Expanding into a new market is a major step for any business, and Vietnam, with its fast-growing economy and strategic location in Southeast Asia, is an attractive destination for foreign investors. However, fully committing to a local subsidiary or joint venture can be costly and complex. For businesses looking to establish a foothold without the heavy financial and legal burdens of a full-scale operation, setting up a Representative Office (RO) can be the ideal solution.

But is it the right choice for your company? This guide explores the key benefits and limitations of setting up a Representative Office in Vietnam, detailing its permitted activities, legal requirements, and strategic advantages.

What is a Representative Office?

A Representative Office (RO) is a type of foreign business presence in Vietnam that allows companies to conduct certain non-commercial activities. Unlike a Wholly Foreign-Owned Enterprise (WFOE) or a Joint Venture (JV), an RO cannot engage in direct profit-making activities such as sales, contract execution, or invoicing. Instead, its primary functions include:

  • Market research to assess business opportunities in Vietnam.
  • Promotional activities for the parent company’s products and services.
  • Liaison with partners and clients to build relationships.
  • Supervising the implementation of contracts signed overseas.

An RO serves as a stepping stone for companies that want to test the Vietnamese market before committing to a more substantial investment.

Benefits of Setting Up a Representative Office in Vietnam

1. Low-Cost Market Entry Strategy

Setting up an RO is one of the most cost-effective ways for foreign businesses to establish a presence in Vietnam. Unlike a WFOE, an RO does not require minimum charter capital, significantly reducing financial risks.

2. Simplified Licensing and Compliance

Compared to other business structures, ROs benefit from:

  • A faster and simpler licensing process – typically taking around 7-15 working days.
  • No corporate income tax (CIT) obligations, as they do not generate revenue.
  • Fewer reporting requirements compared to fully operational businesses.

3. Brand Awareness & Business Expansion

An RO allows foreign companies to establish a brand presence, build local connections, and understand customer needs without immediate financial commitment. It acts as an official liaison office, helping to foster relationships with potential partners, suppliers, and government agencies.

4. Tax Advantages

As an RO does not engage in commercial activities, it is exempt from corporate income tax. However, taxes such as personal income tax (PIT) for employees and social insurance contributions still apply.

Limitations of a Representative Office

Despite its advantages, an RO is not suitable for all business models. Here are the key limitations to consider:

1. No Revenue-Generating Activities

  • An RO cannot sell products or services directly in Vietnam.
  • It cannot issue invoices or sign contracts on behalf of the parent company.
  • The only permissible financial activities involve office maintenance and operational expenses.

2. Limited Operational Scope

  • ROs are restricted to non-commercial activities such as marketing, liaison, and oversight.
  • Import/export activities are not allowed under an RO structure.
  • Some industries may have stricter regulatory oversight for ROs.

3. Compliance and Reporting Obligations

  • ROs must renew their license every five years.
  • Annual reports must be submitted to regulatory authorities.
  • Employment regulations apply, including work permits for foreign staff and compliance with Vietnamese labor laws.

How to Register a Representative Office in Vietnam

Step 1: Prepare the Required Documents

  • A notarized business license of the parent company.
  • Audited financial statements of the parent company.
  • An application form detailing the activities and objectives of the RO.
  • Legal documents appointing a Chief Representative.

Step 2: Submit the Application to the Ministry of Industry and Trade (MOIT)

  • The application is processed within 7-15 working days.
  • If approved, an RO establishment license is issued.

Step 3: Register for Tax and Labor Compliance

  • Although ROs are not taxable entities, they must register with Vietnam’s tax department.
  • Social insurance and personal income tax (PIT) registration is mandatory for employees.

Step 4: Operational Setup

  • Lease office space and set up administrative infrastructure.
  • Open a Vietnamese bank account for operational expenses.

Alternatives to a Representative Office

Establishing a Wholly Foreign-Owned Enterprise (WFOE) provides full business control and the ability to generate profits. However, it requires a more extensive investment, is subject to corporate income tax, and must comply with stricter licensing and reporting obligations. Companies that plan to engage in direct trade or contract execution might find this structure more suitable than an RO.

Partnering with a Vietnamese company through a Joint Venture (JV) grants access to restricted industries that are not fully open to foreign investment. While this structure allows revenue generation, it also involves shared decision-making, profit distribution, and potential challenges in managing partnerships with local entities.

Conclusion

A Representative Office is a great option for foreign businesses looking to: Explore the Vietnamese market without a major financial commitment. Establish a legal presence for marketing and business liaison. Build strong partnerships with Vietnamese firms before scaling up. However, if your goal is to generate revenue, sign contracts, or engage in direct trade, a WFOE or Joint Venture may be a better alternative.

At Corporate Counsels, part of Le & Tran, we guide businesses through Vietnam’s ever-evolving commercial landscape with precision and foresight. Recognized by Chambers, Legal500, and Benchmark Litigation, our highly-regarded [Corporate Lawyers] specialize in crafting solutions tailored to your needs. Whether it’s navigating mergers and acquisitions, ensuring labor law compliance, or strengthening corporate governance. With a deep understanding of your industry and a commitment to excellence, we’re here to help your business thrive while minimizing risks along the way. For expert guidance in Setting Up a Representative Office in Vietnam, contact us at letran@corporatecounsels.vn.