Which Form of Investment - Branch or Company?

 Foreign entities can set-up company or branch offices in Vietnam to carry out business activities.

There are several main different aspects between opening a branch office or establishing a foreign owned company in Vietnam.

1. Conditions

• Permits for establishment of Vietnam-based branches of foreign enterprise shall each have a valid term of five years.

• Foreign enterprise must choose between establishing a 100% foreign capital enterprise or forming a joint-venture with domestic investor or company.

2. Certificate

• The Branch office needs to apply and obtain the operation license of a Branch;

• A foreign owned company will need to apply and obtain the investment certificate (“IC”) to operate in Vietnam.

3. Capital

• Optional, foreign entity will decide how much money to invest in branch. The allocation capital for branch is capital for the subordinate units.

• Mandatory, foreign entity will need to provide minimum capital as required by Vietnam Law in conditional investment area.

4. Obligation of owner

• For branch office in Vietnam, owner takes full responsibility;

• For company, owner takes responsibility within the capital contributed into the company in Vietnam;

5. Other matters

• For branch office setting up in Vietnam, the procedure is less complicated compared to those for the establishment of a 100% foreign owned company; the branch office is able to carry out trading and some other activities as stipulated by Vietnam laws and the WTO commitments which Vietnam enters. The business lines of a branch have to be aligned with the business lines of the headquarter of the foreign entity.

• Setting up foreign owned company would be more complicated than the setting up of the branch office, however this form of investment has more flexibility and freedom as it is a stand alone Vietnam entity recognized under Vietnam laws.