What do foreign traders know about liquidation of representative office?

Representative offices of foreign businesses in Vietnam function as affiliated entities under the umbrella of foreign traders, established in adherence to Vietnamese legal regulations. Their primary purpose is to conduct market research and engage in specific trade promotion endeavors permitted by Vietnamese law. It’s evident from this that the role of representative offices of foreign traders is restricted from engaging in profit-generating activities directly within Vietnam. They are prohibited from entering into contracts, making modifications to established contracts of overseas traders, unless explicit authorization through a valid power of attorney is granted by the foreign trader’s head. There are certain exceptional circumstances of liquidation of business in Vietnam as defined by law under which these restrictions might not apply.

1. Navigating the Impact and Viability of Foreign Traders’ Representative Offices: A Comprehensive Exploration

The effectiveness of foreign traders’ representative offices depends not only on factors like operational productivity and management capabilities but also significantly on the market situation. When the market grows, the activities of the representative office become more engaging. Conversely, during a market recession, the continuation of representative office operations can burden the managing foreign company in Vietnam. Hence, the termination of representative office operations becomes an inevitable outcome. However, the question of how to handle the liquidation of business in Vietnam ‘s assets in compliance with Vietnamese law concerns management companies, particularly the tax issue.

closure of representative office

Is liquidation of representative office easy?

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2. When does liquidation of representative office happen?

Currently, a representative office of a foreign trader is terminated or liquidation of representative office in the following cases:

  • At the request of a foreign trader;
  • When a foreign trader terminates its operation under the laws of the country or territory where such trader establishes or registers its business;
  • The term of operation under the License for Establishment of a Representative Office expires but the foreign trader does not request an extension;
  • Expiration of the operation period under the License to establish a Representative Office without the License-Issuing Authority agreeing to extend it;
  • Having the License to establish a representative office revoked according to the law;
  • Foreign traders and representative offices no longer satisfy the conditions prescribed by law.

3.  The process of terminating the operation of representative offices of foreign traders

Returning to the issue, in order to terminate the operation, the representative office of a foreign trader must conduct closure of representative office’s assets, which can be mentioned as desks, chairs, computers, office machinery, equipment, cars and other assets owned by representative offices of foreign traders. An issue that is concerned by most representative offices of foreign traders is whether their representative offices are subject to taxes when liquidating assets.

liquidation of representative office

Steps of liquidation of business in Vietnam

When conducting the liquidation of representative office, it will basically generate taxes such as value added tax, corporate income tax (for organizations) / personal income tax (for individuals).

3.1 Tax Implications for Foreign Trader Representative Offices: Value-Added Tax and Nature of Operations

Firstly, in accordance with the provisions outlined in Article 3 of Circular No. 219/2013/TT-BTC, which establishes guidelines for value-added tax payers, the definition is as follows: “Value-added tax payers encompass organizations and individuals engaging in the production and business of goods and services subject to value added tax within Vietnam, irrespective of business categories, structures, or organizational forms (hereinafter referred to as business establishments). Additionally, individuals and organizations that import goods and services, including those acquired from overseas, are also considered value-added tax payers (hereinafter referred to as importers).”

Furthermore, Clause 3 of Article 5 in the aforementioned circular clarifies that entities devoid of business functions and individuals are exempt from property sales tax. Derived from these stipulations, it is evident that the primary purpose behind establishing a representative office is not to conduct commercial operations, but rather to engage in market research and trade promotion endeavors. Such offices do not engage in other forms of business activities or manufacturing operations. Consequently, when a foreign trader’s representative office undergoes liquidation of business in Vietnam, it is not subjected to value-added tax as dictated by law.

3.2 Corporate Income Tax Exemption for Representative Offices: Understanding the Non-Business Entity Status

Secondly, as per the directives outlined in Clause 1 of Article 2 in Circular No. 78/2014/TT-BTC, which defines the entities liable for corporate income tax, it is stated that “Corporate income tax payers encompass production organizations and entities engaged in the trading of goods and services, possessing taxable income (hereinafter referred to as enterprises).” In this context, representative offices do not fall under the definition of enterprises, nor do they partake in the production and business activities related to goods and services, nor do they generate income. Consequently, they are not subject to corporate income tax under the prevailing regulations.

3.3 Invoice Issuance and Asset Liquidation: Representative Offices’ Tax Considerations

Thirdly, it’s important to note that representative offices of foreign traders are not eligible to obtain invoices from tax authorities during the process of asset liquidation. This is explicitly stipulated in Clause 1 of Article 13 in Circular No. 39/2014/TT-BTC, which governs the issuance of invoices by tax authorities. In light of these regulations, it’s evident that during the liquidation of business in Vietnam assets, tax authorities are not obligated to issue invoices.

Based on the aforementioned factors, it becomes evident that the process of closure of representative office is relatively straightforward within the context of tax finalization. This simplicity arises when the representative office is exempt from the obligation to declare and remit value-added tax and corporate income tax. Furthermore, the absence of a requirement for invoice printing is an additional advantage. Collectively, these circumstances create a favorable environment that expedites the process of discontinuing the operations of foreign traders’ representative offices.

The aforementioned content provides comprehensive insights into the procedure for closure of representative office of a foreign company in Vietnam. Should you have any inquiries or require assistance regarding the closure of a representative office in Vietnam, feel free to reach out to S4B.com.vn.

Our comprehensive approach to closure transcends the procedural aspects. We understand that a smooth closure contributes to your company’s reputation and future business endeavors. S4B streamlines the process, from preparing documentation to liaising with local authorities, ensuring that your representative office consulting marked by efficiency, accuracy, and professionalism.


  • Address: Unit 602A, Tower A, Handi Resco Office Building. 521 Kim Ma Street, Ba Dinh District, Hanoi
  • Tel: + 84 24 3974 4181
  • Email: service@s4b.com.vn

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