THE ESTABLISHMENT OF BRANCHES OF FOREIGN ENTERPRISES IN VIETNAM

Branches of foreign traders in Vietnam, which are independent units of such traders, are established and operate commercial activities in Vietnam according to Vietnamese Law. Therefore, international traders need to clearly understand issues related to What are branches of foreign enterprises? and What procedures do traders have to implement? NPLaw will provide you with regulations and understandings surrounding this issue to avoid mistakes. 

I. The facts of branches of foreign enterprises in current.

Currently, many foreign enterprises have established branches or representative offices in countries all over the world. Specifically, some enterprises also expand their scale of operation by establishing many branches in different nations. However, not all these investments are also successful and create profits for foreign traders; the development of branches is different and depends on elements including the economic market, investment policy, or business environment of each country.   

Besides, some branches of foreign enterprises have significantly developed and contributed to the economies of countries where they are located. Such branches will often be invested with many human resources, causing work and income to locate citizens.

II. What are branches of foreign enterprises?

1. What is the establishment of foreign enterprises’ branches?

Establishing enterprises’ branches in foreign countries means such established branches will be independent units of foreign enterprises (known as a holding company), and they have the obligation to perform a part or entire function of enterprises, including authorized representatives. 

2. Legal basic

• Law on Enterprise 2020 (Article 44);
• Decree 07/2016/ND-CP.

III. Regulations for establishing foreign enterprises’ branches

1. Procedures for publishing activities of foreign companies’ branches 

Within forty-five (45) days from the date of granting the License of branches, traders have to publish in writing or online (media) newspapers that are issued in Vietnam for three (03) consecutive time related to the following contents:

• Name and headquarters address of Branches;
• Name and headquarters address of Foreign Traders;
• Branch’s Chief;
• Number, issued date, and duration of the License for establishing Branches;
• Operating contents of  Branches.

During the above prescribed duration, Branches have to be officially operated and foreign traders have to notify the Department of Commerce and Ministry of Commerce where to locate headquarters of such operations.                    

2. Rights and obligations of the branch’s chief

A Chief of a foreign company’s branch in Vietnam is an individual appointed by traders to manage operations of their branch in Vietnam.

Thus, the branch’s Chief will have the following rights and obligations:

• The Chief is responsible for their activities and branches operations in the authorized scales and contents by a foreign company (holding company);
• The Chief is responsible for their activities if such activities are beyond the authorized scales and contents;
• The Chief has to authorize in writing another person to perform the rights and obligations of the branch's Chief according to the Law if leaves Vietnam. Such authority has to be agreed upon by a foreign company (holding company), and the Chief is also responsible for performing authorized rights and obligations;
• If the authority expires according to Clause 3 of this Article, the Chief doesn’t come back to Vietnam yet and doesn’t perform another authority; the previously authorized person will continuously perform appointed works until the branch’s Chief comes back and works at the branch, or when a foreign company (holding company) appoints a new person as the Chief;
• If the branch’s Chief doesn’t present in Vietnam for more than thirty (30) days without authorizing another person, or if the Chief is dead, missing, in custody, sentenced, or at the limit of civil act capacity, a foreign company (holding company) has to appoint another person as the Chief. 

3. Cases that traders aren’t granted for the license to establish branches

Pursuant to Article 14 of Decree 07/2016/ND-CP, cases aren’t granted the License of establishing Representative Offices or Branches of foreign traders in Vietnam, as follows:

Licensing agencies will not grant the License to foreign traders in the following cases:

• Foreign traders don’t demand one of the conditions as defined by Articles 7 and 8 of Decree 07/2016/ND-CP related to granting for the License of establishing Representative Offices or Branches;
• Foreign traders apply for granting the License within two (02) years from the date of being revoked the License of establishing Representative Offices or Branches in Vietnam according to Article 44 of Decree 07/2016/ND-CP;
• The establishment of Representative Offices or Branches in Vietnam is limited according to the Law because of nation defense and security, social order and safety, morality and culture, and community health;
• Other cases according to the Law. 

IV. Some questions and answers related to branches established abroad by foreign enterprises

1. Can foreign enterprises establish branches in Vietnam?

The establishment of foreign enterprises’ branches in Vietnam is still entitled to be allowed to perform, if foreign traders belong to subjects having the rights and conditions for establishing and granting the Establishment License according to the Law in Vietnam.

2. What conditions are there to establish foreign traders’ branches in Vietnam?

Pursuant to Article 3 of Decree 07/2016/ND-CP, stipulating the establishment of branches of foreign traders, as follows:

• Foreign traders are entitled to establish their Representative Office or Branches in Vietnam according to Vietnam's commitment to International Treaties of which Vietnam is a member.
• A trader isn’t allowed to establish more than one (01) Representative Office or Branches that has similar names across a Province or a City under Central.

Besides, according to Article 8 of Decree 07/2016/ND-CP, there are granting conditions for License of establishing Branches of foreign traders in Vietnam, as follows:

• Foreign traders have to be established and registered businesses according to the Laws of nations or territories participating in International Treaties of which Vietnam is a member, or foreign traders have to be recognized by the Laws of these nations or territories;
• Foreign traders have operated for at least five (05) years from the date of the establishment or registration;
• If the Enterprise Registration Certificate or other equivalently valid documents of foreign traders stipulate operation duration, such duration has to still be at least one (01) year from the date of submitting registration applications;
• Operating contents of Branches have to be appropriate to Vietnam’s commitment to opening the market to International Treaties of which Vietnam is a member, and such contents have also to be appropriate to foreign traders’ businesses; 
•  If operating contents aren’t appropriate with the listed conditions or foreign traders don’t belong to nations or territories participating in International Treaties of which Vietnam is a member, the establishment of Branches has to be approved by the Minister of Professional Management Department.

3. The duration of the License for establishing Branches in Vietnam

Pursuant to Article 9 of Decree 07/2016/ND-CP, the duration of the License for establishing Branches of foreign traders in Vietnam is prescribed as:

• The License for establishing Representative Offices or Branches has a duration of five (05) years but not exceeding the remaining duration of the Business Registration Certificate or other equivalent value documents (if such documents have the regulations for duration) of foreign traders.  
• The duration of the License for establishing Representative Offices or Branches will be re-granted like a previously granted License according to the Law;
• The duration of the License for establishing Representative Offices or Branches will be extended (renewal) as defined by the Law.

4. Fees for establishing Branches of foreign companies in Vietnam

Pursuant to Circular 47/2019/TT-BTC, a fee for establishing Branches is fifty (50) thousand dong per time; however, when registering the establishment of Representative Offices via internet (online), it is free.   

5. What taxes do foreign invested enterprises pay to establish branches?

According to the Law, every year, foreign invested enterprises have to submit four (04) types of basic taxes,including Business License Tax, Profit Tax, Value-Added Tax (VAT), and Personal Income Tax (PIT). Besides, there are also Import-Export Tax, Special Consumption Tax, etc.

• Business License Tax: is a direct tax and quotas (including import and export) that are levied on the business licenses of enterprises;

• Profit Tax: is a direct tax that is levied on the taxable income of enterprises, including incomes from manufacturing activities, trade in goods and services, and other incomes according to the Law;
• Value-added Tax (VAT): It depends on methods that enterprises have chosen first from the date of establishing and operating such enterprises. There are two payment methods for Value-added Tax, as follows:
  • Deduction method: In this method, VAT has to be submitted, as follows: (the value of sold goods and services X the VAT rate) - deductible input VAT
  • Direct method: VAT has to be submitted, as follows:  “revenue X tax percentage of business subjects”
• Import-Export Tax: According to types of goods and services, there are two types of taxes applied, as follows: Percentage Tax and Flat Tax ( Flat rate duty)
• Special Consumption Tax (SCT): (Taxable price of SCT) x (Tax rate of SCT).

These are all information related to THE BRANCHES OF FOREIGN ENTERPRISES as prescribed by Vietnamese Law. Please don’t hesitate to contact us, if the clients have any further questions.

NPLAW is proud to be a prestigious law firm unit and has the trust and belief of clients, enterprises, and individuals. NPLaw specializes in providing legal services all-around relating to domestic and abroad investments such as Enterprise, Real Estate, Intellectual Property, Labor; Drafting Consultation, negotiations and concluding support for the Commercial Contract, domestic and abroad Service Contract; consultations and support for implementing licensed procedures of licenses, etc,. NPLaw, with our professional Lawyers and Specialists, we have the full ability to consult with and support customers as they implement the above procedures. Along with the slogan “Your benefits - Our Priority”, NPLaw definitely becomes the accurate and safe choice for your legal issues.  

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