What are the considerations for foreign investors when establishing a branch in Vietnam?

1. Considerations need to be acknowledged by foreign investors when establishing a branch in Vietnam.

Firstly, the right to establish branches of foreign investors in Vietnam:

According to Article 4 of Decree 07/2016/ND-CP detailed regulations on the establishment of representative offices or branches of foreign investors in Vietnam under Law on Commerce 2005:

• Foreign investors are entitled to establish their branches in Vietnam according to Vietnam’s commitments to treaties which Vietnam is a signatory.

• Each foreign investor shall not establish more than one branch that has the same name within a province or centrally affiliated city.

Secondly, requirements for foreign investors when establishing branches in Vietnam:

According to Decree 07/2016/ND-CP, foreign investors may not establish branches in Vietnam if the following conditions are not satisfied:

• Foreign investors must be established and operate under the laws of a country or territory. This country or territory must be a party to international treaties to which Vietnam is a signatory.

• Foreign investors have come into operation for at least 05 years from the date of establishment or registration.

• The Enterprise Registration Certificate or equivalent document is valid for at least 01 more years from the date of submission of the application.

• The scope of operation of the branch is conformable with Vietnam’s commitments to market access that stipulated in treaties to which Vietnam is a signatory.

• The field of operation of the branch must be appropriate for the foreign investor's business lines.

Furthermore, the Licensing Office has the authority to deny issuing Establishment of Branch License if:

• Foreign investors apply to establish a new branch within 2 years from the date when the previous license was revoked.

• Foreign investors are prohibited from establishing branches for reasons of national defense, security, social order or safety, social ethics, and public health.

• The application of foreign investors submitted to the Licensing Agency fails to meet the requirements for applications as prescribed by the Licensing Agency; Noncompliance may occur because of notarization or consular legalization of papers from another country.

• When the regulatory agency requests additional documents or explanations for supplementation or change, foreign investors avoid submitting them.

Thirdly, requirements for the head of the branch:  

Decree 07/2016/ND-CP also stipulates that the head of a branch shall not concurrently hold the following positions: 

• The head of a Representative Office of another foreign investor. 

• The head of a Representative Office of the same foreign investor.

• The Legal Representative of a business organization incorporated under the Vietnamese laws.

Fourthly, the procedure for establishing branches for foreign investors in Vietnam:

• It should be noted that each foreign investor is only permitted to establish one branch within a province or municipal city.

• The Licensing Agency will issue official results on the establishment of a branch upon the receiving of a completed application from a foreign investor. This process can take place within 07 working days as required by law. When specific permission from the Minister is necessary before permitting the establishment of a branch, the estimated  time frame is 13 working days.

Fifthly, effective periods of Establishment of Branch License of foreign investor

The Establishment of Branch License shall be valid for 05 years but not exceeding the remaining effective period of the Enterprise Registration Certificate or the equivalent.

2. Legal basis 

• Law on Commerce dated June 14, 2005, of the National Assembly.

• Decree 07/2016/ND-CP dated January 25, 2016, of the Government detailing the Commercial Law on representative offices and branches of foreign investors in Vietnam.

• Circular No. 11/2016/TT-BTC dated July 5, 2016, of the Ministry of Industry and Trade, stipulating the form of implementation of Decree 07/2016/ND-CP dated January 25, 2016, of the Government detailing Law on Commerce on representative offices and branches of foreign investors in Vietnam.