As Vietnam continues to integrate into the global economy, the presence of foreign merchants has become increasingly prominent. However, establishing branches of foreign businesses in Vietnam comes with a unique set of restrictions and regulatory challenges. These limitations are designed to protect domestic industries, ensure compliance with local laws, and maintain economic sovereignty. This paper will delve into the various restrictions imposed on foreign merchant branches, examining their implications for foreign investment, the operational landscape, and the overall economic environment in Vietnam.
- Legal restrictions on the establishment of branches of foreign merchants in Vietnam
Establishing branches of foreign merchants in Vietnam is subject to strict legal regulations to ensure compliance with international treaties and national laws. These requirements are outlined in Decree No. 07/2016/ND-CP, dated January 25, 2016, which governs the conditions under which foreign merchants may operate branches in Vietnam. Below is an expanded explanation of the legal restrictions, requirements, and procedures related to this matter.
- The foreign merchant must be established and operate under the laws of a country or territory that is a member of the international treaties to which Vietnam is a party;
- The foreign merchant must have been in operation for at least 5 years from the date of its establishment or registration;
- The business registration certificate or equivalent documents must remain valid for at least 1 year from the date of the application for branch establishment;
- The branch’s scope of activities must align with Vietnam’s commitments to market access under the international treaties to which Vietnam is a party; and
- The branch’s field of operation must be consistent with the business lines of the foreign merchant.
In addition to meeting the above conditions, foreign merchants must also overcome several legal hurdles during the application process. The licensing authority has the right to refuse to issue a branch establishment license (“License”) in the following cases:
- The foreign merchant applies to establish a new branch within two (02) years from the date its previous License was revoked;
- The foreign merchant is restricted from establishing a branch for reasons related to national defense, national security, public order and safety, social ethics, or public health;
- The foreign merchant’s application dossier submitted to the licensing authority fails to comply with Vietnam’s legal requirements. Non-compliance may arise from issues such as improper notarization or consular legalization of documents originating from abroad; or
- The foreign merchant fails to submit additional documents or provide further explanations as requested by the competent authority during the application review process.
- Legal restrictions for the Head of branch of a foreign merchant in Vietnam
Decree No. 07/2016/ND-CP also outlines specific restrictions for individuals appointed as the head of a branch. These restrictions are established to prevent conflicts of interest and ensure the effective management of operations. According to the decree, the head of a branch is prohibited from concurrently holding the following positions:
- The head of a representative office of another foreign merchant;
- The head of a representative office of the same foreign merchant; or
- The legal representative of an economic organization established under the laws of Vietnam.
- Legal restrictions on the procedures for establishing branches of foreign merchants in Vietnam
Foreign merchants must also adhere to procedural restrictions when establishing branches in Vietnam. One of the key legal limitations is that each foreign merchant is permitted to establish only one branch within a province or centrally governed city in Vietnam. This rule prevents over-concentration of operations and promotes equitable distribution of business activities across different regions.
In summary, In conclusion, the process of establishing a branch in Vietnam is governed by strict legal regulations under Decree No. 07/2016/ND-CP. These rules ensure that foreign merchants operate responsibly, comply with Vietnam’s international commitments, and contribute positively to the local economy. While the regulations may appear stringent, they serve to protect national interests, maintain market order, and promote sustainable economic growth. Foreign merchants seeking to establish branches in Vietnam must carefully review and comply with these legal requirements to avoid rejection of their applications. By doing so, they can ensure a smooth entry into the Vietnamese market and build a foundation for long-term success.
📞 CONTACT LEGAL CONSULTANT:
TLA Law is a leading law firm with a team of highly experienced lawyers specializing in criminal, civil, corporate, marriage and family law, and more. We are committed to providing comprehensive legal support and answering all your legal questions. If you have any further questions, please do not hesitate to contact us.
1. Lawyer Vu Thi Phuong Thanh, Manager of TLA Law LLC, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Chairman of the Members’ Council, Ha Noi Bar Association
Email: tmle@tlalaw.vn.
Dinh Phuong Thao