5 reasons to establish representative offices before setting up wholly foreign-owned enterprises

Tuesday, August 16, 2016 8:04 AM | UTC+7 Viewed: 980
Establishing representative offices in Vietnam is considered as a safe initial step before the traders conduct a series of complex legal procedures with high cost for the establishment of wholly foreign-owned enterprises.
5 reasons to establish representative offices before setting up wholly foreign-owned enterprises
Market research
For any new foreign traders enter Vietnam market for the first time, their initial primary purpose might be promoting the brand, getting accquantance with and examining the market while preparing for the official business. Therefore, establishing a representative office is the option chosen by many people.
Simple procedures
Compared with the establishment of commercial presence in Vietnam in other forms such as business co-operation contracts, establishing foreign-invested enterprises or establishing a branch, the procedures for establishing the representative offices are considered as the least complex procedures.
To establish representative offices, the foreign traders only need to meet the following conditions:
• Having been established and registrated in accordance with the laws of territories and nations being members to international treaties to which Vietnam is also a member, or having been recognized by such territories and national laws;
• Having operated for at least 1 year from the date of establishment or registration, the remaining operation term must be at least 1 year from the date of submission of the application for Certificate of establishment of the representative office.
Licensing 
Time to be granted the Certificate of establishment of the representative office is pretty quick. Within approximately 7 working days from the date of submission of sufficient and valid dossier at the licensing agency, a representative office is able to be licensed to operate.
Lợi ích khác của việc thành lập văn phòng đại diện là không bị áp thuế do không phải hoạt động kinh doanh thuần tuý, mà chỉ phải kê khai nộp thuế thu nhập cá nhân cho đội ngũ nhân sự của văn phòng. 
Cost savings
When establishing a wholly foreign-owned enterprise in Vietnam, the traders will need to go through a lot of stages with lots of procedures, documentation and especially the cost of such tasks can be up to several thousand dollars. On the other hand, spending a large cost on establishing a wholy foreign-owned enterprise without a real clear comprehension on Vietnam market is an insecure and risky move.
Another benefit of establishing the representative offices is that it would not be subject to other taxes due to not being pure business activities, but only personal income tax for the office staffs. 
Pre-step to establish foreign invested enterprises
Although the representative offices of foreign companies are not allowed to perform the business operation or other profitable activities as prescribed by the laws, representative offices will perform the function of liaison office, market research, and promotion of the business investment opportunities, etc. for foreign traders in Vietnam.
Once the image and brand of the foreign traders have become familiar and popular with clients in Vietnam market, they can be assured to establish wholly foreign-owned enterprises and officially perform commercial activities in Vietnam.
PLF Law Firm
 


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