Summary: A representative office (RO) in Vietnam is a liaison presence, not a commercial company, and operates under a narrower set of permitted activities than a licensed enterprise. This article outlines what an RO can and cannot do, the compliance obligations of the chief representative, and the practical steps involved in closing or converting an RO into a company.
By ECOVIS Vietnam Law | Last reviewed: 13 July 2026
“A representative office is a liaison mandate, not a sales channel — the moment staff start negotiating terms or issuing quotations, the parent company should already be planning the move to a licensed entity.” — Attorney Vu Manh Quynh, Founder & Managing Partner, ECOVIS Vietnam Law
Why This Matters for Foreign Companies
Representative offices remain a common first step for foreign traders exploring the Vietnamese market, particularly in East Ho Chi Minh City where many regional and country managers are based to oversee supplier relationships or market research. However, because an RO is not permitted to conduct direct commercial activities such as signing sales contracts or issuing invoices, foreign companies sometimes unintentionally cross the line between permitted liaison functions and prohibited commercial operations.
This distinction matters because activities conducted outside the RO’s permitted scope may expose the parent company and the chief representative to administrative penalties, and can complicate the eventual transition to a fully licensed company. Understanding the compliance boundaries early can help avoid this.
Key Legal and Compliance Issues
- Permitted activities. An RO may generally conduct liaison activities, market research, promotion of the parent company’s business, and supervision of contracts the parent company has entered into with Vietnamese partners — but it may not directly generate revenue, sign commercial contracts in its own name, or issue invoices for goods or services.
- Chief representative responsibilities. The chief representative is generally responsible for RO operations and compliance, including maintaining proper records, signing permitted documents within scope, and ensuring the RO does not exceed its licensed activities. This role carries a degree of personal accountability for the RO’s compliance status.
- Employment and work permits. Staff employed by the RO, including foreign employees, are subject to Vietnamese labor law, work permit requirements (unless an exemption applies), and social insurance obligations. ROs should maintain accurate employment records and monitor work permit validity and renewal timelines.
- Annual reporting and record keeping. ROs are generally required to submit periodic activity reports to the licensing authority and maintain records of their operations, staffing and any changes to the chief representative or office address.
- Contracts and commercial activity restrictions. Any contracts the RO enters into (e.g., office lease, employment contracts, service agreements for its own operation) should be limited to supporting the RO’s permitted liaison functions, rather than commercial trading activity on behalf of the parent company.
- License renewal and address changes. The RO’s operating license typically has a defined validity period and must be renewed before expiry; changes to the office address, chief representative, or scope of activities generally require notification or approval from the licensing authority.
- Common compliance risks. Frequent issues include the RO staff negotiating or signing sales contracts, issuing quotations that function as binding offers, or engaging in activities that resemble direct sales — any of which may be viewed as exceeding the RO’s permitted scope.
Practical Risks for Management
- Chief representative: may face personal exposure if the RO is found to have exceeded its permitted scope of activities.
- Regional manager: may inadvertently authorize RO staff to negotiate commercial terms that should properly be handled by a licensed company entity.
- Foreign trader (parent company): may face reputational or regulatory complications if the RO’s activities are inconsistent with its license.
- HR function: may overlook work permit renewal deadlines for foreign staff assigned to the RO.
What Companies Should Review
- Confirm the RO’s licensed scope of activities and compare against actual day-to-day operations.
- Review the chief representative’s authority and reporting responsibilities.
- Check work permit and social insurance compliance for all RO staff.
- Confirm annual activity reports have been filed on time.
- Review office lease and any service contracts for consistency with RO status.
- Track license validity and renewal deadlines.
- Assess whether current or planned activities suggest the RO should transition to a licensed company.
- Maintain records of any changes to chief representative, address or staffing.
How Ecovis Vietnam Law Can Support
Ecovis Vietnam Law advises representative offices, chief representatives and foreign traders on maintaining compliance with permitted activities, employment obligations and periodic reporting requirements. Serving clients in Thao Dien, An Phu, Thu Thiem, Thu Duc and across East Ho Chi Minh City, our team can review an RO’s current activities against its license, assist with annual reporting, and support the legal process of closing an RO or converting it into a fully licensed company where commercial operations have expanded.
FAQ
Can a representative office sign sales contracts?
Generally no — an RO is not permitted to sign commercial contracts in its own name for the sale of goods or services, and doing so may be viewed as exceeding its licensed scope.
Does an RO need to file tax returns?
An RO does not generate taxable revenue in the way a company does, but it still has certain reporting and, in some cases, personal income tax withholding obligations related to its staff.
How long is a representative office license valid?
RO licenses are typically issued for a defined term and require renewal before expiry; the specific term should be confirmed against the current license.
What happens if an RO wants to start selling directly in Vietnam?
In that case, the foreign company would generally need to establish a licensed commercial entity, as the RO structure does not permit direct sales activity.
Is a chief representative required to reside in Vietnam?
Requirements vary depending on the specific facts and current regulations, and should be confirmed based on the RO’s circumstances.
What is involved in closing a representative office?
Closure generally involves notifying the licensing authority, settling employment and tax obligations, and completing a formal deregistration process.