The Decree 07/2016/ND-CP, which was issued on 25 January, took effect on 10 March.  The decree aims to manage operations of representative offices and branches of foreign businesses in Viet Nam, which includes procedures for licensing and conditions for establishment.

According to the Tax Consultant International (Taxci), a branch means a location or office from which business activities are conducted. A representative office is smaller than a branch and does not handle or manage business activities. The main purpose of a representative office is to conduct market research, provide information on a company, product or service, and act as a contact point.

Who does the law apply to?

Article 3 stipulates that all foreign business, representative offices and branches in Viet Nam are regulated under this decree.

Representative offices or branches of foreign businesses in Viet Nam operating in specialized fields (banking, finance, legal services, culture, education, travel or other fields pursuant to legal regulations) shall be subject to relevant legal documents in pursuance of Article 1.

Who is responsible for issuing licenses for representative offices and branches?

According to Article 5 and Article 6, countrywide departments of industry & trade and authorities at export processing, industrial, special economic and hi-tech zones are authorized to issue representative office licenses.

According to Article 6, the Ministry of Industry and Trade shall be responsible for issuing licenses for new branches.

How many representative offices and branches foreign individuals be permitted to establish in Viet Nam, and who is eligible to establish a representative office or branch?

Article 3 stipulates that a foreign businessperson shall not be allowed to establish more than one representative office or branch with a similar name in the same province or centrally controlled city in Viet Nam.

According to Article 7, foreign businesspeople shall be issued representative office establishment licenses in Viet Nam when they meet the following requirements:

- Foreign businesspeople who are eligible to establish or register a business license under the legal regulations of their own countries or territories;

- Having operated for no less than 1 year since the legal establishment or valid business registration in their countries of origin;

- The business registration license or other relevant documents must be valid for at least 1 year from the day of submission;

- The Operational Charter (fundamental information of an organisation with address, establishment day, capital, business field, industry, missions, organizational structure, etc.) of a representative office must be suitable with Viet Nam’s agreements in international treaties and documents signed with other countries, territories;

- In case the operational charter is not suitable with Viet Nam’s agreements in international treaties, documents signed among and other countries, territories; or foreign businesspeople from countries, territories that are not part of any joint treaty, agreement, pacts or other documents signed with Viet Nam, the case shall be decided by a minister or top leader of a ministerial organisation.

According to Article 8, foreign businesspeople shall be entitled to a branch establishment license in Viet Nam when they meet the above-mentioned requirements. The only difference from establishing a representative office is that foreign businesspeople applying for a branch license must have been operating for at least 5 years since their legal establishment or valid business registration in their countries of origin.

What documents are required for foreign businesspeople to establish a representative office or branch in Viet Nam?

According to Article 10 and Article 12, the additional stipulation is that foreign businesspeople need to submit documents on the expected location of their representative office or branch, including:

- Copy of a Memorandum of Understanding or site rent agreement or copy of confirmation of site exploration and utilization rights;

- Copy of documents pursuant to security, public order, work safety and hygiene, no lending or subleasing or other relevant regulations.

Moreover, other required documents are similar to the previous regulations in Decree 72/2006/ND-CP, including:

- Application form for the establishment license of a representative office/branch issued by the Ministry of Industry and Trade;

- Copy of a Business Registration Certificate or other relevant documents;

- Representative office/branch director's appointment/assignment contract;

- Copy of audited financial statement for the latest 5 fiscal years or other relevant documents issued by original country’s competent agencies or organisations;

- Copy of representative office/branch Operational Charter (documents stipulating basic information of an organisation);
- Copy of passport/identity card (Vietnamese) or copy of passport (foreigner) of representative office/branch director.

How long are the licenses valid?

According to Article 9, representative office/branch establishment licenses shall be valid for 5 years but not exceed the remaining validity of a business registration certificate.

Who is not eligible for a license?

According to Article 14, the agencies in charge of granting licenses for the establishment of representative offices and branches shall not grant a license for a foreign business in the following cases:

1. Foreign business does not meet conditions as specified in Article 7 or Article 8 of the Decree.

2. Foreign business applying for license for establishment of representative office or branch within two years of having its license revoked in Viet Nam in accordance with Article 44 of the Decree.

3. There is evidence that establishment of the representative office or branch is harmful to people’s health, national defense, security, social order, historic traditions, culture, ethics and other Vietnamese customs, or damage natural resources and the environment.

4. Other cases pursuant to legal regulations.

(Source: VnExpress/ International)