreign company must continue to comply with various legal obligations relating to the scope of activities, reporting, tax, employment, the Chief Representative, licensing and other regulatory requirements.

For foreign companies maintaining a Representative Office in Vietnam, understanding these obligations is essential to managing legal risks and ensuring that the RO operates within the scope permitted by Vietnamese law.

This article outlines the key compliance obligations of Representative Offices in Vietnam, including the responsibilities of the foreign company, the Chief Representative and the Representative Office throughout its operations.

1. Responsibilities of the Foreign Company for Its Representative Office in Vietnam

The foreign company is responsible under Vietnamese law for all activities of its Representative Office in Vietnam.

Accordingly, establishing a Representative Office does not separate the foreign company from responsibility for the RO’s activities. The foreign company must ensure that its Representative Office operates within the scope of its license and complies with applicable Vietnamese laws.

For the foreign company, managing a Representative Office should therefore take into account several key areas, including:

Scope of activities;
Chief Representative;
Reporting obligations;
Tax and financial obligations;
Employment;
Representative Office License; and
Other legal obligations arising during the course of operation.

2. What Activities Can a Representative Office Conduct?

A Representative Office performs liaison functions, conducts market research and promotes and facilitates investment and business opportunities for the foreign company it represents, excluding service sectors in which the establishment of Representative Offices is governed by specialised legislation.

In practice, a Representative Office may serve as a local point of contact for its foreign company in Vietnam to:

Conduct Market Research: A Representative Office may research and gather information about the Vietnamese market to support the foreign company’s assessment of opportunities and business planning.
Promote Business Opportunities: A Representative Office may conduct promotional activities within the scope permitted by Vietnamese law.
Perform Liaison Functions: A Representative Office may maintain communication between the foreign company and customers, business partners and other relevant parties in Vietnam.

However, the Representative Office must operate within the objectives, scope and term specified in its Representative Office License.

3. Activities That a Representative Office Is Not Permitted to Conduct

One of the most important compliance obligations of a Representative Office is not exceeding the scope of activities permitted by law.

Under Article 18 of the Law on Commerce, a Representative Office has the following obligations:

No Direct Profit-Generating Activities: A Representative Office may not directly conduct profit-generating activities in Vietnam.
Commercial Promotion Only Within the Permitted Scope: Promotional activities conducted by a Representative Office must fall within the scope permitted by the Law on Commerce and relevant regulations.
Restrictions on Entering into Contracts: A Representative Office may not enter into, amend or supplement contracts entered into by the foreign company, except where the Chief Representative has a lawful power of attorney from the foreign company or where otherwise permitted by law.
Financial Obligations: A Representative Office must pay taxes, fees, charges and fulfil other financial obligations in accordance with Vietnamese law.
Reporting Obligations: A Representative Office must comply with its reporting obligations under Vietnamese law.

These limitations are among the key matters that foreign companies should consider when operating a Representative Office in Vietnam.

4. Responsibilities of the Chief Representative

The Chief Representative has direct responsibility for their own activities and the activities of the Representative Office within the scope of authority granted by the foreign company.

Responsibilities Within the Scope of Authority

The Chief Representative is responsible to the foreign company for their own activities and those of the Representative Office within the scope of the authority granted.
Where the Chief Representative performs activities beyond the authority granted by the foreign company, the Chief Representative is responsible for those activities.

Where the Chief Representative Leaves Vietnam

When the Chief Representative leaves Vietnam, they must provide a written authorisation for another person to exercise their rights and perform their obligations in accordance with the law.
Such authorisation must be approved by the foreign company.
The Chief Representative remains responsible for the exercise of the rights and obligations that have been authorised.

Where the Chief Representative Is Absent for More Than 30 Days

If the Chief Representative is not present in Vietnam for more than 30 days without authorising another person to exercise their rights and perform their obligations, or where the Chief Representative dies, goes missing, is detained, is sentenced to imprisonment or has their civil act capacity restricted, the foreign company must appoint another person as Chief Representative.

5. Which Positions May the Chief Representative Not Hold Concurrently?

The Chief Representative of a foreign company’s Representative Office may not concurrently hold the following positions:

Head of a branch of the same foreign company;
Head of a branch of another foreign company;
Legal representative of that foreign company or another foreign company;
Legal representative of an economic organisation established under Vietnamese law.

These restrictions should be considered when appointing the Chief Representative and throughout the operation of the Representative Office.

In addition, where the Chief Representative is authorised by the foreign company to enter into, amend or supplement a contract, the authorisation must be made in writing for each instance of entering into, amending or supplementing the contract, as required by law.

6. Reporting Obligations of a Representative Office

Reporting is one of the key compliance obligations of a Representative Office.

Under the applicable regulations, before 30 January each year, a Representative Office must submit a report in the prescribed form issued by the Ministry of Industry and Trade concerning its activities during the preceding year by post to the licensing authority.

In addition to periodic reporting, a Representative Office must report, provide documents or explain matters relating to its activities when requested by a competent state management authority.

What Should Companies Keep in Mind?

Reporting obligations do not end with the annual report. A Representative Office should maintain relevant information and records concerning its activities so that these can be provided or explained when requested by the competent authorities.

Related service: LTS LAW assists with Setting up a Representative Office in Vietnam.

7. Tax and Financial Obligations

A Representative Office may not conduct direct profit-generating activities in Vietnam, but it remains subject to tax and financial obligations under applicable regulations.

Under the Law on Commerce, a Representative Office is required to:

Pay taxes;
Pay fees and charges; and
Fulfil other financial obligations in accordance with Vietnamese law.

For employees working at the Representative Office, the company must also fulfil applicable personal income tax obligations and mandatory insurance obligations for employees who fall within the relevant statutory requirements.

The Representative Office should maintain appropriate records relating to employees, payroll, tax and operating expenses.

Example

A Representative Office of a foreign company employing Vietnamese staff must comply with personal income tax and mandatory insurance obligations applicable to those employees.

8. Employment and Recruitment Obligations

A Representative Office has the right to recruit Vietnamese and foreign employees to work at the Representative Office in accordance with Vietnamese law.

This is one of the rights recognised under Article 17 of the Law on Commerce. At the same time, recruitment and employment must comply with applicable Vietnamese labour regulations.

For foreign employees, the Representative Office must consider requirements relating to their right to work in Vietnam, including work permits or applicable exemptions from work permit requirements.

For Vietnamese and foreign employees who are subject to mandatory insurance requirements, the Representative Office must fulfil the relevant insurance obligations in accordance with the law.

Related service: LTS LAW provides [Work Permit Services in Vietnam] and legal support on matters relating to foreign employees.

9. Compliance Obligations Relating to the Representative Office License

A Representative Office must operate in accordance with the objectives, scope and term stated in its Representative Office License.

During its operation, changes to information recorded in the License may require an amendment or reissuance of the License where required by law.

Such changes may include:

Representative Office address;
Chief Representative;
Information concerning the foreign company;
Other information recorded in the License.

The foreign company should therefore monitor the information stated in the Representative Office License and complete the relevant amendment procedures whenever required by law.

10. Representative Office License Renewal Obligations

A Representative Office License is issued for a defined period. The foreign company should monitor the License’s expiry date and proactively initiate the renewal procedure where it intends to continue operating the Representative Office.

Continuing to operate after the License has expired without obtaining an extension may result in penalties under applicable regulations.

Where the foreign company wishes to maintain its Representative Office, the renewal application should be prepared and submitted within the applicable timeframe to avoid disruption to its operations.

Learn more: [Representative Office License Renewal in Vietnam]

11. Obligations Relating to the Bank Account, Office Premises and Seal

Under the Law on Commerce, a Representative Office has the right to:

Lease its office premises;
Lease or purchase facilities and equipment necessary for its activities;
Open foreign currency accounts and Vietnamese dong accounts with foreign currency origin at banks permitted to operate in Vietnam;
Use such accounts only for the activities of the Representative Office;
Have a seal bearing the name of the Representative Office in accordance with Vietnamese law.

Accordingly, during its operation, a Representative Office should ensure that:

It maintains an appropriate office premises;
It operates at the address stated in its License;
Its bank accounts are used for the proper purposes; and
Its seal is managed and used in accordance with applicable regulations.

12. Violations and Administrative Penalties

Failure to comply with regulations governing the establishment and operation of a Representative Office may result in administrative penalties under Decree No. 98/2020/ND-CP.

Fines from VND 5,000,000 to VND 10,000,000

These may apply to certain violations, including:

Making false declarations in an application for issuance, reissuance, amendment or renewal of a Representative Office License;
Failing to publicly post the required notice when terminating the operation of a Representative Office.

Fines from VND 10,000,000 to VND 20,000,000

Certain violations in this category include:

Failing to maintain an office premises for the Representative Office;
Subleasing the Representative Office premises;
Operating at an address different from the address stated in the License;
Failing to submit periodic reports or submitting inaccurate reports;
Failing to report, provide documents or provide explanations when requested by a competent authority;
Failing to carry out procedures for amendment or reissuance of the License where required by law;
Adding to, erasing or altering the contents of the issued License.

Fines from VND 20,000,000 to VND 30,000,000

Certain violations include:

Forging documents in an application;
Operating outside the activities stated in the License;
The Chief Representative concurrently acting as head of a branch of the same foreign company or another foreign company;
The Chief Representative concurrently acting as legal representative of the foreign company;
The Chief Representative concurrently acting as legal representative of an economic organisation established under Vietnamese law;
Leasing, borrowing, subleasing or lending the Representative Office License.

Fines from VND 30,000,000 to VND 50,000,000

These may apply to:

Continuing to operate after the foreign company has ceased operations;
Continuing to operate after the competent authority has revoked the Representative Office License or after the License has expired without being renewed.

In addition to monetary fines, certain violations may result in additional sanctions, including confiscation of exhibits or suspension of the right to use the Representative Office License for a period of between one and three months.

In certain cases, a remedial measure may also be imposed requiring the violator to return any unlawful gains obtained from the violation.

13. Key Compliance Obligations to Monitor During Operations

The main obligations of a Representative Office in Vietnam can be summarised into the following areas:

1. Scope of Activities

Operate within the objectives, scope and term stated in the Representative Office License.

2. Chief Representative

Ensure that the Chief Representative acts within the scope of authority granted and does not concurrently hold positions prohibited by law.

3. Reporting

Submit periodic reports and provide information, documents or explanations when requested by competent authorities.

4. Tax and Financial Obligations

Fulfil applicable tax, fee, charge and other financial obligations.

5. Employment

Comply with requirements relating to recruitment, employment, work permits and mandatory insurance.

6. Licensing

Monitor the information stated in the License and carry out amendment, reissuance or renewal procedures when required.

7. Office Premises, Bank Account and Seal

Maintain appropriate office premises, use bank accounts for permitted purposes and manage the seal in accordance with applicable regulations.

14. How LTS LAW Supports Representative Office Compliance

LTS LAW advises and assists foreign companies in maintaining their Representative Offices in compliance with Vietnamese law.

Our support may include:

Advising on the permitted scope of Representative Office activities;
Advising on reporting obligations;
Supporting License amendments and renewals;
Advising on the Chief Representative;
Advising on tax and financial obligations;
Advising on employment and work permits;
Advising on insurance and related obligations;
Reviewing compliance matters throughout the Representative Office’s operation.

[Learn More About Representative Office Closure in Vietnam]

Establishing a Representative Office in Vietnam is only the first step. Throughout its operation, the Representative Office and its foreign company must maintain compliance with various obligations, from its permitted scope of activities, Chief Representative and reporting obligations to tax, employment, licensing, office premises, bank accounts and seals.

Non-compliance may result in administrative penalties and may affect the Representative Office’s ability to continue operating.

Foreign companies should therefore proactively review their Representative Office’s legal obligations and complete the necessary procedures whenever circumstances change.

Need assistance with Representative Office compliance in Vietnam?

Contact LTS LAW for legal advice on the scope of activities, reporting, licensing, tax, employment and other compliance matters.

This article is provided for general informational and reference purposes only and does not constitute legal advice. The application of relevant laws and procedures may vary depending on the specific documents, circumstances, and countries or territories involved.

For advice tailored to your specific circumstances, please contact LTS LAW FIRM for further consultation and legal assistance.

LTS LAW FIRM
6th Floor, 520 Cach Mang Thang Tam
Nhieu Loc Ward, Ho Chi Minh City, Vietnam
Tel: (+84) 965 000 524
Email: contact@lts.com.vn