In this article
Many foreign companies open a representative office in Vietnam because the procedure is simple and running costs are low. The risk is that the line between “promotion” and “trading” is thin: if the chief representative signs a few contracts on behalf of the parent company, the tax picture changes. This article sets out what a representative office (RO) may do, what it may not do, and its accounting obligations, from the perspective of the accounting team at ACCA Consulting Vietnam.
1. What is a foreign representative office?
A representative office (RO – văn phòng đại diện, VPĐD) is a dependent unit of a foreign trader. An RO is not a Vietnamese legal entity, has no charter capital and may not directly carry out profit-generating business. All rights and obligations arising from the RO's activities belong to the parent company abroad.
An RO therefore suits the exploratory stage: researching the market, meeting partners and supporting the parent company's existing customers. Once there are regular orders in Vietnam, investors should consider a separate legal entity; see comparing forms of investment in Vietnam.
2. Quick reference: what is and isn't allowed
| Activity | Usually permitted | Risky / not permitted |
|---|---|---|
| Market research and information gathering | Yes | — |
| Meeting customers and introducing the parent company's products | Yes | Quoting or agreeing prices on behalf of the parent company |
| Supporting and monitoring contracts signed by the parent company | Yes | Signing sales contracts in the RO's own name |
| Hiring staff to work for the RO | Yes, in line with labor regulations | Having staff provide fee-paying services to customers |
| Receiving funds from the parent company to cover operating costs | Yes | Collecting sales proceeds from Vietnamese customers |
| Issuing invoices for goods or services | — | No, an RO does not conduct profit-generating business |
The list above is for reference only. The specific scope of each RO is stated in its establishment license; if its activities go beyond the license, the RO may be penalized under current regulations.
3. Signs that an RO may be treated as a permanent establishment
A permanent establishment (PE – cơ sở thường trú) is a concept used in double taxation agreements and tax law. If an RO is found to be a PE, the profits linked to the parent company's activities in Vietnam may become taxable in Vietnam. Warning signs to avoid:
- The chief representative regularly negotiates and decides the key terms of sales contracts.
- Vietnamese customers pay into the bank account of the RO or of RO staff.
- Emails, quotations or contracts name the RO as the seller or service provider.
- RO staff directly provide technical, installation or warranty services for a fee.
- The RO holds inventory to deliver to customers on behalf of the parent company.
- Internal records do not clearly show that the RO only provides support and that contracts are signed by the parent company.
4. Tax, insurance and reporting obligations of an RO
Because it does not trade, an RO usually has no value-added tax (VAT/GTGT) or corporate income tax (CIT/TNDN) arising from sales. However, an RO is still an income-paying organization, so it has the following main obligations:
- Personal income tax (PIT/TNCN): withhold tax from employees' salaries and file monthly or quarterly; no PIT return is required for a period with no tax withheld. The income payer's annual PIT finalization is due on the last day of the third month after year-end (31 March for a calendar year).
- Family deductions from the 2026 tax period: VND 15.5 million/month for the taxpayer (≈ USD 608, approximate, at a reference rate of VND 25,500/USD) and VND 6.2 million/month for each dependant.
- Compulsory insurance for Vietnamese employees: the RO contributes 21.5% and the employee 10.5% of the salary subject to social insurance.
- Periodic activity reports submitted to the licensing authority under current regulations.
- Receipts and payments records: track funds transferred by the parent company and all expenses, and keep source documents used directly for bookkeeping for at least 10 years.
- Social insurance (BHXH)17.5%
- Health insurance (BHYT)3%
- Unemployment insurance (BHTN)1%
Rates on the salary subject to social insurance; the employee contributes a further 10.5% (8% + 1.5% + 1%).
View as table
| Social insurance (BHXH) | 17.5% |
| Health insurance (BHYT) | 3% |
| Unemployment insurance (BHTN) | 1% |
Illustrative payroll cost for one employee
Illustrative example: an RO pays a Vietnamese employee a salary subject to social insurance of VND 15 million/month. The RO's insurance contribution is 15,000,000 × 21.5% = VND 3,225,000; the amount deducted from the employee's salary is 15,000,000 × 10.5% = VND 1,575,000. The RO's total cost for this employee is VND 18,225,000/month, before other benefits.
5. When should you move from an RO to a legal entity?
- 1Assess transaction frequency
If Vietnamese customers order regularly, the RO is operating beyond its scope.
- 2Choose a new model
A 100% foreign-owned company, a joint venture or a branch, depending on the business line and objectives.
- 3Set up the entity in parallel
Obtain the IRC and ERC; open a DICA and contribute capital within 90 days of the ERC issue date.
- 4Transfer staff and contracts
Terminate employment contracts at the RO, sign new ones with the entity and close out insurance.
- 5Close the RO
Finalize PIT, close the tax code and return the license as required.
FAQ
Can a foreign representative office issue invoices?
No. An RO may not conduct profit-generating business, so it does not issue invoices for goods or services. Contracts and invoices must be issued by the parent company or by a legal entity licensed to trade.
Does an RO have to prepare financial statements like a company?
An RO does not prepare financial statements like a trading company, but it must track receipts and payments, file PIT returns and submit periodic activity reports as required. The specific bookkeeping approach should be agreed with the parent company.
Does a foreign chief representative pay PIT in Vietnam?
Possibly, depending on tax residency status and who pays the income. The number of days present in Vietnam and any relevant tax treaties should be established before filing.
Keep your RO within scope and compliant
ACCA Consulting Vietnam supports representative offices and FDI companies with accounting services in Ho Chi Minh City: payroll, insurance, PIT and periodic reports. Call or Zalo +84 938 847 699.
Free consultationZaloWhatsApp
