The legal matters concerning the leader of a representative office (RO) for foreign traders in Vietnam need to be taken into consideration, so as to ensure compliance with local regulations when conducting business activities. Failure to adhere to these legal points may result in potential consequences such as administrative sanctions, fines or even the closure of the said representative office. Therefore, a good understanding and following of these legal issues is essential in avoiding legal disputes and promoting successful business operations in Vietnam.

Whether RO can be a contracting party of labor contract or not?

Legal basis

– Article 18.3 of Labour Code 2019, the person executing labour contract on employer side shall include, among others, the representative of organization being not legal entity or the person authorized under laws.

– Articles 2.2 of Decree 152/2020/ND-CP (“Decree 152”) the foreign employer shall include, among others, the representative office in Vietnam of an organization of which establishment to be licensed by competent authority,

– Articles 17.3 and 18.3 of Commerce Law 2005, the representative office has the right to hire employees being Vietnamese and foreigner to work in representative office under Vietnamese laws and must not execute, amend, supplement the contract which had been executed by foreign traders except for the case that head of representative office was being duly authorized in written by the foreign trader

Answer

RO can be a contracting party of labor contract (excluding those Foreign Trader had executed), in which Head of RO shall signed as a representative of employer. According to the Labor Code, the representative office has the authority to considered the employer and can sign labor contracts for the purpose of working and managing activities of the representative office. This enables foreign companies to establish a presence in Vietnam to conduct research, marketing, and other non-commercial activities.

However, it’s important to note that representative offices in Vietnam are not independent legal entities and have limited legal rights and responsibilities, in comparison to registered local companies. Additionally, the activities of the representative office must abide by the regulations and guidelines set forth by the Vietnamese government.

Moreover, prior to entering into a labor contract with Vietnamese employees, the representative office must obtain an establishment license and operate under the supervision and management of the Ministry of Industry and Trade or the provincial Department of Industry and Trade. It is also important to ensure compliance with other labor laws and regulations in Vietnam, to avoid potential legal disputes and penalties.

The head of an RO, irrespective of their nationality, to maintain a physical presence in Vietnam exist?

According to Article 33.3 of Decree 07/2016/ND-CP, if the head of a representative office is not present in Vietnam, they may delegate their authorized rights and responsibilities to another individual through a written authorization, in accordance with the law. This written authorization should be made with the consent of the foreign trader, but the head of the representative office remains responsible for ensuring that the delegated tasks are carried out in compliance with applicable regulations and laws. 

If the authorized period for the head of a representative office (RO) to be absent from Vietnam, as stipulated in Article 33.3 of Decree 07/2016/ND-CP, expires and they have not returned to Vietnam or obtained additional authorization, the appointed individual may continue to execute the head of the RO’s responsibilities and rights within the authorized scope until they return to work in the RO or the foreign trader appoints another individual to take on the role of the head of the RO according to Article 33.4 of Decree 07.

Moreover, if the head of the RO is absent from Vietnam without any authorization for over 30 days, the foreign trader must appoint another person to fill the position of the head of the RO in accordance with Article 33.5 of Decree 07. Therefore, in general, the head of an RO, regardless of their nationality, must typically remain in Vietnam. If they need to be absent, circumstances require them to authorize another person to fulfill the responsibilities and rights of the head of the RO, which should comply with applicable laws and regulations. Additionally, if their absence exceeds 30 days without proper authorization, the foreign trader must designate another individual to be the head of the RO.

The major distinctions in terms of insurance and labor contracts between Vietnamese employees and foreign employees

As a general rule, the insurance requirements for both Vietnamese and foreign employees are as follows. Depending on the specific circumstances, certain individuals, such as retired senior employees or foreign employees working in Vietnam under the form of an internal transfer, may not have an obligation to have insurance.

However, the employer (such as RO) must still pay an equivalent amount, mandated by law, even for employees such as Vietnamese employees and foreign employees who not required to have mandatory insurance, as if the insurance covered the employee. As a result, these differences in insurance regulations do not significantly impact the operations of ROs and foreign traders.

With regards to labor affairs, foreign employees wishing to work in Vietnam, unlike their Vietnamese counterparts, must obtain a work permit or work permit exemption, unless certain exceptions apply. Additionally, these foreign employees must fulfill several demanding requirements, such as having the necessary qualifications, work experience, health status, as required by the Ministry of Health and other relevant regulations. Thus, hiring foreign employees may generally be more complex and challenging than hiring Vietnamese employees due to these additional obstacles.

Conclusion

In conclusion, as the head of a representative office of a foreign trader in Vietnam, it is essential to remain fully informed about the country’s legal requirements and guidelines. Numerous legal issues need to addressed, ranging from labor regulations to obtaining necessary permits and licenses. By staying on top of these matters and seeking out expert legal advice when necessary, foreign traders can ensure smooth and compliant operations in Vietnam. Furthermore, a strong understanding of local laws and regulations can also help these businesses build positive relationships with local partners and clients, and position themselves for long-term success in the Vietnamese market.

HMLF is always available to offer assistance in understanding the procedures with authorities.

Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 93 721 5585
Website: hmlf.vn Email: [email protected]