TAX OBLIGATION OF REPRESENTATIVE OFFICES AND BRANCHES ESTABLISHED BY FOREIGN BUSINESSES IN VIETNAM

Recently, Doanh Tri Law firm has received many questions from customers about the tax obligations of representative offices and branches established by foreign businesses in Vietnam. To answer questions related to this topic, please refer to the following analysis from Doanh Trí’s consultants.

I. Tax obligations of representative offices

Representative offices of foreign traders, established under the provisions of Vietnamese law to explore the market and carry out a number of trade promotion activities. Under Vietnamese law, representative offices of foreign traders are not allowed to make direct profits in Vietnam. In fact, a representative office is an authorized unit of the business, so the representative office still has the tax code and must pay the full tax.

There are 2 cases with the tax payment of a representative office: 

Case 1: Representative offices do not sign contracts, business activities only perform trade promotion, do NOT need to pay taxes. 

Case 2: Representative offices sign contracts under the authorization of enterprises opening representative offices and seal of the company, which will pay a license tax and personal income tax. Representative offices shall fulfill the obligation to deduct, declare and pay personal income tax when payment of salaries, bonuses, and service charges to taxpayers is made. 

II. Tax obligations of a foreign branch in Vietnam

Normally, to develop and expand the scale, foreign traders will pay more attention to establishing branches in the provinces. Branches can be divided into two categories: dependent branches and independent branches.

The dependent accounting branch will transfer data, vouchers of revenue, and expenses to the company. The Company combines data from other branches of the same company and its activities to account for and fulfill its corporate income tax liability.

The accounting unit of the company includes the accounting department of branches.

An independent accounting branch will determine its taxable expenses and assessable income and shall be responsible for declaring and paying the corporate income tax regardless of its business performance as well as its branches. Others in the same company. These branches will fully record books, financial statements, and so on.

The accounting department or accounting department of an independent accounting branch is an accounting unit under the Accounting Law.

The tax payment will be determined by the type of branch, considering whether the branch is a dependent accounting branch or an independent accounting branch. 

With excise tax, both types are subject to the excise tax of 1,000,000 VND / year.

With value-added tax (VAT) will apply:

• The dependent accounting branch will send the figures, vouchers, revenue to the company for accounting and tax obligations.
• The independent accounting branch will do the accounting itself, different provinces with the head office will have to declare and pay VAT.

With corporate income tax (CIT) will be applied: 

• If the branch maintains its independent accounting, the branch shall submit the CIT declaration at the affiliated entity to the tax authority directly managing the branch.
• Dependent accounting branch, the branch is not required to file a corporate income tax return, the headquarter shall file a tax return for the whole income at the branch.

The above is an analysis of Doanh Tri Law firm on the issue of tax obligations of representative offices and foreign branches established in Vietnam. If customers have questions or need further information, please contact Doanh Tri Law firm through the following forms: 

Hotline: (+84) 911.233.955

Email: [email protected]