Some tax regulations when opening a representative office

What is a representative office? When establishing a representative office, what taxes should taxpayers pay attention to? The following article will help you answer these questions.

Representative office

According to the provisions of the 2014 Enterprise Law, "A representative office is a dependent unit of an enterprise, with the task of representing the interests of the enterprise by authorization and protecting those interests."

Illustration photo.

Thus, the representative office does not conduct business activities by itself, but the representative office performs the function and task of authorizing activities to protect the interests of the enterprise.

When opening a representative office, do I have to register for tax?

According to Vietnamese law, when opening a representative office, a tax code and tax registration are required. According to the provisions of Point c, Clause 3, Article 3 of Circular 80/2012/TT-BTC, the tax code issued is 13 digits.

Regulations on paying business license tax

If the representative office only conducts transactions, office administrative work and trade promotion and does not conduct business activities or sign contracts, it does not have to pay business license tax.

If the office has business activities, contracts, revenue and expenditure activities, it must pay business license tax.

The business license tax payable is based on Article 4, Circular 302/2016/TT-BTC "for branches, representative offices, business locations, public service units, and other economic organizations, the business license tax payable is 1,000,000 VND/year".

However, if the representative office is opened in the first 6 months of the year, the taxpayer must pay the full year's tax. If the representative office is opened in the last 6 months of the year, the taxpayer only has to pay 50% of the annual tax.

Regulations on personal income tax

When the Company directly signs labor contracts and pays employees working at the Representative Office, the Company is responsible for declaring, deducting, and paying personal income tax centrally at the Company.

If the Office directly pays salaries to employees, the Office will declare, deduct and pay personal income tax on the income from salaries and wages of the Representative Office's employees according to the provisions of Articles 24 and 25 of Circular 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance guiding the implementation of the Personal Income Tax Law for the tax authority directly managing the Office.

For monthly declaration and payment: no later than the 20th day of the month following the month in which the tax liability arises.

For quarterly declaration and payment: no later than the 30th day of the quarter following the month in which the tax liability arises.

Value Added Tax

Representative offices that do not directly sell goods or generate revenue do not need to carry out tax declaration procedures, but the Company declares centrally at the head office. Input costs related to the Office's operations that bear the Office's name and tax code are declared and deducted by the Company from value added tax if they meet the conditions for input VAT deduction as prescribed.

If a representative office generates revenue, according to Article 11 of Circular 156/2013/TT-BTC, it must declare value added tax (VAT):

In case the taxpayer has a affiliated business unit in a province other than the one where the taxpayer has its head office, the affiliated unit shall submit value-added tax declaration dossiers to the tax authority directly managing the affiliated unit.

Good luck!

Tran Thi Thuy - lecturer of Faculty of Accounting