What are the differences between representative offices and 100% foreign capital company in Vietnam? LSX Lawfirm will give you the answer according to this article:”Comparison representative offices and 100% foreign capital company in Vietnam”, as follows:
Law on investment 2020
What means of “representative offices”?
Accordingly, Vietnam-based representative office of a foreign trader means a dependent unit of the foreign trader, established under the provisions of Vietnamese law to conduct market survey and a number of commercial promotion activities permitted by Vietnamese law.
What means of “100% foreign capital company”?
So, an enterprise with 100% foreign investment capital is an enterprise foreign investors owned and established in Vietnam. Then, foreigners are responsible for their own management and self-responsibility for business results.
You can also refer to related article in LSX.VN
Comparison representative offices and 100% foreign capital company in Vietnam
Accordingly, for a representative office, the main function is to contact, research the market, promote business investment opportunities, excluding the service industry where the establishment of a representative office in that field is specified in specialized legal documents.
In addition, the law do not allow representative offices to enter into contracts, amend or supplement signed contracts of foreign traders, unless the head of the representative office has a lawful power of attorney from the foreign trader. outside. Mainly, the law only allow representative offices to perform tasks to protect the legitimate rights and interests of foreign traders.
100% foreign capital company
Meanwhile, for 100% foreign capital company , it is possible to carry out business activities to bring profits to investors; Besides, when doing business in Vietnam, foreign traders can receive many incentives in the Government’s investment attraction policy. The law considered a company with 100% foreign capital a legal entity, so it can sign contracts and transactions by itself, improving its competitiveness in the market.
In general, the most basic difference between a representative office of a foreign trader and a company with 100% foreign capital is that the company can conduct business investment activities while the representative office cannot. It is also this fundamental difference that leads to other differences in the organization, management, operation, rights and obligations, etc. of the two forms above, which can be mentioned
- The company has a management system with many levels, stricter and more complicated than the representative office.
- The management of the Company complies with the provisions of the law on enterprises. The company also needs to have internal regulations so that the business process is clear and unambiguous.
- The reporting and management regime of the company is more complicated than that of a representative office, so it requires a team of highly qualified personnel with legal knowledge to ensure full compliance with the company’s obligations to the company with the State.
– Function: There is no business function, only a liaison role, promoting business investment opportunities of foreign traders.
– The subject of business contract: Not allowed to sign the contract. Foreign traders are the contracting parties.
– Contract performance: Overseas traders are responsible for performing contracts with partners in Vietnam, the Representative Office plays the role of liaison and support.
– Profit: Representative offices do not do business, so they do not generate profits. Foreign traders earn profits from their business activities and must pay separate tax on such profits (if any).
– Term of operation under license: 5 years and can be extended.
– Function: Having the function of doing business and making profits in the Vietnamese market.
– The subject of business contract: Enter into contracts yourself with partners.
– Contract performance: Self-execution of signed contracts.
– Profit: In case the business is profitable, has fulfilled its tax obligations and other financial obligations as prescribed by law, and has ensured the full payment of debts and other due property obligations, the foreign trader is a foreign trader. Company owners share profits. The repatriation of profits must comply with the laws of the country of the trader’s nationality.
– Term of operation under license: 50 years and can be extended. Long operating time with large investment cost requirements. The establishment of a company with 100% foreign capital is suitable for traders who intend to develop long-term, stable and serious business with the Vietnamese market.
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