Do representative offices have to pay licensing fee in Vietnam?

Do representative offices have to pay licensing fee in Vietnam?

Based on clause 6, Article 3 of the Commercial Law 2005, which defines representative offices as follows:

Terminology Explanation

In this Law, the following terms are understood as follows:

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6. A representative office of a foreign trader in Vietnam is a dependent unit of a foreign trader, established under the laws of Vietnam to study the market and carry out some trade promotion activities that are allowed by Vietnamese law.

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According to Article 2 of Decree 139/2016/ND-CP on payers of business license fees as follows:

Payers of Business License Fees

Payers of business license fees are organizations and individuals engaged in production and trading of goods and services, except as stipulated in Article 3 of this Decree, including:

1. Enterprises established under the law.

2. Organizations established under the Cooperative Law.

3. Public service units established under the law.

4. Economic organizations of political organizations, political-social organizations, social organizations, professional social organizations, and units of the people's armed forces.

5. Other organizations engaged in production and business activities.

6. Branches, representative offices, and business locations of the organizations specified in clauses 1, 2, 3, 4, and 5 of this Article (if any).

7. Individuals, groups of individuals, and households involved in production and business activities.

Furthermore, according to Section 2 of Official Dispatch 1279/TCT-CS 2017 from the General Department of Taxation in response to Official Dispatch 88/CT-THNVDT on January 23, 2017, from the Kien Giang Tax Department regarding business license fees for representative offices and business locations, as follows:

2. On Business License Fees for Representative Offices and Business Locations:

Article 2 of Decree No. 139/2016/ND-CP dated October 4, 2016, of the Government of Vietnam, stipulates payers of business license fees as follows:

"Payers of business license fees are organizations and individuals engaged in production and trading of goods and services, except as stipulated in Article 3 of this Decree, include:

1. Enterprises established under the law...

6. Branches, representative offices, and business locations of the organizations specified in clauses 1, 2, 3, 4, and 5 of this Article (if any)...

Based on the above provisions, should a representative office or business location engage in production and trading of goods and services, they are required to pay business license fees; otherwise, they are not obligated to pay such fees.

Therefore, according to the above provisions, the payment of licensing fee by a representative office is divided into two scenarios:

- If a representative office engages in production and trading of goods and services, it must pay the licensing fee;

- If a representative office does not engage in production and trading of goods and services, it is not required to pay the licensing fee.

What is the licensing fee rate for representative offices in Vietnam?

Pursuant to point c, clause 1, Article 4 of Circular 302/2016/TT-BTC, the rate of business license fees for representative offices is specified as follows:

Rate of Business License Fees

1. The rate of business license fees for organizations engaged in production and trading of goods and services is as follows:

a) Organizations with charter capital or investment capital over 10 billion dong: 3,000,000 (three million) dong/year;

b) Organizations with charter capital or investment capital of 10 billion dong or less: 2,000,000 (two million) dong/year;

c) Branches, representative offices, business locations, public service providers, and other economic organizations: 1,000,000 (one million) dong/year.

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Thus, the licensing fee rate for a representative office is 1,000,000 dong/year.

Note: The licensing fee rate for representative offices will be based on the charter capital stated in the business registration certificate or enterprise registration certificate or stated in the cooperative's charter.

If there is no charter capital, it will be based on the investment capital stated in the investment registration certificate or investment decision document.

What cases are exempt from licensing fee in Vietnam?

According to Article 3 of Decree 139/2016/ND-CP (supplemented by clause 1, Article 1 of Decree 22/2020/ND-CP), the cases exempt from licensing fee include:

- Individuals, groups of individuals, households engaged in production and business activities with annual revenue of 100 million dong or less.

- Individuals, groups of individuals, households engaged in irregular production and business activities; without a fixed location as guided by the Ministry of Finance.

- Salt-producing individuals, groups of individuals, households.

- Individuals, organizations, groups of individuals, households involved in aquaculture and fishing activities, including support services.

- Social cultural post office points; press agencies (printed, spoken, broadcast, electronic newspapers).

- Cooperatives, cooperative alliances (including branches, representative offices, business locations) operating in the agriculture sector as per the legal regulations on agricultural cooperatives.

- People's credit funds; branches, representative offices, business locations of cooperatives, cooperative alliances, and private enterprises operating in mountainous areas. The mountainous areas are defined according to the regulations of the Committee for Ethnic Minorities.

- Exemption from licensing fee in the first year of establishment or operation (from January 1 to December 31) applies to:

+ Newly established organizations (granted new tax codes, new business numbers).

+ Households, individuals, and groups of individuals initially engaging in production and business activities.

+ During the period of business license fee exemption, if organizations, households, individuals, or groups of individuals establish branches, representative offices, or business locations, such entities will be exempt from business license fees for the period the parent entity enjoys the exemption.

- Small and medium-sized enterprises converted from business households are exempt from licensing fee for 3 years from the date of being granted the first enterprise registration certificate.

+ During the licensing fee exemption period, if a small or medium-sized enterprise establishes branches, representative offices, or business locations, these will also be exempt for the period the parent entity is exempt.

+ Branches, representative offices, business locations of small and medium-sized enterprises (eligible for licensing fee exemption under Article 16 of the Supporting Small and Medium Enterprises Law 2017) established before this Decree's enforcement will have the exemption calculated from this Decree's enforcement date until the exemption period for small and medium enterprises expires.

+ Small and medium-sized enterprises converted from business households before this Decree's effective date shall apply the licensing fee exemption as stipulated in Articles 16 and 35 of the Supporting Small and Medium Enterprises Law 2017.

- Public general education institutions and public preschool education institutions.