The representative office is the lightest presence form for a foreign trader in Vietnam, and also the most misunderstood. Many offices operate for years in a grey zone — signing sales contracts ‘for’ the parent, collecting customer money, running projects like a real company — until the first inspection by the Department of Industry and Trade. The legal boundary of a representative office is actually very clear in Decree 07/2016/ND-CP: it is a liaison office, not a business unit, and every activity beyond that boundary has its price.
Three permitted functions: liaison, market research, promotion
Under Decree 07/2016/ND-CP on representative offices and branches of foreign traders in Vietnam, a representative office performs the functions of a liaison office, market research, and promotion of the foreign trader’s cooperation projects and investment and business opportunities in Vietnam. Translated into real activities: meeting potential partners and customers to present the parent’s products and capabilities; gathering market, competitor and policy information; supporting the parent in negotiating and supervising performance of contracts the parent signs directly with Vietnamese partners; joining fairs and exhibitions in a promotional capacity. The office may lease premises, employ Vietnamese and foreign staff as regulated, open bank accounts in Vietnam to fund its own operations, and its chief may sign documents serving the office’s functioning within authorisation. The point to memorise is that every permitted activity points back to the parent: the office is the parent’s eyes, ears and liaison arm in Vietnam, not a revenue-generating subject.
The prohibited zone: direct profit-making and the price of crossing the line
Decree 07/2016/ND-CP prohibits a representative office from conducting direct profit-generating activities in Vietnam. Concretely, the office may not sign goods sale or service contracts with customers in its own name as a trading party; may not collect customers’ goods or service payments into its accounts as revenue; may not issue sales invoices; and may not lease warehouses or premises to run its own distribution or production operations. When found operating beyond scope, the office faces administrative penalties in the trade field under Decree 98/2020/ND-CP — fines by act, plus measures such as forced cessation of the violation — and, more seriously, the risk of having its establishment licence revoked, while all revenue ‘run through’ the office may be examined by the tax authority as undeclared business of the parent in Vietnam. The practical line lies in contracts and money flow: if end-customer money flows into the office and the customer contract is signed by the office as seller, that is trading. The proven safe model is: contracts signed between the parent (or a licensed distribution enterprise) and the customer, with the office only supporting liaison and performance supervision — and the office’s internal documents should reflect exactly that support role, so that when inspectors arrive, the file tells the right story by itself.
Frequently asked questions
1. What may a foreign trader’s representative office do, and what is it banned from?
Permitted: liaison office functions, market research, promoting the parent’s cooperation and investment opportunities, supporting supervision of the parent’s contracts, leasing premises and hiring staff for the office itself. Banned: all direct profit-making — signing trading contracts in its own name, collecting customer payments, issuing sales invoices, running its own distribution or production.
2. How is operating beyond scope penalised?
Administrative penalties in the trade field under Decree 98/2020/ND-CP depending on the act, plus forced cessation of the violation; serious or repeated cases risk revocation of the office establishment licence. Revenue run through the out-of-scope activity may also be treated by the tax authority as undeclared business.
3. Where is the line between trade promotion and trading?
In the contract and the money flow: presenting products, meeting customers and supporting negotiation for the parent to sign is promotion. The office signing a sales contract as seller and collecting customer money itself is trading. When in doubt, ask: if an inspector reads the contract and the bank statements, who appears as the seller — that is the answer.
4. May a representative office supervise the parent’s contracts in Vietnam?
Yes — that is one of its official functions: following up, urging and supporting performance of contracts and agreements the parent signed with Vietnamese partners. Supervision does not include receiving money for the parent or signing annexes that alter the contract’s economic obligations.
5. May a representative office join trade fairs and advertise products?
Yes, in a trade promotion capacity for the parent — displaying and presenting the parent’s products and capabilities. But advertising must comply with Vietnamese advertising law, and selling directly at the fair as the seller sits outside the office’s permitted scope.
Key takeaways for investors
- Only three lawful functions: liaison, market research, promotion of the parent’s opportunities.
- Direct profit-making is absolutely banned: signing sales contracts, collecting customer money, issuing invoices are all out of scope.
- The line lies in contracts and money flow — who is the seller on paper and where the money goes.
- Crossing the scope faces Decree 98/2020 fines, licence revocation and tax risk for the parent.
This article has been quality-reviewed by the FLAW AI Legal Council