Stricter regulations on representative offices of foreign companies in Vietnam

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;
  • The application to set up a representative office must include documents relating to the proposed office of the representative office including (1) an in-principle lease agreement, and (2) documents evidencing that the proposed office satisfy security conditions, safety conditions and other related conditions;
  • The licensing authority may need to obtain opinion from specialized authority if the proposed scope of operation of a representative office is not consistent with commitment of Vietnam in the relevant international treaties;
  • The scope of operation of a representative office is limited to (1) liaising office, (2) market research, and (3) promoting investment and business opportunities of the foreign company represented by the representative office. Under the old Decree 72/2006, a representative office may also develop investment project of the foreign company or monitor performance of contracts signed with the foreign company; and
  • The head of a representative office must reside in Vietnam or, if he or she is not in Vietnam, must authorize a person to act on behalf of the head of the representative office. There is no such requirement under the old Decree 72/2006.