Opportunities and challenges of establishing a representative office versus setting up a company in Vietnam

Vietnam continues to affirm its position as one of the most attractive destinations for foreign direct investment (FDI). Specifically, in the first three months of 2025, the total newly registered capital, adjusted capital, and capital contribution and share purchases by foreign investors reached nearly USD 10.98 billion, an increase of 34.7% compared to the same period in 2024.⁽¹⁾
When considering entering the Vietnamese market, foreign investors are often faced with two common options: establishing a Representative Office or setting up a Foreign-Invested Company. 

The choice of the appropriate model will have a direct impact on business operations, operating costs, and long-term strategy in Vietnam. This article will analyze the opportunities and challenges of each model based on the current legal regulations in Vietnam. 

1. Overview of the Two Models Under Vietnamese Law 

1.1. Representative Office 

According to Article 3.6 of the 2005 Commercial Law, a Representative Office of a foreign trader in Vietnam is a dependent unit of the foreign trader, established in accordance with Vietnamese law to explore the market and conduct certain trade promotion activities permitted under Vietnamese law.

1.2. Foreign-Invested Company (FDI)

An FDI company is an independent legal entity established under the 2020 Investment Law and the 2020 Enterprise Law. Foreign investors can register to operate in all sectors not restricted by international treaties or Vietnamese law, including manufacturing, trade, services, distribution, import and export, information technology, etc. 

2. Analysis of Opportunities and Challenges 

2.1. Representative Office 

2.2. Foreign-Invested Company (FDI)

2.3. Which Model Should Be Chosen? 

Foreign investors should choose to establish a Representative Office if: 

• The investor wants to survey the market before making a large investment. 

• The parent company needs to set up information channels and marketing in Vietnam. 

• There is no immediate business plan. 

Foreign investors should choose to establish an FDI Company if: 

• The investor intends to engage in direct business activities in Vietnam. 

• They want to develop the market for the long term and expand the scale of operations. 

• They need to take advantage of Vietnam’s investment incentives. 

3. Conclusion

The choice of an appropriate investment model in Vietnam depends on the foreign investor’s strategy, business goals, and financial capacity. 

To ensure effective investment activities, investors should seek specialized legal advice to understand the procedures and comply with relevant legal obligations. 

Apolat Legal is ready to assist foreign investors in choosing the optimal investment model and completing necessary procedures quickly and effectively. 

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