Many EU companies open a representative office in Vietnam as a scouting step before committing capital to a legal entity. The model is fast and light on obligations — but the legal boundary is sharp: a representative office may not conduct profit-generating business directly. Crossing it exposes the company to penalties and back taxes. This article clarifies the functions, limits and tax duties of an EU company’s representative office.
Legal framework
- Commercial Law 36/2005/QH11 (Articles 16–25): a foreign trader’s representative office functions as liaison, trade promotion and market research — and only that.
- Decree 07/2016/ND-CP: licensing procedure — the licence is issued by the provincial Department of Industry and Trade, valid for 5 years, renewable.
- Moving to real business operations: Investment Law 143/2025/QH15 (effective 1 March 2026) applies for establishing an economic organisation and obtaining an IRC.
What is allowed and what is not
Allowed: maintaining an office, hiring staff (including foreigners — who still need work permits under Decree 219/2025), meeting partners, gathering market intelligence, promoting business opportunities for the parent, and carrying out authorised non-profit activities.
Not allowed: signing business contracts in the office’s own name; directly buying/selling goods or supplying paid services in Vietnam; subletting the office for business. The office may sign contracts only under a valid authorisation from the parent company and within its scope — tax authorities scrutinise this closely when deciding whether the office constitutes a permanent establishment (PE).
Tax and reporting duties
- Business licence tax: the office must pay annual licence tax (at the rate for representative offices).
- Personal income tax: withholding and filing PIT for staff working at the office, including foreign experts.
- Corporate income tax: no CIT arises if the office genuinely performs only representative functions. If it oversteps (signing contracts, collecting money), the tax authority may treat it as the parent’s PE and assess back CIT on allocated profits.
- Reporting: annual activity reports to the Department of Industry and Trade; notifications of changes of chief representative or address.
The path from representative office to legal entity
Once the market is clear, EU companies typically move to a subsidiary (100% foreign-owned or joint venture). Note: an office cannot be “upgraded” into a company — a new economic organisation must be established under the Enterprise Law 2020 with an IRC under Investment Law 143/2025, then the office is terminated. Staff and office leases can carry over if negotiated in advance.
Frequently asked questions
How long does it take to open a representative office in Vietnam?
A complete dossier filed with the provincial Department of Industry and Trade is usually processed in about 7–15 working days. In practice, consular legalisation of the EU parent’s business licence takes the longest — prepare it early.
Must the chief representative be an EU national?
No. The chief representative may be Vietnamese or foreign. A foreigner working in Vietnam needs a work permit or must qualify for an exemption under Decree 219/2025/ND-CP.
Can the office open a bank account and lease premises?
Yes. The office may open foreign-currency and VND accounts for its operations, sign office leases and hire employees. These transactions serve the representative function, not profit-generating business.
When should the office be closed in favour of a subsidiary?
When the EU company starts signing contracts, issuing invoices or collecting money from Vietnamese customers — signs that activity has exceeded the representative function. Keeping the office while conducting real business creates PE risk and back-tax exposure.
Contact FLAT Law Firm
FLAT Law Firm supports EU companies from the licensing step (legalising dossiers, working with the Department of Industry and Trade) through conversion into a full business entity. Contact us for advice on the right path.
This article has been quality-reviewed by the FLAW AI Legal Council
