Key Compliance Procedures For Foreign Representative Office In Viet Nam

Although a representative can enhance and support business development for parent company, easy to manage and able to keep investor away from many potential risks of violating local compliance procedures: No add valued tax, no corporate income tax, no accounting books, no financial statement, no independent audit required… but, in fact that there are many representative offices have endured serious fines due to misconduct of compliance procedures.

compliance procedures

It is not rare for a representative office to pay thousands dollars of fines because of late license extension, and the fines can get up to hundred thousands dollars due to failure in collecting proper invoices and cashbook/ petty cash of office expenditures preparation, and declaring personal income correctly.

The potential and existing risks can be identified to resolve in advance. However, it required you to have a good understanding and practical experience of the local regulations to be able to identify the risks. Please go through some key points below with us, we hope you can find it useful.

Tasks 01 of 8: Initial compliance procedures after granting the office license

  • Publish on three consecutive issues of a printed or online newspaper licensed in Vietnam
  • The representative office must officially commence its operation and notify in writing the provincial/municipal Trade Service of the commencement of its operation at the registered head office.
  • Open current bank account at a commercial bank
  • Employee profile and labor contracts
  • Tax code – Personal income tax for local staff and expats. Registering Personal Tax Code for employee
  • Declaration of using employees
  • Business records

Tasks 02 of 8: Social insurance – Medical insurance – Unemployment insurance

  • You should register and declare labor use for any new employee.
  • For employees with labor contract from 03 months, you should deduct 10,5% from the employees and pay more 23,5% on the salary budget for compulsory insurances. Your employees usually focus on net receivable amount, it is means if you want to pay salary net amount of 10 million VND, your actual cost will be 13 million or more.
  • If you pay that way, it is may impact to your cash flow or headcount limited, if you not pay that way, you may face issue from competent authorities. So how to survive? There are still some ways…

Tasks 03 of 08: Enter labor contracts

  • How to prepare labor contract in line with labor law and regulations?
  • How to make the terms and conditions about working hours and Resting time; Working regulations; Working safety, health safety; Property protection and business secret, Technology secret, intellectual property; Conflict of interest, corruptions – gifts or benefits and the corresponding form of discipline, responsibility
  • How to amend, renew, terminate a labor contract… to avoid labor disputes?

Task 04 of 08: Personal income tax

  • Personal income tax for local employees.
  • Personal income tax for expat.
  • Personal income tax for resident.
  • Personal income tax for none resident.
  • Personal monthly, quarterly declaration and annually settlement.
  • Taxable incomes, non – taxable incomes, tax incentives, tax exemption…
  • Tax completion certificates.

Task 05 of 08: Cashbook and Petty cash

  • Most of people think that, a representative office does not need any accounting book. In fact, there are not full accounting books system but there must be standard reports to verify about every cash in from parent company, cash out for each expenditure. And, each transaction must have a lawful invoice or papers.
  • Fail to prepare the report or collect the lawful invoices, your office will face serious issues when tax officers do inspection or when you want to shutdown your office.

Task 06 of 8: Annual report

  • By January 30th of each year, every representative office shall submit operation status reports using the form stipulated by the Ministry of Industry and Trade to the licensing agency by post.
  • Representative offices shall submit reports, documents and explanations for their operation upon the request of competent state regulatory authorities.
  • Fail to submit the reports on time, there will be a penalty amount up to 40 million VND and a black record will impact to the extension office license process in future.

Task 07 of 08: Extension the office license

Other than cases be revoked such as:

  • Fail to come into operation for 01 year and fail to enter into transactions with licensing agencies.
  • Fail to submit reports on the operation of the representative office for 02 consecutive years.
  • Fail to submit reports annual reports to the licensing agency within 06 months from the deadline of submission or at the written request of the licensing agency.

Every office shall be eligible for the grant of extension of the license or establishment of the representative office.

There are many reasons may trouble you to extend the license properly, and you should prepare in advance at least 03 months. It would take time to prepare for the papers and dossiers for the extension. Moreover, the officers will audit your previous operations, tax declaration and settlement and other condition before making decision on if your office can be extended or not, new period can be 1 years or 5 years…

Task 08 of 08: Working permit and temporary resident card for expat

  • Foreign employee shall produce his/her work permit when carrying out immigration procedures and upon request of a competent state agency. Any foreign citizen working in Vietnam without a work permit shall be deported from Vietnam according to the Government’s regulations. Any employer employing foreign citizens without work permits shall be handled in accordance with law.
  • With a work permit, foreign employee can obtain a temporary resident card (TRC) equivalent to 02 years multiple visa. And with a TRC, he or she can obtain the same for their family.
  • There are cases in which the foreign is exempted from applying for work permit and there are cases in which the work permit is revoked or cancel. The representative office shall be responsible to sort out the work permit and temporary resident card for their employees.

The exists and risk can be managed by competent consulting parties: With more than 10 years of delivering business consultation for  more than 1000 foreign representative offices in Viet Nam, Viva Business Consulting is capable to consult and implement any query you have in the most practical way. We prevent your business from any potential risks in advance so you can operate the office in the most simple and cost effective way.

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