In the context of corporate expansion, businesses frequently establish either representative offices or branches to extend their presence in foreign markets. While both serve as extensions of the parent company, they differ fundamentally in terms of legal person status, operational scope, and regulatory obligations. A clear understanding of these distinctions is essential for companies seeking to navigate the complexities of international market entry and compliance.
I. Legal basis
- The Law on Enterprise 2020;
- Decree No. 01/2021/ND-CP on Business Registration.
II. Differences between branches and representative offices of enterprises
| Criteria | Branch | Representative office |
| Definition | Branch of an enterprise is a dependent unit of the enterprise, having the task of performing all or several of the functions of the enterprise, including the function of authorized representation. The branch’s business lines must be the same as those of the enterprise. | Representative office of an enterprise is a dependent unit of the enterprise, having the task of representing under authorization the interests of the enterprise and protecting such interests. The representative office may not perform the business function of the enterprise. |
| Business lines | Allowed to register all professions that the head office has registered | No business function; Only authorized representatives are allowed |
| Name | The name of a branch shall consist the enterprise’s name and the phrase “Chi nhánh” | The name of a representative office shall consist the enterprise’s name and the phrase “Văn phòng đại diện” |
| Scope of Activities | Perform all or part of the functions of the enterprise, including business functions and representative functions under authority. | Only perform authorized representative duties for the interests of the business and protect those interests. |
| Form of accounting | Both dependent accounting and independent accounting | Only dependent accounting |
| Tax Obligations | – The branch pays license tax at the Tax Authority where the branch headquarters is located. – In case the dependent accounting branch operates in a province or city other than the area where the enterprise’s head office is located, the enterprise income tax declaration shall be made in the place where the head office is located. – The branch still must fulfill tax obligations for value added taxes and corporate income according to regulations. | – The representative office does not perform business functions, so it does not pay license tax – Representative offices must submit tax declaration documents for taxes that must be paid or paid on behalf of the representative office; Taxes do not arise, representative offices do not have to submit tax declarations. |
| Types of taxes and fees to be paid | – Business license fee – Value-added tax (VAT) – Corporate income tax – Personal income tax | – Personal income tax |
| Purpose of Establishment | A business may wish to open a facility for operations in multiple fields, sign contracts, and issue invoices to customers; the facility operates in provinces or cities different from the one where the company’s headquarters is located. | The business may want to conduct market research, monitor trademark violations, or not engage in business at this facility in provinces or cities where the headquarters is not located, without the intention of generating business activities. |
III. Should you establish a Branch or a Representative Office?
Based on the differences listed above, businesses should choose between establishing a branch or representative office depending on their objectives.
- If the company wants to open a multi-functional business facility, capable of signing contracts and issuing invoices to customers, and the facility operates in a province or city different from the headquarters, it should choose to establish a branch. Establishing a branch offers the following advantages:
- More autonomy in organizing business activities and handling internal matters at the branch.
- Establishing a branch in high-revenue areas (provinces or cities) will significantly reduce transportation costs. Additionally, it provides increased trust, convenience, and better customer service. This is why businesses and corporations choose to establish branches in multiple large cities instead of just business locations.
- Branches can choose between independent or dependent accounting, whereas business locations must be dependent on the company or branch.
- Branches have their own tax identification number, so there is no need to apply for a 13-digit tax number like a business location.
- If the business is looking to conduct market research, monitor trademark violations, or does not intend to engage in business at the facility in provinces or cities outside the location of the headquarters, then establishing a representative office is the best choice.
—————————-
📞 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.
-Nguyen Huong Huyen-