Can a representative office sign a contract in Vietnam? What is a representative office in Vietnam? And What contracts can representative offices sign in Vietnam? Let us learn about this topic with LSX Law firm below:
What is a representative office?
A representative office is a dependent unit of the enterprise; which has the task of representing by authorization for the interests of the enterprise and protecting those interests. Representative offices do not perform business functions of enterprises and have the following main characteristics:
Firstly, representative offices do not incur independent tax obligations; but the managing enterprise will make the tax payment without the representative office needing to perform this obligation.
Secondly, the representative office has its certificate of operation registration; and its seal to serve the internal activities of the representative office.
Thirdly, representative offices may not perform business functions; may not sign economic contracts with the representative office’s seal, but still sign contracts under the authorization of the enterprise.
Can a representative office sign a contract in Vietnam?
The contract is an agreement between the parties on the establishment, change, or termination of rights; civil obligations, and one of the important contents of the contract institution is the validity of the contract; usually from the time of signing; unless otherwise agreed or otherwise provided by relevant law, it is meant to be signed by the parties.
One of the essential characteristics of a representative office in this concept is that; it does not perform the business function of the enterprise. However, a representative office can still enter into a contract; and become a party to the contractual relationship based on Clause 5; Article 84 of the Civil Code 2015, which stipulates: “The head of the branch or office representative to perform tasks authorized by the legal entity within the authorized scope and time limit.”
The legal representative of the company decides the scope of authorization. And in any circumstances, the company also has the right to cancel the approval for the head of the representative office.
When a representative office signs some contracts or performs some work that requires the company’s permission; the head of the representative office must present a written authorization of the company.
What contracts can representative offices sign?
When authorized to sign contracts, representative office contracts that they can sign include:
– Contract for leasing the location of the head office
– Contract for the purchase of necessary equipment and supplies for the representative office
In addition, the Commercial Law stipulates that a representative office of a foreign trader operating in Vietnam is prohibited from entering into a contract; amending or supplementing a signed agreement of a foreign trader; unless the Chief the representative office has the legal power of attorney of the foreign trader or other specified circumstances and can; therefore, be able to conclude commercial contracts in general.
Finally, hope this article is helpful for you!
In case the representative office does not conduct business, collects and pays debts but only promotes trade and does not do business, there is no need to pay license tax.
Foreign representative offices in Vietnam are not allowed to directly recruit Vietnamese workers, but must go through competent organizations to recruit employees.