Sep 25, 2011. KPMG’s advisors Nam Nguyen and Hoang Anh Tuan provide valuable insights on what representative offices need to know to ensure they stay within the law in Vietnam.
A representative office (“RO”) is a popular form of business presence of many foreign investors in Vietnam and is commonly used by many foreign investors or traders as the initial vehicle to enter Vietnam’s market. RO operations have proved to be effective and efficient for the purposes of operation management, facilitating trade and relationships with customers and government.
By regulations, the activities of an RO is restricted to auxiliary activities in nature such as conducting market surveys, collecting market information relating to the products or services provided in Vietnam by the parent company it represents, acting as a liaison conduit between the parent company and its business partners in the Vietnam. It facilitates business negotiations and contracting for the parent company. An RO is specifically prohibited from engaging in any direct profit-making activities. In other words, an RO is a cost centre, not a profit centre, and it must not generate any revenue in its own right. This prohibition is often stated explicitly in an RO’s licence.