Incorporating a Representative/Foreign Owned Office in Vietnam

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Question: We are a IT company based in USA and would like to setup a representative/equity office in Hanoi, Vietnam mainly for our off-shore IT and Research & Development effort. We do not foresee sales at all through the Vietnam office within the next 3-5 years.

We would like to request for quotation on your service to specifically:

1.     Incorporate our office in Hanoi, Vietnam (and Recommendation whether a Representative office or equity office would fit company like us better)

2.     Draft employment contract to facilitate in our hiring of vietnamese employee in compliance to Vietnamese labour law.

3.     And any other due diligent services  (please indicate clearly as ‘required' or 'for our considerations' only) to incorporate the office in Vietnam.

Answer: This is reference to your email below. I am Corporate Lawyer of SB Law.

Regarding to your question, we would like to answers as follows:

1. Under Vietnam Law, a Representative Office is for purpose of conducting market research, contact point for liaising with business partners of parent company or service/product promotion/marketing only. A Representative Office is not allowed to conduct any activities for direct interest making purpose. Meanwhile, an equity office is allowed to carry out business activities for interest making purpose.

In this case, we understood that, the new office shall not involve with any sale activities in 3-5 years. The new office shall only operate for the purpose of off-shore IT and Research & Development. Under Vietnam Law, such activities are classified to activities for interest making purposes. Then, equity office shall be suitable.

However, you should note that, in case, the new office only develop software or IT under the instructions of the Parent Office and the Parent Office finances its operation including office lease cost, salary paid for employees etc, the office in Vietnam shall be subject to submission of report on transactions with associated parties for anti-price transfer. A minimum profit can be imposed by the tax authority for calculating corporate income tax if your report is not persuasive. This is the reason why several IT Companies like you prefer the Representative Office which is not subject to corporate income tax under Vietnam Law.

For your ease of reference, it shall take you about 15 working days and 1,500USD (our professional fee) to complete licensing procedure for setting up representative office. For setting up equity office, it shall take you about 1,5 month and our fee shall be around 4,000USD. Our quoted fee is exclusive of 10% VAT, governmental fee and actual cost for translating your documents from English into Vietnamese (10USD/150 words).

2. Our fee for preparing employment contract shall be 450USD. The fee is exclusive of 10% VAT. It shall take us about 01 working day to complete the preparation of employment contract.



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