SHOULD CHOOSE REPRESENTATIVE OFFICE OR BRANCH OF THE COMPANY?

Many businesses to expand their business and facilitate transactions with customers have chosen to set up offices or branch companies. However, there are many enterprises that do not fully understand the legal provisions on representative offices and branches of the company, leading to confusion between these two models? In the framework of the following article, Lawyers would like to share with you businesses and readers about the difference.

1. What is representative office? What is a company branch?

The Law on Enterprises 2014, Civil Code 2015 allows enterprises to establish dependent units that are responsible for performing all or part of the functions of the business; or act as authorized representative for the interests of the business and protect those interests.
The dependent units of the business can be established under the model of company branches or representative offices.

1.1 What is an affiliate?

Clause 1, Article 45 of the 2014 Law on Enterprises stipulates that a branch is a dependent unit of an enterprise, and is responsible for performing all or part of the functions of the authorized representative, including the function of authorized representative. permission. A branch’s line of business must not be different from the business line of an enterprise.
From the above law, it can be seen that a branch is a dependent unit of the enterprise, has no legal status but functions as a representative of the enterprise, may be authorized by the business to perform all functions and duties of an enterprise, including business activities.

1.2 What is a representative office?

What is representative office? In Clause 2, Article 45 of the 2014 Law on Enterprises, a representative office is a dependent unit of an enterprise, having the task of authorized representative for the interests of the company and protecting the interests of the enterprise.
The Law on Enterprises 2014 contains two concepts of representative office and company branch. Depending on the business needs and purposes, the business owner or the head of the organization can choose to establish a company branch or representative office, each with its own advantages and disadvantages.

2. The similarity between a representative office and a branch company

2.1 All are dependent units of the enterprise and the company’s branches and representative offices are required to register for a tax code.

3. The difference between a representative office and a company branch:

3.1 About functions and duties

The difference in functions and duties between a representative office and a company’s branch is:
A company branch is entitled to perform all or part of the functions of the enterprise, including the function of business representative and the function of authorized representative.
While representative offices have no business function, they can only perform the tasks under the authorization mentioned above. Representative office is the place to promote the products of the business and is the place to answer and advise customers.
It can be understood that a representative office is a dependent unit of an enterprise but has no business function, nor is it allowed to directly conduct business activities of the enterprise. separate contracts where the representative office functions as a liaison with the main task of providing and exchanging information, providing business support as well as in charge of outreach between partners and the enterprise. , the operation content of the representative office must be consistent with the operational content of the business.
In fact, in the working process, there are still cases where the representative office signs the contract. However, when a representative office is on behalf of the business to sign and will have a legal power of attorney from the business, the content of this authorization must be directly related to the content of the contract. signed.
With the characteristics of not doing business activities without distinguishing functions and duties, a Representative Office is like a liaison office, performing the following activities:
+ Market research, provide information, support businesses to access and connect with new markets and partners, with such a representative office function that is very suitable for located in many provinces inside and outside water to perform main tasks such as;
+ Promote the brand, approach and Contact with partners, perform customer care activities as well as answer customer questions …
This is a very suitable model for businesses dealing in services such as: Tourism, construction, advertising, … because these types of business usually do not need to be done directly at the address of the company. unit that works at the address of that service business office.

3.2 Regarding the obligation to declare and pay taxes

The company’s branches are required to pay license tax in accordance with the law, while representative offices are not required to pay license tax, but according to the functions of each representative office.
License tax will be collected annually and the rate is classified by grades, based on the registered capital or operating revenue of the previous year or the added value of the previous business year depending on each country and each locality, but these levels are different.
In fact, when conducting business activities, representative offices have to pay two types of taxes: license tax and personal income tax. And if not, the representative office only has to pay personal income tax.

      Above are some of the different points of representative offices and company branches. Call us at hotline 0984.62.4444 for detailed advice and support in the procedures of opening representative offices, company branches.

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