Which Form of Investment – Set up Branch or Set up Company in Vietnam?

Foreign entities can set up company in Vietnam or set up branch offices in Vietnam to carry out business activities.

There are several main different aspects between opening a branch office or establishing a foreign owned company in Vietnam.

1.Conditions

-Permits for establishment of Vietnam-based branches of foreign enterprise shall each have a valid term of five years.

-Foreign enterprise must choose between establishing a 100% foreign capital enterprise or forming a joint-venture with domestic investor or company.

2.Certificate

-The Branch office needs to apply and obtain the operation license of a Branch;

-A foreign owned company will need to apply and obtain the investment certificate (“IC”) to operate in Vietnam.

3.Capital

-Optional, foreign entity will decide how much money to invest in branch. The allocation capital for branch is capital for the subordinate units.

-Mandatory, foreign entity will need to provide minimum capital as required by Vietnam Law in conditional investment area.

4.Obligation of owner

-For branch office in Vietnam, owner takes full responsibility;

-For company, owner takes responsibility within the capital contributed into the company in Vietnam;

5.Other matters

-For branch office setting up in Vietnam, the procedure is less complicated compared to those for the establishment of a 100% foreign owned company;  the branch office is able to carry out trading and some other activities as stipulated by Vietnam laws and the WTO commitments which Vietnam enters. The business lines of a branch have to be aligned with the business lines of the headquarter of the foreign entity.

-Setting up foreign owned company would be more complicated than the setting up of the branch office, however this form of investment has more flexibility and freedom as it is a stand alone Vietnam entity recognized under Vietnam laws.

ANT Lawyers is a law firm in Vietnam with English speaking lawyers, located in the business centers of Hanoi, Danang and Ho Chi Minh City to provide convenient access to our clients. With highly professional staff and great experience in foreign investment, we would like to support you to establish company in Vietnam.

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Conditions for Establishing Representative Office in Vietnam

Decree No. 07/2016 / ND-CP regulating the Commercial Law regarding representative offices and branches of foreign traders in Vietnam that have recently been issued by the Government.

Accordingly, foreign traders can establish their representative offices and branches in Vietnam under Vietnam’s commitments in international treaties to which Vietnam is a member. A foreign trader cannot establish more than one representative office or branch with the same name within a province or city under central authority.

Foreign traders are licensed to establish representative offices when they meet five conditions:

– Foreign traders can establish and register for business in accordance with law of nation and territories participating in international treaties in which Vietnam is a member, or recognized by the law of those nations and territories.

– Foreign traders that have been in operation for at least one year from the date of establishment or registration.

– In case the certificate of business registration or papers with equivalent value of the foreign traders have prescribed the time limit for operation, then the duration must be at least 1 year from the date of submitting record.

– The operation of the representative office must match the commitment of Vietnam in the international treaties in which Vietnam is a member.

– The case where the operation of the representative office is inconsistent with Vietnam’s commitments or foreign traders do not belong to any nations and territories participating in the international treaties in which Vietnam is a member, the establishment of representative offices must be approved by the Minister of specialized management.

The Decree also stipulates the conditions for foreign traders to be granted licenses to establish their branches. Specifically, foreign traders will be licensed for the establishment of branches when they meet 5 conditions:

– Foreign traders can establish and register for business in accordance with law of nation and territories participating in international treaties in which Vietnam is a member, or recognized by the law of those nations and territories.

– Foreign traders that have been in operation for at least five year from the date of establishment or registration.

– In case the certificate of business registration or papers with equivalent value of the foreign traders have prescribed the time limit for operation, then the duration must be at least 1 year from the date of submitting record.

– The operation of the branch office must be consistent with the market-opening commitments of Vietnam in the international treaties in which Vietnam is a member, and in line with the business lines of the foreign trader.

– If the content of the branch operation is inconsistent with Vietnam’s commitments or foreign traders do not belong to any nations and territories participating in the international treaties in which Vietnam is a member, the establishment of branches must be approved by the Minister of specialized management.

The license for the establishment of representative office and branch of foreign traders have a term of 5 years but does not exceed the remaining term of the certificate of business registration or papers of equivalent value of the foreign trader in the case that those papers contain provisions on the term.

Source: ANTLawyers

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