If you intend to launch a 100% foreign-owned business in a vibrant, rapidly growing economy such as Vietnam, you should explore the option of establishing a Branch Office.
Since the 1990s, foreign entrepreneurs have been increasingly drawn to Vietnam for investment. The country’s rising purchasing power and the willingness of Vietnamese consumers to spend on goods and services make it an attractive destination for business establishments. According to the World Bank’s 2020 report, out of 190 countries, Vietnam was ranked 70th (Source: Trading Economics, Foreign Direct Investment – Vietnam) for ease of doing business, noting significant improvements in this regard. Recent Foreign Direct Investment (FDI) data indicates a 16.3% increase in FDI from January to September 2022 compared to the same period last year, highlighting the country’s investment appeal.
Expanding an existing business into a new market through full incorporation can be a complex undertaking. In this context, establishing a branch office becomes an advantageous solution. A Branch Office functions as an extension of the foreign parent company and can be established instead of a Limited Liability Company or a Joint Stock Company. In Vietnam, a branch office enjoys various privileges, including the ability to generate income, issue invoices, and employ staff.
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When a company establishes a branch in another country, it must adhere to local legal compliance requirements. Similarly, foreign businesspersons conducting commercial operations in Vietnam must comply with the legal prerequisites for establishing a branch office in the country, with each foreign businessperson restricted to one branch per province or town.
Setting up a Branch Office in Vietnam offers several advantages, including the ability to issue VAT invoices independently, conduct a full spectrum of business activities such as inventory, manufacturing, and trading, and flexibility in keeping accounting and financial records either together or separate from the headquarters, and the freedom to enter into and amend contracts or agreements.
Aspects of a Branch Office in Vietnam
Structure of a Branch Office
As a Branch Office is considered exactly that, a branch of the parent company, it can only be opened if there is already an existing entity in the home country. You must prove this by providing legitimate business licenses of incorporation from your home country. Therefore the parent company bears all liabilities of the branch office in Vietnam.
Branch Manager
The branch manager, who is in charge of the daily operations of that branch, must be assigned as the legal representative based in Vietnam. The manager is in charge of all branch operations, including hiring new employees and making sure that all divisions’ output is at a high level and that all deadlines are fulfilled.
Process for Incorporating a Branch Office in Vietnam
Following the submission of the application and any supporting documents, the registration of a branch typically takes 30 to 60 days. The first stage in the process is to obtain the registration certificate and the branch’s seal.
Legalizing and translating all papers into Vietnamese might take up to two weeks. Refer to the next section for more information on the prerequisites.
Legal Requirements for a Branch Office in Vietnam
- Corporate investor (The Owner)’s Business Certificate/ Enterprise Certificate/ Company Certificate or equivalent documents from the country of origin.
- Copies of audited financial statements of the 5 previous years
- The passport or ID card of the head of the branch
- (MOU) or office leasing agreements
- POA from the Corporate investor to Cekindo
- A letter of appointment of the head of the Branch
- All documentation requested from the home country must be translated and legalized.
The Differences between Representative Office and Branch Office in Vietnam
There are considerable differences between a representative office and a branch office for business registration in Vietnam.
The advantages & disadvantages of opening a Representative Office vs Branch Office
Plus Points of a Representative Office
- The licensing procedure is simpler
- The license tax is not applicable
- It has a separate bank account and stamp
- Much easier to terminate the entity if the business doesn’t work out
- Foreigners can run the office legally with no restriction on the number of employees
Minus Points of a Representative Office
- No issuance of the invoice
- No profit-generating business activities are permitted
- Not allowed to sign contracts or agreements on its own without authorization from the parent company
Plus Points of a Branch Office
- Issuance of VAT invoice on its own
- Full business activities are permitted. For instance, inventory, manufacturing, and trading
- Accounting and financial records can be kept together or separated from the headquarters
- Entry into and amendments to contracts or agreements are allowed
Minus Points of a Branch Office
- More complex setup procedure and business registration in Vietnam
- The annual license tax is applicable
- The accounting system and tax declaration must be set up separately. Monthly, quarterly, and annual reports for compliance are required as well
- All tax obligations or final tax settlements must be clear before the termination of a branch
How InCorp Vietnam Can Assist
At InCorp Vietnam, we understand well that starting a new business in Vietnam can be a tough task when there’s a steep learning curve for foreigners to grasp the country’s laws and regulations. The specific procedure for business registration in Vietnam may seem complicated, or even confusing.
However, if you follow the guided process with the right, professional support, it is far simpler than you may think. That’s why entrepreneurs are recommended to conduct business registration in Vietnam with an experienced consultant. InCorp Vietnam will handle the whole procedure on your behalf, and take the hassle out of your business registration in Vietnam.
About Us
InCorp Vietnam is a leading market entry and corporate services firm in Vietnam. We are part of InCorp Group, a regional leader in corporate solutions that encompasses 9 countries in Asia-Pacific, headquartered in Singapore. With over 1,500 legal experts serving over 20,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business fit into the market perfectly with healthy growth.
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