Procedures For Russian Companies To Establish A Representative Office In Vietnam

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Процедуры для российских компаний по созданию представительства в Вьетнам

As bilateral trade between Russia and Vietnam is growing fast due to the Vietnam-Eurasian Economic Union Free Trade Agreement, we are seeing an increasing number of Russian businesses looking at Vietnam as a market to sell into. Our market analysis on the opportunities for Russian businesses in Vietnam can be seen in the article What Products & Services Is Vietnam Buying From Russia.

A Vietnamese Representative Office (RO) offers a low-cost entry for Russian companies seeking to gain a better understanding of the Vietnamese market. As such, this option is among the most common for first-time entrants to the Vietnamese market and often precedes a larger presence within the country.

What are ROs permitted to do?

ROs are permitted to engage in the following activities:

  1. Conduct market research;
  2. Act as a liaison office for its parent company;
  3. Promote the activities of its head office through meetings, and other activities, that leads to business at later stages.

Representatives offices are dependent on their parent company and are not allowed to generate their own profits or enter directly into contracts. They are also not allowed to issue invoices.

What do I need to do to get a license?

Pre-licensing checklist for setting up a RO:

  1. File an application for setting up a RO with company chop or seal;
  2. Appointment letter of Chief of RO with identification documents and company seal;
  3. Power of attorney in favor of consultant to submit the application dossier;
  4. Provide the Certificate of Incorporation for the Russian parent company and/or Business Registration Certificate of the Company;
  5. Audited financial report of the Russian parent company for the latest fiscal year;
  6. Memorandum of Understanding (MoU) of leasing office or leasing contract;
  7. Documents providing legal rights of landlord regarding the right of leasing office
    For steps 1 to 6, the foreign entity would require one notarized and consularized copy of each document and a translated copy in Vietnamese by a Vietnamese competent authority.

A signed leasing contract is also required before registering a RO in Vietnam.

What do I need to do after I get the license?

Post-licensing checklist for setup a RO:

  1. Make a seal for the RO;
    • License on the establishment of RO
    • Passport of Chief of RO if Russian, or passport/ID card if Chief is Vietnamese
  2. Register a Tax code for RO;
    • Declaration to register a tax code
    • Power of attorney
    • Certificate of seal registration
    • Certificate of RO in Vietnam
  3. Open a bank account of RO;
    • License on the establishment of RO
    • Certificate of seal registration
    • Certificate of tax code registration
    • Letter of authorization appointing the authorized signatories of the bank accounts
  4. Announcement of the establishment of RO of Company.

For steps 8 to 10, notarized and translated documents will be required to complete the process.

How long does it take to set up an RO?

ROs can be set up in between six to eight weeks. We recommend hiring a professional service firm to deal with the myriad of laws and procedures. Our practice, Dezan Shira & Associates, has offices in Hanoi, Ho Chi Minh City and Da Nang.

Given the absence of in-country revenue and associated licensing requirements, the setup process for this option does not entail as many bureaucratic procedures as others.

An RO license is valid for five years but can be extended for another five years.

What comes next?

Hiring, tax, and reporting.

There is no cap on the number of local and expatriate employees that a representative office can hire as long as their employment is properly documented.

All expatriate hires including the chief representative are required to have a work permit. ROs can hire staff directly or use the assistance of recruiting agencies.

An RO is not subject to Vietnamese corporate income tax (CIT). However, it is responsible for declaring its employees’ personal income tax (PIT).

In order to determine payable tax, ROs have to undertake a tax audit which checks all revenues and expenses during the tax term to establish grounds for declaring and paying tax. The RO also has to send reports of its activities of the previous year to the Department of Industry and Trade before January 30 of each year.

With bilateral trade between Russia and Vietnam expected to hit US$10 billion in 2020, numerous Russian companies are entering the market to either export to Russia or manufacture in the country to sell into Vietnam and the ASEAN region, as Vietnam has free trade within the ASEAN bloc, which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, and Thailand. ASEAN countries also have Free Trade Agreements with India and China, and with China being so close, yet with Vietnam having about 50% of the China production costs, Vietnam can be a viable alternative to manufacturing for the China market.

Russian businesses interested in Vietnam may contact Maria Kotova at vietnam@dezshira.com.

 

About Us

Russia Briefing is produced by Dezan Shira & Associates. The firm has 15 years of experience in assisting foreign companies into India and has 3 offices throughout the country. We have assisted numerous Russian companies into India. For assistance please contact Maria Kotova at russia@dezshira.com or visit us at www.dezshira.com. Readers may also refer to our India Briefing website at www.india-briefing.com for further technical advise on establishing and operating a business in India.

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