Why choose a representative office (RO) to create a sourcing platform in Vietnam?

Representative offices are the most inexpensive and easiest type of model to establish. Typical uses for ROs include:

• Maintaining relations with existing suppliers;
• Coordinating sourcing activities;
• Helping with quality control at the suppliers factories; and
• Searching for new suppliers.

ROs act as an arm of their overseas parent company, and as such have no legal status within Vietnam. Importantly, an RO is forbidden from conducting any revenue-generating activities in the country. Therefore, ROs can only indirectly interact with Vietnamese businesses.

On the positive side, ROs do not require capital injections, and are funded according to their needs, acting as cost centers. ROs that are involved in supporting sourcing activities are not liable for corporate income tax but are still subject to a value-added tax (VAT).

Foreign staff working for ROs can have a direct employment relationship with ROs instead of the parent company abroad. Unlike in many other countries in the region, ROs can directly hire Vietnamese staff and/or foreign staff.