Content Summary
Representative offices of foreign traders in Vietnam are dependent units of foreign traders, established under Vietnamese law to study the market and carry out several trade promotion activities permitted by Vietnamese law. Representative offices of foreign traders in Vietnam have the rights and obligations as prescribed by Vietnamese law. Foreign traders must be responsible before Vietnamese law for all activities of their representative offices in Vietnam.
According to the provisions of the Commercial Law 2005, representative offices are not allowed to conduct business activities, other activities to generate profits. They can carry out activities within the scope and duration specified in the representative office establishment license. In addition, they have the right to rent the head office, rent and purchase the necessary and supplies for the operation of the representative office; recruit Vietnamese and foreign workers to work at representative offices under Vietnamese law. The representative offices can use foreign currency accounts and in Vietnam dong accounts and only use this account for their operations; have a seal bearing the name of the representative office under Vietnamese law. The representative offices can sign contracts and perform transactions with partners when authorized by the enterprise.
Due to the limited scope of activities, the tax liability of a foreign representative office is narrower than that of a corporation. Below are the taxes applicable to foreign representative offices in Vietnam.
License fee
According to Article 2 of Decree 139/2016/ND-CP on license fees:
“Article 2. License fee payers
License fee payers are organizations and individuals engaged in the production and trading of goods and services, except for the case specified in Article 3 of this Decree, including:
- Enterprises established under the law.
……..
- Other organizations engaged in production and business activities.
- Branches, representative offices and business locations of organizations specified in Clauses 1, 2, 3, 4 and 5 of this Article (if any).”
Thus, representative offices of foreign traders will be subject to the license tax.
However, there are also cases where representative offices of foreign traders are not subject to the license tax.
According to the guidance in Official Letter No. 15865/BTC-CST dated November 7, 2016, Official Letter No. 1025/BTC-CST dated January 20, 2017, guiding the license fee of the Ministry of Finance:
The representative offices of enterprises engaged in the production and trading of goods and services must pay license fees;
The representative office is not engaged in the production and trading of goods and services, it is not required to pay license fees as prescribed.
The representative offices of foreign traders in Vietnam being a dependent unit of foreign traders, studying the market and carrying out several trade promotion activities permitted by Vietnamese laws are not required to pay license fees.
Personal income tax
The fact that the representative office has the right to recruit Vietnamese or foreign workers to work in the office is the basis for arising the obligation to pay personal income tax. At the same time, according to the provisions of Clause 1, Article 24 of Circular 111/2013/TT-BTC, representative offices of foreign organizations are subject to personal income tax registration. For employees working at foreign representative offices in Vietnam, the taxable income is salary and wages specified in Clause 2, Article 3 of the Law on Personal Income Tax. The obligation to declare, withhold, pay tax and finalize personal income tax of employees working at a foreign representative office is the responsibility of the representative office itself.
Above are regulations on tax obligations of representative offices of foreign traders in Vietnam. If you have any questions or need legal assistance related to representative office operations, please don’t hesitate to contact us at Hotline 0987.748.111 or email info@azlaw.com.vn
