Procedures For Establishment Of Branches Of Foreign Companies In Vietnam – Part 1: Branches Of Foreign Traders

In the context that Vietnam is expanding its current international economic integration, the establishment of a Vietnamese branch by foreign traders helps to cut many unnecessary costs while opening up more business opportunities, promoting the development of the economy. However, besides opportunities, there are always barriers that make it difficult to operate of branches including legal barriers (L-Legal, one of the 6 elements of the PESTLE analysis model of factors that can cause changes in the business market). Opening a series of articles on legal relations of foreign company branches in Vietnam, Lac Duy & Associates is pleased to send you an overview of the procedures for establishing a branch of foreign traders in Vietnam as follows:

Conditions for foreign traders to be granted licenses to establish branches:

According to the provisions of Article 16 of the Commercial Law No. 36/2005/QH11(“Commercial Law”), “Foreign traders being traders are traders established and registered for business in accordance with the provisions of foreign law or recognized by foreign laws” andare allowed to set up representative offices and branches in Vietnam. According to the provisions of Clause 7, Article 3 of the Commercial Law, “Branches of foreign traders in Vietnam are dependent units of foreign traders, established and operated commercially in Vietnam in accordance with the provisions of Vietnamese law or treaties to which the Socialist Republic of Vietnam is a contracting party”.

Currently, the establishment of branches of foreign traders in Vietnam is guided in detail in Decree No. 07/2016/ND-CP of January 25, 2016 (“Decree 07”) detailing the Commercial Law on representative offices and branches of foreign traders in Vietnam. Article 8 of this Decree provides for the conditions for foreign traders to be granted licenses to establish branches as follows:

“Article 8. Conditions for issuance of licenses for establishment of branches

Foreign traders may grant licenses to establish branches when they satisfy the following conditions:

1. Foreign traders may establish or register their business in accordance with the laws of the countries or territories to which Vietnam is a contracting party or recognized by the laws of these countries and territories;

2. Foreign traders have operated for at least 05 years from the date of establishment or registration;

3. Where the business registration papers or equivalent papers of foreign traders stipulate the operation duration, such time limit must be at least 01 year from the date of submission of dossiers;

4. The operation contents of branches must be consistent with Vietnam’s commitment to market opening in treaties to which Vietnam is a contracting member and in accordance with the business line of foreign traders;

5. Where the operation contents of branches are inconsistent with commitments of Vietnam or foreign traders other than those of countries or territories participating in treaties to which Vietnam is a contracting party, the establishment of branches must be approved by the Minister of Specialized Management”.

Competence to grant licenses for establishment of branches and duration of licenses for establishment of branches.

According to the provisions of Article 6 of Decree No. 07, currently, the Ministry of Industry and Trade is the agency competent togrant, re-issue, adjust, extend, revoke the license to establish a branch and terminate the operation of the branch in case the establishment of the branch has not been specified in the specialized legal documents.

Regarding the validity of the license to establish branches of foreign traders in Vietnam, currently Article 9 of Decree 07 is prescribed as follows:

“Article 9. Duration of licenses for establishment of representative offices or licenses for establishment of branches

1. A license to establish a representative office or branch of a foreign traders shall be valid for 05 years but must not exceed the remaining duration of the business registration certificate or equivalent papers of the foreign traders in case such papers provide for the duration.

2. The duration of the license to establish a representative office or branch is re-granted equal to the duration of the license previously granted.

3. The duration of the license to establish a representative office or branch shall be extended as prescribed in Clause 1 of this Article”.

Thus, the license to establish a branch of a foreign traders inVietnam is valid for 05 (five) years and needs to be changed/renewed/re-granted each time it expires.

Application for issuance of branch establishment license

When a foreign traders wish to apply for a license to establish a branch in Vietnam, such foreign traders need to prepare a dossier for issuance of licenses for establishment of branches as prescribed in Article 12 of Decree No. 07 as follows:

“Article 12. Application for issuance of branch establishment license

1. A dossier of 01 set includes:

a) An application form for a branch establishment license made according to the form of the Ministry of Industry and Trade signed by a competent representative of the foreign traders;

b) A copy of the business registration certificate or equivalent papers of the foreign traders;

c) A document of the foreign traders appointing/appointing the head of the branch;

d) A copy of the audited financial statement or written certification of the implementation of tax or financial obligations in the latest fiscal year or equivalent papers issued or confirmed by the competent agency or organization where the foreign traders are established. , proving the existence and operation of foreign traders in the latest fiscal year;

dd) A copy of the branch’s charter;

f) A copy of the passport or id card (if vietnamese) or a copy of the passport (if it is a foreigner) of the head of the branch;

g) Documents on the expected location of the branch headquarters include:

– A copy of the memorandum of understanding or the agreement on the lease of the place or a copy of documents proving that the traders have the right to exploit and use the place for the head office of the branch;

– A copy of documents on the expected location of the branch as prescribed in Article 28 of this Decree and relevant laws”.

2. Documents specified at Points b, c, d, dd and e (for copies of passports of heads of branches being foreigners) Clause 1 of this Article must be translated into Vietnamese and authentic certified in accordance with the provisions of Vietnamese law. Documents specified at Point b, Clause 1 of this Article must be certified or consular legalized by overseas Vietnamese diplomatic representative agencies or consulates in accordance with the provisions of Vietnamese law.”

Order and procedures for issuance of licenses for establishment of branches

Currently, the issuance of licenses to establish branches for foreign traders in Vietnam shall comply with the provisions of Article 13 of Decree No. 07 as follows:

“Article 13. Order and procedures for issuance of licenses for establishment of branches

1. Foreign traders shall submit dossiers in person or by post or online (if applicable) to the licensing agency.

2. Within 03 working days after receiving the dossier, the licensing agency will examine and request for supplementation if the dossier is incomplete and invalid. Requests for additional documents are made up to once during the process of singing.

3. Except for the cases specified in Clause 4 of this Article, within 07 working days after receiving a complete and valid dossier, the licensing agency shall grant or not grant a branch establishment license to the foreign traders. In case of refusal of license, there must be a document stating the reason.

4. In the case specified in Clause 5, Article 8 of this Decree and if the establishment of a branch has not yet been prescribed in a specialized legal document, the licensing agency shall send a written request for comments from the specialized management ministry within 03 working days from the date of receiving a complete and valid dossier. Within 05 working days after receiving the document from the licensing agency, the specialized management ministry has a written consent or no consent to the establishment of the branch. Within 05 working days from the date of receiving the document from the specialized management ministry, the licensing agency grants or does not grant the branch establishment license to the foreign traders. In case of non-licensing, there must be a document stating the reason”.

Therefore, after following the above steps, foreign traders applying for a license to establish a branch in Vietnam will be granted a branch establishment license within 15 days after submitting a complete and valid dossier. If the profile is invalid, it will be notified in 03 days for traders to supplement and edit.

Things to do after being granted a Branch Establishment License:

In order to ensure legal capacity and minimize legal risks, after being granted a license to establish a branch, foreign traders should pay attention to do the following immediately:

• Make seals of branches and notify seal samples to competent state agencies and post notices of seal samples to portals of competent management agencies (if required);

• Register digital signatures, open bank accounts for branches, order e-invoice printing;

• Notify the tax administration agency where the branch is located; to declare and pay the fee for the practice (Clause 1, Article 4 of Decree No. 139/2016/ND-CP providing for the fee for disciples prescribing the charge rate for branches organizing the production and trading of goods and services is VND 1,000,000/year);

• Notify other regulatory agencies (e.g., in accordance with the provisions of the Labor Code 2019 and Decree 145/2020/ND-CP, it is necessary to declare the labor situation to the Labor , War Invalids and Social Affairs Department where the branch is located).

Cases of not being granted a branch establishment license:

According to the provisions of Article 14 of Decree No. 07, the licensing agency does not grant a license to establish a branch forforeign traders in the following cases:

• Not meeting one of the conditions prescribed in Article 8 of Decree 07.

• Foreign traders shall request the grant of licenses for establishment of branches within 02 years from the date of revoicing the licenses for establishment of branches in Vietnam under the provisions of Article 44 of this Decree.

• The establishment of branches is restricted in accordance with the provisions of law for the reasons of national defense, security, social order and safety, social ethics and public health.

• Other cases as prescribed by law.

Fee for issuance of branch establishment license:

According to the provisions of Article 26 of Decree No. 07, the fee rate for grant of licenses for establishment of branches shall complywith regulations of the Ministry of Finance of Vietnam.

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