Vietnam, a country full of potential with a rapidly developing economy, attracts the interest of many foreign businesses and traders. Currently, with the need to access the Vietnamese market, numerous foreign investors have been exploring and surveying the market before engaging in any significant investment activities in Vietnam.

To accomplish this, some investors opt to establish representative offices or branches of foreign traders in Vietnam. While a representative office of a foreign trader only conducts activities related to market research and exploration, without directly engaging in profit-generating business activities, a branch of a foreign trader operates with rights and obligations that are not much different from those of a foreign enterprise in Vietnam. In this article, we would like to share with you all the essential information when a foreign trader has the intention to establish a branch in Vietnam.

1. Branch of Foreign Trader in Vietnam

A branch of a foreign trader in Vietnam is a dependent unit of a foreign trader, established and engaged in commercial activities in Vietnam in accordance with the regulations of Vietnamese law or international treaties of which the Socialist Republic of Vietnam is a member.

Within the scope of business operations in Vietnam, a branch has the same rights as an enterprise. Accordingly, a branch of a foreign trader in Vietnam will have the following rights:

• Lease premises and rent or purchase necessary equipment and supplies for branch operations.
• Recruit Vietnamese or foreign employees to work at the branch in accordance with Vietnamese law.
• Enter into contracts in Vietnam that are relevant to the activities specified in the branch’s establishment certificate and compliance with the applicable laws.
• Open bank accounts in Vietnamese dong or foreign currencies at the permitted banks in Vietnam.
• Transfer profits abroad in accordance with Vietnamese law.
• Have a seal bearing the name of the branch as regulated by Vietnamese law.
• Carry out the sale of goods and other commercial activities in accordance with the establishment certificate as prescribed in Vietnamese law, and international treaties of which the Socialist Republic of Vietnam is a member, as well as other rights as specified by regulations.

Corresponding to these rights, the branch conducts profit-generating business activities in Vietnam and, therefore, assumes corresponding obligations in accordance with the business sectors and scope of its operations in Vietnam. These obligations include tax obligations, labor obligations, public security obligations, environmental obligations, and others generally similar to those of enterprises operating within the same business sector and scope. In addition to these general obligations, a branch of a foreign trader in Vietnam is also required to periodically report its activities to the management authority on an annual basis.

It is important to note that a branch of a foreign trader in Vietnam is subject to accounting regulations as stipulated by Vietnamese law. If there is a need to apply alternative accounting practices, approval from the Ministry of Finance must be obtained.

2. Conditions for Foreign Traders to Apply for a Branch Establishment Certificate in Vietnam

Foreign traders are granted a Branch Establishment Certificate when they meet the following conditions:

• The foreign trader is established and registered in accordance with the regulations of their home country or territory, participates in international treaties of which Vietnam is a member, or is recognized by the laws of these countries or territories.
• The foreign trader has been in operation for a minimum of 5 years, counted from the date of establishment or registration.
• In cases where the Business Registration Certificate or equivalent document of the foreign trader specifies an operating period, that period must be valid for at least 1 year from the date of application submission.
• The activities of the branch must align with Vietnam’s market-opening commitments in international treaties of which Vietnam is a member and be compatible with the foreign trader’s business sector.
• If the activities of the branch are not in line with Vietnam’s commitments or the foreign trader does not belong to a country or territory participating in international treaties of which Vietnam is a member, the establishment of the branch must be approved by the Minister of the specialized management agency.

3. Required documents for the establishment of a Branch of Foreign Traders

In practice, the required documents to establish a branch for foreign traders in Vietnam are quite complex. This complexity arises from the fact that the business activities of the branch will be based on Vietnam’s commitments regarding market access under the WTO, relevant international treaties, and Vietnamese laws. In other words, there is not much difference between establishing a foreign business entity and establishing a branch in Vietnam. Therefore, despite being a branch, the sequence of steps, conditions, and required documents will not be simpler than establishing a foreign-owned enterprise. Accordingly, foreign traders will need to prepare the following basic set of documents:

• A request letter for the issuance of the Branch Establishment Certificate, in the prescribed format by the Ministry of Industry and Trade, signed by the authorized representative of the foreign trader.
• A copy of the Business Registration Certificate or equivalent document of the foreign trader.
• The document of appointing/nominating the head of the branch from the foreign trader.
• A copy of the audited financial report or a document confirming the fulfillment of tax or financial obligations in the most recent financial year, or an equivalent document issued or certified by the competent authority where the foreign trader is established, proving the existence and operation of the foreign trader in the most recent financial year.
• A copy of the branch’s operating charter.
• A copy of the passport, identity card, or citizen identification card (for Vietnamese individuals) or a copy of the passport (for foreign individuals) of the head of the branch.
• Documents related to the intended location of the branch’s registered office, including:
  1. A copy of the memorandum of understanding or lease agreement for the premises, or a copy of documents proving the trader’s right to exploit and use the premises for establishing the branch’s registered office.
  2. A copy of the documents related to the intended location of the branch’s registered office, as prescribed in Article 28 of this Decree and relevant laws and regulations.

Foreign documents must be translated into Vietnamese and legalized according to Vietnamese regulations. Documents related to the legal status of the foreign trader must be certified or consular legalized by the diplomatic or consular representative agency of Vietnam abroad, in accordance with Vietnamese regulations.

4. Procedures for Obtaining a Branch Establishment Certificate

To establish a branch in Vietnam, foreign traders can submit their applications directly, by post, or online (if applicable) to the licensing authority.

Within 03 working days from the date of receiving the application, the licensing authority will review it and request additional documents if the submitted application is incomplete or invalid. The request for additional documents can only be made once throughout the application process.

Except as provided in Clause 4 of this Article, within 07 working days from the date of receiving a complete and valid application, the licensing authority will grant or refuse the issuance of a branch establishment certificate to the foreign trader. In the case of refusal, a written document stating the reason must be provided.

In cases where the establishment of a branch is not specified in the relevant legal documents of the specialized industry, the licensing authority shall send a written request to seek the opinion of the competent management authority within 03 working days from the date of receiving a complete and valid application. Within 05 working days from the date of receiving the written request from the licensing authority, the competent management authority shall provide a written document stating their agreement or disagreement with the issuance of the branch establishment license. Within 05 working days from the date of receiving the written document from the competent management authority, the licensing authority will grant or refuse the issuance of a branch establishment certificate to the foreign trader. In the case of refusal, a written document stating the reason must be provided.

5. Requirements for the Head of a Branch

A branch of a foreign trader in Vietnam operates with all the rights and obligations of a business entity. Therefore, the individual who serves as the Head of the branch in Vietnam must be responsible to the foreign trader for the activities of both themselves and the branch within the scope authorized by the foreign trader.

The Head of the branch is accountable for their activities if they conduct activities beyond the authorized scope granted by the foreign trader. If the Head of the branch is absent from Vietnam, they must authorize their rights and obligations through written authorization to another person. This authorization must be approved by the foreign trader.

If the authorization period expires and the Head has not returned to Vietnam and there is no other authorization in place, the authorized person has the right to continue exercising the rights and obligations of the Head of the branch within the previously authorized scope until the Head of the branch returns to work or until the foreign trader appoints another person as the new Head.

It is important to note that the Head of the branch of a foreign trader is not allowed to concurrently hold the following positions:

• Head of the Representative Office of another foreign trader.
• Head of the Representative Office of the same foreign trader.
• The legal representative of an economic organization established under the laws of Vietnam.

Considering the overall conditions and procedures outlined above, it is evident that establishing a branch in Vietnam is not a simple process, as the operational scope of a branch in Vietnam is not limited compared to that of a regular business. Therefore, choosing between establishing a branch or establishing a new foreign enterprise in Vietnam is one of the common questions that investors often raise when first approaching the Vietnamese market. In our next article, we will provide insights to help you answer this question.

Time of writing: 17/06/2023

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer at info@cdlaf.vn

You can refer for more information:

• Establishment of Enterprise in Vietnam, What Foreign Investors Need to Consider (Part 1)
• Establishment of Enterprise in Vietnam, What Foreign Investors Need to Consider (Part 2)
• Procedure for Foreign Investor to contribute capital, purchase shares in the enterprise in Vietnam.
• The enterprise with opening and using direct investment capital account
• Avoiding the risks when leasing the office in Vietnam – some recommendations
• Foreign Investors provide Employment Services in Vietnam
• Franchise in Vietnam (Part 1)
• Franchise in Vietnam (Part 2)
• Foreign investor doing hotel business in Vietnam
• Regulations on capital contribution for Shareholder and Member
• Business conditions for foreign investor in the education service in Vietnam (Part 1)
• Business conditions for foreign investor in the education service in Vietnam (Part 2)
• Business Conditions for advertising services for foreign investor in Vietnam
• Methods for enterprise to effectively control and debt management
• Reduction of Principal for Customers