Establishing a company or a branch

Establishing a company or a branch

Establishing a company or a branch

Establishing a company or a branch of to execute the investment activity in Viet Nam? (in case of a Japan trader)

Establishing a company or a branch of Japan: establishing a branch of Japan trader for the easier procedures and fees

1. About the form of organization establishment

Considering the demand of the company which want a convenient and easy way to do, branch establishment should be chosen. About branch establishment: Firstly, it is more irreducible and quicker in the procedures and time of the establishment; The company do not need to implement the step of applying for the Investment Registration Certificate with a significant number of requirements and conditions which must be explained; Secondly, the company can still ensure that its branch can freely active the business according to the company’s fields; Thirdly, branch’s activities still depend on the rights and responsibilities that decided by the company, ensuring that the company in Japan still can hold and control the activities of its branch. (Article 33 Decree 07/2016/ND-CP regulations on the representative offices and branch of foreign traders in Viet Nam. However, establishing a branch also has some limitations, such as foreign traders who are responsible for the entire operation of the branch or branch will not be entitled to investment incentives for this field under the Law. The investment or branch establishment license is only valid for 5 years and must then be extended.

Considering the advantages of long-term development and business in Vietnam, the company should choose to establish an independent legal entity. Although firstly about procedures, establishing a company in Vietnam will be more complicated. However, the software field is a field that Vietnam is prioritizing to open and enjoy investment incentives with lower tax rates, or exemption of import tax, exemption or reduction of land rent and land use (According to Article 15 Investment Law). Secondly, the establishment of an economic organization is the establishment of a new legal entity, the legal entity will have independent assets, and the investor is only responsible for the amount of the contributed capital (limited liability companies, joint stock companies under Law on Enterprises 2014), foreign companies are not subject to all obligations and damages incurred as for branches. Foreign companies will not be subject to taxes when investing in Vietnam, all accounting and tax payment activities will be responsible by enterprises in Vietnam (Clause 3, Article 8 Law on Enterprises). Secondly, all activities of an independent company will not depend on the parent company, have great powers in trading and contract transactions without being confined to the scope of authorization of foreign companies (Article 7 Law on enterprises 2014).

2. The legal representative should be Vietnamese or Japanese for the convenience?

Considering the actual operation, the head of the branch will be the person who directly manages the branch, constructs the branch and performs all types of transactions within his or her authority and knows how to coordinate with the Japanese company in necessary activities. Therefore, the head of the branch should be a Vietnamese citizen because his or her will be fluent in the language, which makes it is easier to apply laws and conduct administrative transactions as well as carry out issues related to work permit, visa, temporary residence, …

3. Does the place need first or a legal entity?

The location should be preceded because the application for a license to set up a branch should have documents about the location where the branch office is to be located according to Point e, Clause 1, Article 10 of Decree No. 07/2016/ND-CP.

4. Regulation on the establishment capital

The sector in which the company intends to set up an organization for business currently does not require the establishment of a branch. The company only needs to meet the conditions in Article 8 of Decree 07/2016/ND-CP.

5. Time to complete the procedure, how much is the tax in Vietnam?

– Time to complete the procedures of establishment is maximumly 10 working days (According to clause 3 and clause 4 Article 17 Decree 07/2016/ND-CP)

– The company is subject to 20% corporate income tax (According to point d Article 2 and Article 11 of Circular 78/2014/TT-BTC) – the company is not subject to VAT (According to Clause 21 Article 4 Circular 219/2013/TT-BTC)

6. After deducting operating expenses in Vietnam, how is money transferred to Japan taxed?

The branch can only transfer annual profits to the parent company. Under Clause 5, Article 19 of Law on Commerce 2005, branches of foreign traders are allowed to remit profits abroad but must comply with the provisions of Vietnamese law. Accordingly, the time of profit transfer abroad is strictly regulated in Article 4 of Circular 186/2010/TT-BTC, including the annual transfer of profits and the transfer of profits upon the end of direct investment activities with a condition that all financial obligations to the Vietnamese State have been fulfilled in accordance with the provisions of law related to the income that constitutes profits that foreign investors remit abroad. Therefore, if the company wants to return to the parent company profits each time, often by month, by quarter from training activities, the branch can not do it but can only transfer profits annually. According to Clause 1, Article 11 of the Foreign Exchange Ordinance 2005, this transfer of profits must be made via a foreign currency account opened at an authorized credit institution.

7. Dossier which the Japanese side needs to prepare?

The establishment documents are prescribed in Article 21 of Decree 07/2016/ND-CP

The Japanese side needs to prepare the following original documents to send to Vietnam:

  • Business registration certificate or equivalent documents of foreign traders;
  • Document of foreign traders nominating/appointing the head of the branch
  • Audited financial statements or documents certifying the situation of tax or financial obligations in the latest fiscal year or equivalent papers; passport of the head of the branch (if the foreigner);
  • Operation charter of the branch;

8. What should be prepared in Viet Nam?

Vietnam needs to complete a dossier of registration for setting up a branch, including: Application, Documents about the location where the branch office is to be located and copies of documents that Japan has prepared (except for appointment documents) translated into Vietnamese and authenticated; Separately, Business Registration Certificate must be consular legalized or certified by consular agencies.

9. Policies of Viet Nam?

The operation of the foreign traders in Viet Nam currently is under the regulation of Law on Commerce and Decree 07/2016/ND-CP. Viet Nam does not have any preferences for the branch of the foreign traders established in Viet Nam.

Hnlaw & Partners Law Firm

Hotline: 0912.918.296

Email: tuvan.hnlaw@gmail.com

http://www.hnlaw.vn/en/investment-consultancy

https://en.wikipedia.org/wiki/Company

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