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Laws & RegulationsWednesday, 09/06/2006, 09:02

Foreign rep offices and branches in Vietnam 

Foreign rep offices and branches

Foreign rep offices and branches in Vietnam 

Legislation implementing the 2005 Commercial Law (effective as of 1 January 2006) has gradually been issued over the last six months or so. The latest Decree 72-2006-ND-CP of the Government dated 25 July 2006 updates Vietnam�s regulation of foreign representative offices (RO) and branches in the commercial sector.  Decree 72 sets out the conditions and procedures for the establishment of ROs and branches as well as their rights and obligations; and the administrative responsibilities of the licensing bodies (Ministry of Trade and local Departments of Trade). 

 

With respect to ROs, positive reforms under Decree 72 include:

�           No longer a cap of only 1 RO in any one province or city (as had been proposed in earlier drafts).

�           No longer compulsory to notify the licensing body of the number of staff or to seek a license amendment when there is an increase in the number of expatriate staff (as required under current regulations).

�           Circumstances which will result in license withdrawal have been softened.

 

Negative reforms include:

�           Mandatory conditions for a foreign business entity to establish a RO have been expanded in comparison to current regulations from (just) having lawful business registration in the foreign country to (also) having been in operation for at least 1 year. Of note, this extra condition disqualifies foreign start-up companies from testing Vietnam�s investment-business waters through a RO.

�           Duration of RO operation has been re-capped at 5 years (extendable).

 

With respect to branches, positive reforms include:

�           Narrow range of permitted activities of branches under the current regulations has been abolished.  Under Decree 72, branch offices will be permitted to conduct trading activities (ie import-export) and activities directly related to trading of any goods. Of note, the right to conduct trading in particular goods and services will only be available as scheduled in Vietnam�s international undertakings.

�           License withdrawal: as for ROs above.

 

Negative aspects include:

�           Mandatory conditions for a foreign business entity to establish a branch still include at least 5 years in operation as well as having lawful business registration.

�           The duration of operation has been capped at 5 years (extendable).  Currently, no cap applies.

ROs and branches of foreign business entities which operate in �special� commercial sectors (banking, finance, legal services, culture, education, tourism, etc) will be regulated by other specific legal instruments. Of note, the current regulations also govern tourism-related ROs and branches.

 

Existing ROs and branches must register for re-issuance of their licenses in accordance with Decree 72. The period for re-registration is six months from the date of effectiveness of Decree 72 (expected to be end of August 2006).  A six-month period is a relatively short period for the many existing ROs and branches to become informed of and comply with this re-registration requirement. Especially when ministerial guidelines on procedures for re-registration are still in draft. 

To keep up-to-date with the latest legal developments in Vietnam and for access to English translations of close to 3,000 Vietnamese business and investment laws, go to www.vietnamlaws.com.

 


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