Representative Office in Vietnam is a dependent unit licensed to operate in Vietnam of a foreign trader. The law of Vietnam stipulates: Representative Office performs the functions of liaison activities, market research, and promotion of its head office’s business within the scope of the license (according to Clause 6, Article 3 of the Commercial Law No. 36/2005/QH11, Article 30 of Decree No. 07/2016/ND-CP). Besides implementing the above activities, the Representative Office and the foreign trader need to pay attention to tax obligations in Vietnam.
1. Tax obligations of the Representative Office in Vietnam
Based on the activities, tax obligations of the Representative Office in Vietnam are prescribed as follows:
Firstly, the Representative Office is not allowed to conduct profit-making activities directly in Vietnam, therefore, the Representative Office do not incur tax obligations for corporate income tax and value added tax (according to Article 2 of the Law on Corporate Income Tax No. 14/2008/QH12 and Article 3 of the Law on Value-Added Tax No. 13/2008/QH12), and not have to perform accounting book obligations, except for the case of making internal accounting books at the request of the foreign trader.
Secondly, the Representative Office that recruits workers in Vietnam should be responsible for paying wages and withholding personal income tax for employees (according to Article 24 and Article 33 of the Law on Personal Income Tax No. 04/2007/QH12).
Thirdly, in case the foreign trader has profitable activities in Vietnam, the Representative Office is responsible for registering and declaring contractor tax for such profitable activities (according to Article 1 and Article 4 of Circular No. 103/2014/TT-BTC).
2. Guidance on tax declaration of the Representative Office
With the above tax obligations, the Representative Office is responsible for: (1) registering the tax code, deducting tax when paying the employee’ salary; and (2) declare contractor tax as required. Tax code registration shall be carried out at the tax administration authority where the Representative Office is located within 10 days from the date the Representative Office is licensed to operate in Vietnam. In case the Representative Office submits the tax code registration dossier later than the prescribed time, the head of the Representative Office needs to explain at the request of the tax administration authority.
Although the Representative Office is not required to make corporate income tax report or maintain an accounting system, it needs to record and maintain bank books and cash books to be able to explain the cash flows transferred by the foreign trader at the request of the regulatory authorities in Vietnam.
In summary, the tax obligations of a Representative Office in Vietnam are regulated more simply than those of an enterprise established in Vietnam. However, in order to avoid the potential risks in the establishment and operation of a Representative Office, foreign traders and the head of the Representative Offices should actively seek information and consult with lawyers and accountants in Vietnam for detailed advice and guidance.
How TTVN Legal assist you?
Based on your specific needs when accessing the Vietnamese market, TTVN Legal will:
- Advising your ability to reach the necessary and sufficient conditions before establishing a Representative Office in Vietnam;
- Consulting on procedures for requesting the establishment of a Representative Office, rights and obligations of a Representative Office and necessary procedures after being licensed to establish a Representative Office in Vietnam;
- Regular legal consulting, warning of potential legal risks in the process of operation, supporting in making reports in accordance with the law of the Representative Office in Vietnam;
- Consulting and introducing you to the potential partners related to the expected operation of the Representative Office in Vietnam;
- Consulting and supporting you to close a Representative Office.
Contact us if you need further advice.
Note: This article is for informational purposes only and it is not legal advice. The content of the article represents its own TTVN Legal, it is subject to change without prior notice.