Why Do You Need a Representative Office to Operate in Vietnam?

Vietnam’s dynamic economy continues to attract significant interest from international businesses looking to expand their reach into Southeast Asia. With a growing middle class, a young and tech-savvy population, and strategic trade agreements, the opportunities are abundant. However, entering a new market requires careful planning and understanding the local legal and business landscape. For many foreign companies, establishing a representative office (RO) is a crucial and strategic first step. But what exactly is a representative office, and why might it be the right choice for your initial operations in Vietnam?  

What Exactly is a Representative Office?

A representative office is essentially a dependent unit of a foreign parent company. It acts as a liaison point and a base for non-commercial activities within Vietnam. Under Commercial Law 2005 and Decree 07/2016/ND‑CP, an RO is a dependent unit of a foreign enterprise, in other words, a representative office is not a separate legal entity. 

A representative office cannot engage in activities that directly generate profit within Vietnam, such as signing commercial contracts in its own name, issuing invoices, receiving payments directly for goods or services, manufacturing, or providing paid services.  

Think of it as an extension of the parent company, legally permitted to operate within Vietnam for specific, limited purposes. Its primary role is to facilitate communication, conduct market research, and promote the parent company’s business interests without engaging in direct commercial transactions. 

All activities undertaken by the representative office are technically done on behalf of the foreign parent company, which remains legally responsible.  

Permitted Activities of a Representative Office in Vietnam

Understanding the scope of allowed activities is vital when considering setting up a representative office. According to Vietnamese law, a representative office is generally permitted to carry out the following functions:

1. Liaison Activities: Acting as a contact point between the parent company and Vietnamese businesses, partners, customers, and government agencies. This includes facilitating communication, arranging meetings, and supporting relationships.  
2. Market Research: Gathering information about the Vietnamese market, including potential customer demand, competitor activities, industry trends, regulatory changes, and potential local suppliers or partners. This intelligence is invaluable for future strategic decisions.  
3. Promoting Business Cooperation Opportunities: Identifying and exploring potential investment projects or business collaborations for the parent company in Vietnam. This might involve attending trade shows, networking events, or meeting with potential partners.
4. Promoting the Parent Company and its Products/Services: Showcasing the parent company’s offerings and brand within Vietnam. This can involve disseminating information, organizing promotional events (within limits), and building brand awareness, provided it doesn’t constitute direct sales or service provision.
5. Supervising and Expediting Contract Implementation: Monitoring the execution of contracts signed between the parent company (not the RO itself) and Vietnamese partners, ensuring smooth operations and adherence to agreements.

It is important to note that a representative office cannot perform activities like:

• Directly selling goods or services in Vietnam.
• Signing business contracts under its own name.
• Issuing VAT invoices or collecting payments directly.
• Engaging in manufacturing, processing, or construction.
• Providing services for profit within Vietnam.

Any activities beyond the permitted scope can lead to legal complications and penalties from the authority.

Benefits of Establishing a Representative Office in Vietnam

Given the restrictions, why would a company opt for an RO structure? There are several strategic advantages, particularly for businesses in the early stages of entering the Vietnamese market:

Market Entry with Minimal Risk

Setting up an RO is generally considered a lower-risk and lower-cost way to explore the Vietnamese market compared to establishing an LLC or Joint Stock Company (JSC). It allows businesses to test the waters, understand local nuances, build relationships, and assess market potential before committing significant capital investment.

Simpler Setup Procedures

While still requiring proper documentation and adherence to regulations, the process of obtaining an RO license is often perceived as less complex and faster compared to obtaining an Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) needed for an FIE.

Building Local Relationships

Business in Vietnam, as in many Asian countries, relies heavily on personal relationships and trust. Having a local presence through a representative office enables your company to establish connections with potential partners, suppliers, and customers more effectively than managing relationships remotely. These relationships can prove invaluable when expanding operations in the future.

Enhanced Market Intelligence

Operating directly in Vietnam provides access to real-time market intelligence that remote research cannot match. Your representative office can monitor market trends, competitive activities, regulatory changes, and consumer preferences, providing your company with actionable insights for product development and marketing strategies.

Brand Visibility and Recognition

A physical presence in Vietnam enhances your company’s visibility and credibility in the local market. It demonstrates commitment to the Vietnamese market and can differentiate your company from competitors who operate only remotely. This local presence can be particularly important when dealing with Vietnamese government agencies and state-owned enterprises.

Cost-Effective Operation

Compared to establishing a fully operational subsidiary or branch, a representative office involves lower setup and maintenance costs. The simplified regulatory requirements, reduced staffing needs, and limited tax obligations make representative offices a cost-effective solution for market entry and exploration.

Is a Representative Office the Right Choice for Your Business?

An RO is an ideal choice if your primary goals are:

• Foreign companies completely new to the Vietnamese market wanting to conduct thorough research before committing significant capital.
• Businesses aiming to build brand awareness and establish initial contacts.
• Organizations needing a local point person to support existing agreements managed by the parent company.
• Companies exploring potential partnerships or distribution channels.
• Businesses in sectors where understanding local regulations and building government relations is paramount before investment.

If your immediate goal involves direct sales, manufacturing within Vietnam, or providing paid services locally, then other structures like an LLC or Branch would be more appropriate.

Finding the Right Office Space? Consider The Sentry Coworking

After deciding to set up a representative office and completing the licensing process, the next step is securing the right location. Traditional office leases are one option, but they often involve long-term commitments, high upfront costs for renovations and equipment, and ongoing management responsibilities.

For many businesses, especially those starting with a small team, a premium coworking space like The Sentry is a practical and strategic choice. With prime locations in Ho Chi Minh City’s central business districts, The Sentry offers more than just a workspace. It provides a professional, flexible environment that fits the needs of a newly established representative office.

Here’s why it makes sense:

• Credible Business Address: Setting up in a central location such as District 1 immediately enhances your company’s image. It sends the right message to local partners, clients, and stakeholders from day one.
• Cost Control and Convenience: Instead of large deposits and capital investment in setup, coworking memberships offer a single monthly fee that includes utilities, internet, cleaning services, and a staffed reception.
• Flexible and Scalable Options: Whether you need a few desks or a small private office, The Sentry allows you to scale up easily as your business grows, without the hassle of moving or renegotiating terms.
• Professional Facilities: You’ll have access to high-speed internet, meeting rooms, printing services, and a well-trained reception team to welcome guests and handle mail. This helps present a polished and professional presence from the beginning.
• Access to a Business Community: The coworking environment naturally connects you with other professionals and businesses. These informal interactions often lead to valuable local insights and new opportunities.
• Less Time Managing, More Time Growing: By letting The Sentry handle the logistics of office management, your team can focus fully on what matters most, such as market research, building relationships, and supporting your company’s growth in Vietnam.

Choosing The Sentry makes it easier to get your representative office up and running quickly, while maintaining a professional presence and keeping overheads predictable during this important stage of expansion.

Contact us today for a free tour!