If a foreign company only plans to collect information and research Vietnam’s market regarding the demand of certain goods and services and to have a contact point in Vietnam then in addition to incorporating a company under both Investment Law 2014 and Enterprise Law 2014, the foreign company may consider setting up a representative office under the Commercial Law 2005 and Decree 72/2016. The advantages of having a representative office in Vietnam are:

·        The timing and procedures to set up a representative office would be shorter and simpler than setting up a foreign invested company;

·        Technically, a representative office can be operated and managed by one staff (who will be the chief representative in this case); and

·        Operating a representative office would be simplier and less expensive cost because a representative office is not subject to tax declaration, preparation of financial statements, preparation and submission of labor and investment reports. Usually, a representative office only needs to submit annual operating report by 31 January each year.

Operating through a representative office has the following disadvantages:

·        A representative office has no status of independent legal entity;

·        The operation term of a representative office is 5 year at maximum (but can be extended); and

·        A representative office is not entitled to enter into sale and purchase contracts or other business activities.

The inconsistencies between the new Investment Law 2014 and Decree 23/2007 have caused many lawyers confused about the process of  foreign invested enterprises (FIEs) to obtain a Trading Licence to operate in the sector of sale and purchase of goods (i.e. conducting export/import rights) and the related activities (e.g. distribution) (Trading Activities). Some temporary guidelines of licensing authorities recently could help clarify the situation.

According to an official correspondence in June 2016 of Ho Chi Minh City's Department of Planning and Investment (HCMC DPI) to a foreign investor applying for an investment project relating to Trading Activities, the foreign investor should conduct the licensing procedures in the following steps:

Under Decree 7/2016, it is more difficult for a foreign company to set up and operate a representative office in Vietnam. In particular,

• Now only foreign companies from countries which have an international treaty with Vietnam can set up a representative office. And the scope of operation a representative office must be consistent with the relevant international treaty. Vietnam is a member of the WTO. Therefore a company from a country which is a member of the WTO should be entitled to open a representative office. However, Vietnam’s commitments to the WTO only cover a limited service sectors. It is not clear if companies operating in sectors outside of the WTO’s commitments of Vietnam could set up a representative office. Under the old Decree 72/2006, virtually any foreign company from any country and any sector can set up a representative office;