Key considerations when a branch employs foreign workers

In the context of economic integration, an increasing number of Vietnamese enterprises are expanding their operations and hiring foreign workers. In particular, branches of Vietnamese companies also have a growing demand for foreign employees to meet business requirements. However, employing foreign workers at a branch must comply with relevant legal regulations, especially those concerning permit, employment contracts, tax obligations, and salary policies. This article highlights key considerations for branches employing foreign workers, enabling branches to ensure legal compliance and mitigate unnecessary legal risks. 

1. Regarding permit 

In general, when a branch of a Vietnamese enterprise employs foreign employees, it shall obtain a Work Permit (“WP”) or a Certification of Exemption from Work Permit Requirement (“WPE Certification”). Many enterprises believe that if a foreign employee already has a WP for the head office, they can continue using it at the branch. However, since the WP is only valid for the registered work location, the enterprise/branch must obtain a new WP or WPE Certification for employment at the branch. 

i. If the foreign employee is assigned or transferred to work at the branch and no longer works at the head office, the company may apply for a reissued WP due to a change in the work location.(1) 

However, if the employee qualifies for the WP exemption and has already been granted a WPE Certification, a new certification must be obtained when changing the work location, since current labor laws do not regulate reissuance in such cases. 

ii. If the foreign employee works at both the head office and the branch, the WP may be obtained through one of the following options: 

  • Applying for a WP/WPE Certification at the Department of Home Affairs. 

Depending on whether the employment contract is signed with the company or the branch, the respective entity will be responsible for applying for the WP/WPE Certification at the Department of Home Affairs where the employee is expected to work. 

  • Applying for a WP/WPE Certification at the Department of Employment – Ministry of Home Affairs. 

Under this option, the company may apply for a WP/WPE Certification for multiple work locations for the foreign employee. However, to qualify for one WP, the employee must hold the same position, work arrangement, and title at both the head office and the branch, as these details must be consistent on the permit. Below are some common cases where one WP cannot be granted: 

    • If the employee is working at the head office under the intra-company transfer. An intra-company transferee must have been employed by the foreign company for at least 12 consecutive months before being assigned or transferred to its commercial presence in Vietnam.(2) Commercial presence includes foreign-invested economic organizations, representative offices, branches of foreign traders in Vietnam, and executive offices of foreign investors in business cooperation contracts.(3) 

Since the branch of a Vietnamese company does not qualify as a commercial presence of a foreign enterprise, employees working at a Vietnamese branch are not considered intra-company transferees. As a result, they must work at the branch under a different employment arrangement, such as performing the employment contract. 

    • An employee who is both the Director (a managerial position) and the Branch Head (an executive position) cannot apply for a single WP for both positions. 

2. Regarding salary and tax obligations 

If the branch signs the employment contract with the foreign employee, it will be responsible for paying the salary and declaring and paying personal income tax (“PIT”),(4) except in cases where the branch is an accounting-dependent unit. 

If the foreign employee signs the employment contract with the company and is assigned/appointed to work at the branch, the company will be responsible for salary payment. Additionally, the company must:(5) 

i. Submit PIT declaration documents to the tax authority directly managing the company for the employee. 

ii. Pay PIT into the state budget for each province where the employee works.  

(1) Clause 3, Article 12, Decree 152/2020/ND-CP (amended by Clause 7, Article 1, Decree 70/2023/ND-CP).

(2) Clause 1, Article 3, Decree 152/2020/ND-CP.

(3) Clause 7, Article 3, Decree 152/2020/ND-CP. 

(4) Clause 3, Article 42 of the Law on Tax Administration 2019.

(5) Article 19 Circular 80/2021/TT-BTC.

 


Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.

Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Employment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.



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