What are the difference between a representative office and a company branch in Vietnam? LSX Lawfirm will give you an article about: “Difference between representative office and company branch in Vietnam”, as follows:
Law on enterprises 2020
Law on investment 2020
Decree No. 01/2021/ND-CP
Circular No. 01/2021/TT-BKHDT
Representative office in Vietnam
Accordingly, a representative office is a dependent unit of an enterprise; so responsible for representing the interests of the enterprise by authorization and protecting those interests. Then, the operation contents of the representative office must be consistent with the operation contents of the enterprise.
– Regarding business activities: a representative office was established with the function of a liaison office; conduct research activities, provide information, support businesses to access new markets and partners. Representative offices may carry out trade promotion forms (product promotion advertising contracts), but may not conduct direct profit-making activities.
– Authority: As for the signing of a representative office contract; it must authorize by the enterprise and stamped with that enterprise; the representative office has no right to sign a separate contract on its own behalf.
– Financial: The enterprise bears all financial obligations arising from the operation of the representative office. The accounting of a representative office is dependent on the business.
Company branch in Vietnam
A branch is a dependent unit of an enterprise, responsible for performing all or part of the enterprise’s functions, including the function of an authorized representative. The branch’s business lines must be consistent with the business lines of the enterprise.
The branch has the right to sign economic contracts on behalf of the branch, stamp the branch.
- Regarding business activities, branches allowed to carry out activities with profit-making purposes within the lines of business that the enterprise has registered for business. However, not every industry or profession registered by an enterprise or branch allowed to operate.
Being able to perform part or all of direct profit-making activities (signing a contract to buy and sell goods and services of the company).
- Regarding representative authority: the branch director does not automatically have the authority to represent the branch; but this right arises only when there is authorization from the legal representative of the enterprise. The legal representative of the enterprise is entitled to coordinate all matters related to the branch, including the matter of representation.
Financially: The branch is not financially independent of the enterprise; which is responsible for the financial obligations arising from the branch’s operations. Branches may be independent or dependent on the enterprise.
Representative offices and branches are both dependent units of the company or enterprise.
Related article: Procedures for establishment of a representative office in Hanoi
Difference between representative office and company branch in Vietnam
Enterprises can set up branches and representative offices in the same province, in the country as well as abroad.
So Representative offices and branches both operate on behalf of the business owner or the head of that organization; authorized by the head of the organization or business owner.
Enterprises are responsible for civil obligations arising from transactions of representative offices and branches.
Branch: The branch has the right to sign economic contracts on behalf of the branch, stamp the branch.
Representative office: The representative office of the company do not allow to perform operations related to the parent company or in other words is not allowed to produce and do business like the parent company.
Representative offices are suitable for companies that only need to establish a legal address for a representative to facilitate transactions in localities other than where the company’s head office is located. All activities such as tax declaration, invoice issuance, I still declare and report at the place where the company registers its business.
Therefore, if you want to have a legal address to facilitate transactions with partners in the same area.
Branches are suitable for expanding the scope of business. In addition, a branch includes both the function of a representative office and a place of business (performing both the business function and the authorized representative). If you want to expand your business to other localities (other provinces), you should choose the form of establishing a branch rather than a representative office.
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