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6 Reasons to Set Up a Representative Office in Vietnam
Setting up a Representative Office in Vietnam is a strategic decision for foreign investors. Here are 6 key reasons why a Representative Office is an ideal option for foreign businesses:
#1. Low Cost of Setting Up a Representative Office
Setting up and operating a Representative Office is considerably more affordable for foreign investors compared to setting up a foreign-invested company or branch.
From a financial standpoint, a Representative Office does not require significant legal capital, nor is it subject to complex corporate taxes. It generally only needs to meet basic legal requirements. The main tax obligation for a Representative Office is the declaration and payment of personal income tax on behalf of its employees.
As a result, setting up a Representative Office in Vietnam allows new investors to minimize financial risks when entering a new market.
Moreover, investors need not be overly concerned about licensing fees. The actual government charge for setting up a Representative Office in Vietnam is relatively low, at only $2 USD per license. Specifically:
- The fee for issuing a new Certificate of Registration for the Representative Office is 50,000 VND
- The fee for reissuing the Certificate of Registration for the Representative Office is 50,000 VND per issuance
- The fee for making changes to the Certificate of Registration for the Representative Office is 50,000 VND per change.
- The fee for obtaining a copy of the Certificate of Registration for the Representative Office is 20,000 VND per copy.
A Representative Office, being non-profit-generating, primarily focuses on conducting market research in Vietnam and carrying out essential promotional activities.
Consequently, investors are not required to inject substantial initial investments into office rent, interior design, construction, office equipment, or operational costs.
The main costs involved in setting up a Representative Office in Vietnam are as follows:
- Office rental cost: $12 to $35 USD per square meter per month. This is the largest expense and varies based on location and office size.
- Interior design and construction costs: $2,200 to $7,500 USD, depending on the scale and design requirements.
- Office equipment costs: $1,000 to $3,500 USD, covering items such as computers, desks, chairs, printers, and other essential equipment.
- Monthly operating costs: $400 to $800 USD per month, which includes expenses for electricity, water, internet, and other services.
- Salaries: $450 USD per month per person.
#2. Simple and Straightforward Establishment Process
Setting up a Representative Office in Vietnam is relatively simple compared to other business structures. The registration process involves fewer legal complexities, as foreign investors are not subject to strict charter capital requirements or the submission of detailed financial statements.
This streamlined process enables businesses to establish a local presence quickly. Once a complete and accurate application is submitted, the licensing authority typically issues the Certificate of Opening a Representative Office within 5 to 7 working days.
For more details, check out our insightful guide on the 8 Essential Steps to Set Up a Representative Office in Vietnam here.
#3. Building a Market Platform
Setting up a Representative Office plays a vital role in establishing a market platform for the parent company.
Through its presence, businesses can gain valuable insights into customer needs, behaviors, and the unique characteristics of the local market. These insights enable investors to make more informed strategic decisions, from product adjustments to the development of effective marketing strategies.
#4. Enhancing Brand and Reputation
One of the key advantages of operating a Representative Office is its role in promoting the parent company's brand in foreign markets.
A local presence helps businesses strengthen their reputation and build trust with customers and partners. Additionally, the Representative Office serves as an effective platform for accessing cooperation opportunities and expanding the company's business network.
#5. Ideal Option for Specific Industries
Establishing a Representative Office is the most suitable option for industries that do not require direct business operations, such as trade promotion, logistics, or consulting.
With a primary focus on support and market research, a Representative Office effectively meets the needs of businesses in these sectors without demanding significant investments or imposing extensive legal requirements.
#6. Stepping Stone for Future Conversion to a Subsidiary
A key strategic benefit of establishing a Representative Office is that it serves as a stepping stone for foreign businesses considering a future conversion to a subsidiary.
Although a Representative Office cannot engage in profit-generating activities, it plays an essential role in building local connections, promoting investment and business opportunities, and enhancing brand visibility for the parent company.
Once a business becomes familiar with the local market and gains a better understanding of its dynamics, transitioning to a subsidiary becomes a more practical, safer, and streamlined process.
6 reasons to set up a representative office in Vietnam
Conclusions
Vietnam has implemented several open-door policies, including the introduction of a new investment law in 2020, to attract foreign investors. These measures include the removal of market access restrictions, increased capital ownership limits for foreign investors in certain industries, and a range of incentive and support policies.
However, entering a new market still carries inherent risks for foreign investors, particularly during periods of global economic uncertainty, which also impacts Vietnam.
Given these challenges, establishing a Representative Office is a practical option for foreign investors unfamiliar with the market. It offers a low-cost, straightforward solution that allows businesses to lay a solid foundation for future operations.
A Representative Office not only helps investors become familiar with the local market but also serves as a stepping stone for future expansion, such as setting up branches or subsidiaries in Vietnam.
How can thele.blog assist investors?
thele.blog offers comprehensive support to investors looking to establish a Representative Office in Vietnam. Contact us to get detailed answers to your questions and receive in-depth advice on the requirements, procedures, and important considerations for opening a Representative Office.
Once investors have decided to proceed with setting up a Representative Office, they can reach out to us by calling +84-932 837 927 or sending a legal inquiry via hi@thele.blog or through the contact form below.
We’d be delighted to welcome you for a cup of coffee at our office, where our friendly team will be happy to discuss your needs in person.
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