Foreign investors find that it is difficult to acknowledge all regulations managing the activities of a RO, which they shall comply. As a consequence, many of them has been fined a large amount for not complying the regulations during their operation in Vietnam.
There is an increasingly large number of foreign investors approaches Vietnamese market through establishing a representative office (hereinafter referred to as “RO”), which is considered as an effective way to investigate the market before making decision on devoting to and investing sources into Vietnam.
Therefore, Apolat Legal is going to systematically cover several basic regulations which a RO shall comply after being established for avoiding potential risks that may arise, specifically:
1| Procedures shall be done after the certificate of operation is issued
- Operating activities at the RO as registered and notify the authority issuing the certificate.
- Business sign shall be hung at the RO
- Registering the seal of the RO in competent authority
- Registering the tax code of the RO in competent authority
- Collecting profiles of employees and preparing labour contract as regulated
- Opening a bank account of the RO
- Collecting and registering personal income tax codes for employees
- Reporting the status of recruitment and using labour
- Managing the system of business records, especially records and reports as regulated and required by government agencies.
2| Opening a bank account of RO
A RO shall open a bank account to receive fund from overseas holding company and pay salary for employees and other operating costs of the RO.
The direct transfer of money of holding company into personal bank account of employees in Vietnam rather than RO’s bank account to pay for salary and other costs for the operation of the RO is not appropriate with Vietnamese regulations on foreign currency management.
3| Report on the status of recruitment and using labour
In case of using Vietnamese labour, a RO has responsibility in reporting to the authority having competence to recruit and manage Vietnamese labour about the status of recruitment and using labour in the period of 6 months, annually or when there is an extraordinary request.
Besides, during the operation, if there is any change in personnel working at the RO, a report on the increase or decrease in the number of employees shall be submitted to the authority as regulated under Vietnamese law.
4| Social Insurance – Health Insurance – Unemployment Insurance
A RO is responsible for registering Social Insurance – Health Insurance – Unemployment Insurance for its employees as regulated under Vietnamese law
5| Tax
License tax: A RO operating activities such as representation, marketing, market investigation, which are not considered as business activities like manufacturing, sale of goods and services, does not need to pay license tax.
Personal income tax: A RO, pursuant to the salary of its employees, is in charge of deducting, declaring and paying the income tax for them monthly and quarterly and finalizing income tax at the end of the year as regulated under Vietnamese law.
Tax on foreign contractor (if any)
6| Report on petty cash and cashbook
Many ROs misunderstand that because they do not make any revenue so accountant records are not necessary. In fact, a RO still needs to have an accounting book to record and track the amount of fund transferred from its parent company and actual expenditure for actual operation of the RO
Thus, to avoid serious risks in cases there is an inspection of tax authority or a RO is in the process of dissolution, following tasks should be done:
- Preparing reports on petty cash and cashbook to record the incomings or outgoings during the operation period of the RO and lawful documents should be attached following.
- Checking the declaration and payment of tax and tax receipts
- Reconciling the balance and tax status with tax authority.
7| Working permit and temporary resident card for expat:
Foreign employee shall produce his/her work permit when carrying out immigration procedures and upon request of a competent state agency. Any foreign citizen working in Vietnam without a work permit shall be deported from Vietnam according to the Government’s regulations. Any employer employing foreign citizens without work permits shall be handled in accordance with law.
With a work permit, foreign employee can obtain a temporary resident card equivalent to 02 years multiple visa.
8| Annual operation status report
Before January 30th of each year, a RO shall submit operation status reports of the previous year to the licensing agency.
A RO shall submit reports, documents and explanations for their operation upon the request of competent state regulatory authorities.
Fail to submit the reports on time, there will be a penalty amount up to 40 million VND and a black record will impact to the extension office license process in future.
9| Change of registration information of RO
If there is any change relating to the operation and the information written on the certificate of operating registration of a RO, procedures of amendment shall be performed at issuing authority.
Information mentioned above is necessary regulations that a RO shall comply. For further support, consultation and conducting procedures to comply with Vietnamese regulations managing the RO.
If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.
This article is for general information only and is not a substitute for legal advice.
