Challenges in Preparing Documents for Representative Office Application
The representative office (RO) is a popular foreign investment vehicle which investors utilize when wishing to enter the Vietnamese market without committing too much investment. The representative office could help the foreign entity to hire local employee to carry out market research, business promotion.
A foreign company wishes to establish a representative office in Vietnam must submit an application dossier for a license to the Provincial Department of Industry and Trade (DIT).
However, there are cases which the government agencies receiving the application would be different from department of industry and trade depending on the business lines carried out by the foreign entity.
Firstly, the trade service is bound in Vietnam’s Commitment in trade service in WTO but there are no existing specialized legislative documents:
When the trade service which the foreign entity provides does not fall under areas prescribed by specialized legislative documents in Vietnam, the licensing agency shall submit a written request for directions to the relevant ministries for opinions. The foreign entity shall wait for at least 15 working days for receiving a written notice of whether the license for establishment of the representative office is granted or rejected. This process not only extends duration of establishment of representative office but also rises risk of rejection.
Secondly, the trade service is not yet bound in Vietnam’s Commitment:
Where the scope of operation of the representative office is inconsistent with Vietnam’s commitments or the foreign trader is not located in the country or territory being party to treaties to which Vietnam is a signatory, there is an extra process in registration of representative office. The representative office shall be approved by relevant ministers, heads of ministerial agencies for establishment of the representative office.
Thirdly, trade services are supplied in foreign countries, but such does not exist in Vietnam
The foreign entity has to apply codes as following to Vietnam standard industrial classification system or CPC. If the foreign entity can not define a code, it is merely impossible to register the representative office.
In most of the cases, the foreign entity should consult with law firm in Vietnam whom lawyers have expertise in WTO laws, law on investment and experience in working with Vietnam state authorities, to prepare application right at the start and be ready to challenge the authorities when required to protect best interests of the clients.
Investment in setting up trading company in Vietnam is considered as investment in conditional investment areas