Legal and Tax Risks for Legal Representatives in Vietnam and Practical Responses: 10 Key Points Foreign Executives Should Know
When establishing and operating a company in Vietnam, a foreign national serving as the legal representative (director) faces a range of legal and tax obligations and risks — residency requirements, work permits, social insurance, personal income tax (PIT), VNeID, TRCs, and more. NEXORA LAWFIRM currently provides ongoing legal support to more than 30 companies, proposing practical solutions that balance regulatory compliance with effective corporate operation. Drawing on the latest legal reforms affecting legal representatives (the 2025 Enterprise Law and Social Insurance Law), this article explains, in clear terms, the challenges foreign executives typically face and how to avoid them.
01 - Who Is the "Legal Representative" of a Company?
The legal representative (Người đại diện theo pháp luật in Vietnamese) is the individual authorized to act on behalf of a company in dealings with third parties. In practical terms, this is the person who signs contracts in the company's name and carries out any act affecting the company's rights and obligations, including litigation, arbitration, and administrative procedures.
This individual is formally appointed by the members/shareholders, the Board of Members, or the General Meeting of Shareholders, and is treated under Vietnamese law as the company's public face. All dealings with courts, arbitral institutions, and state authorities must be conducted through this legal representative.
Information about the legal representative is recorded as part of the company's official registration, and any change must be promptly reflected through a registration amendment. Choosing who will serve as legal representative is therefore an extremely important decision when establishing and operating a company in Vietnam.
02 - What Position Does the Legal Representative Hold in Vietnam?
Under Vietnamese law, the position held by the legal representative (Người đại diện theo pháp luật) depends on the type of company. Each corporate form is subject to its own rules, as follows.
For a limited liability company (LLC / Công ty TNHH), at least one legal representative is required, and that person must hold the position of either Chairman of the Members' Council (Chủ tịch Hội đồng thành viên) or Director/General Director (Giám đốc／Tổng giám đốc). If the charter is silent on the matter, the Chairman of the Members' Council automatically becomes the legal representative.
For a joint-stock company (Công ty cổ phần), if there is only one legal representative, that person is either the Chairman of the Board of Directors (Chủ tịch Hội đồng quản trị) or the Director/General Director. If the charter contains no special provision, the Chairman of the Board of Directors serves in that capacity. Where there are multiple legal representatives, both the Chairman of the Board of Directors and the Director (or General Director) are designated as legal representatives.
Because the charter plays such a significant role in determining who serves as legal representative, the appropriateness of the position and the applicable legal requirements should be carefully considered at the time of incorporation or whenever the corporate structure changes.
03 - Can a Vietnamese Company Have More Than One Legal Representative? What Are Their Respective Responsibilities and Powers?
Yes. In Vietnam, both limited liability companies (LLCs) and joint-stock companies may appoint one or more legal representatives. This is a matter the company's charter is free to determine.
The number, positions, powers, and duties of the legal representatives must be specifically set out in the charter. Where there are multiple legal representatives, clearly defining each person's scope of responsibility and how representative authority is exercised helps avoid future disputes.
However, if the charter does not clearly delineate each legal representative's role, all legal representatives are deemed to hold full authority to represent the company, and each may take legally binding action vis-à-vis third parties individually. In addition, if the company suffers damage, all legal representatives are jointly and severally liable (under the Vietnamese Civil Code and related legislation).
To avoid these risks, it is strongly recommended that, whenever multiple legal representatives are appointed, the allocation of responsibilities be expressly set out in the charter.
04 - Is There a Residency Requirement for Legal Representatives in Vietnam?
Yes. The Enterprise Law (Article 12(3) of the amended Enterprise Law, effective 2025) expressly requires that a company at all times ensure that at least one legal representative resides in Vietnam.
If the legal representative resides in Vietnam and departs the country, they must delegate their authority and duties as legal representative to another person who resides in Vietnam. This ensures that the company's representative function is always maintained within Vietnam.
What exactly does "reside" mean?
Under Vietnam's Law on Residence (Law No. 68/2020/QH14), "residence" means having an address in Vietnam that serves as one's place of habitual living. For example, even a temporary place of stay counts as "residence" if it is backed by formal address registration (such as temporary residence registration).
Accordingly, when establishing a company, submitting address information showing that the legal representative actually resides in Vietnam is a mandatory requirement. Failure to satisfy this condition may result in rejection of the enterprise registration application.
05 - Can Someone Who Is Not Temporarily Residing in Vietnam Still Become a Legal Representative?
No — in principle, a person who does not reside in Vietnam cannot become the (sole) legal representative.
Under the Enterprise Law (Article 12(3), discussed above), if a company has only one legal representative, that person must reside in Vietnam. "Residence" here means actually maintaining a base of living in Vietnam and holding temporary or long-term address registration based on a residence permit or visa.
Accordingly, a foreign national who has not registered temporary residence cannot serve as the sole legal representative. In such a case, at least one additional legal representative who resides in Vietnam must be appointed.
Furthermore, at the time of company formation (when applying for the Enterprise Registration Certificate, or ERC), the required documents evidencing the legal representative's address in Vietnam must be submitted; without them, the registration application will be rejected.
06 - Is There a Legal Problem If Someone Obtains a Temporary Residence Card (TRC) for an Address Where They Do Not Actually Reside?
Yes — that constitutes a violation of Vietnam's Law on Residence and may result in administrative sanctions and further penalties.
For example, if a person obtains a Temporary Residence Card (TRC) for Vietnam but does not actually reside at the address recorded on the card, the following sanctions may apply:
A fine of VND 3,000,000 to VND 5,000,000 applies to a foreign national who fails to report a change of address and fails to have the TRC re-issued accordingly (Article 18(4) of Decree No. 144/2021/NĐ-CP on administrative violations).
In more serious cases, deportation may also be imposed (Article 18(8) of the same Decree).
In other words, if the holder is not actually living at the address stated on the TRC, it may be treated as a false declaration and subject to severe sanctions.
Accordingly, anyone currently holding a TRC but not actually residing at the registered address should promptly take corrective action, such as voluntarily surrendering the TRC. Vietnam has tightened its immigration controls and management of foreign residents, and deficiencies in visa or residence status can significantly affect both corporate management and eligibility to serve as legal representative.
07 - What Is Required to Obtain an Enterprise Identification Code When a Foreign National Becomes the Legal Representative of a Vietnamese Company?
As of July 1, 2025, most companies in Vietnam are required to use an enterprise identification code (corporate code) for administrative procedures and tax filings. This is part of the government's digital transformation (DX) policy, aimed at streamlining official data management for enterprises.
To obtain an enterprise identification code, the company's legal representative must first have obtained a "Level 2 electronic identification account" (Mức 2) through VNeID (the national electronic identification system).
[Challenges and Solutions for Foreign Legal Representatives]
The VNeID registration system for foreign nationals is not yet fully developed, and actual procedures vary in progress from locality to locality. However, once full operation begins, any foreign national serving as the legal representative of a Vietnamese company will be required to obtain a Level 2 electronic identification account.
Without completing this procedure, the company that the individual represents will be unable to obtain an enterprise identification code, and will be unable to carry out any tax or administrative procedures at all — a serious impediment to business operations.
❓ What Does a Foreign National Need to Obtain an Electronic Identification Account?
Level
Required Submissions
Level 1 (initial registration)
A valid passport number or entry/exit identification document
A mobile phone number or email address registered with a Vietnamese telecom provider (may be registered in the individual's own name or the employer's)
A facial photograph
Any other information required by the VNeID system
Level 2 (full registration)
*The foreign national must appear in person at the immigration authority (the Ministry of Public Security or provincial-level public security) to complete the procedure.
Providing the required information (contact details, data to be linked, etc.)
Facial recognition and fingerprint registration (provision of biometric data)
Once this is completed, a Level 2 electronic identification account is issued, and the enterprise identification code can then be applied for.
As this shows, obtaining an electronic identification account is now essential for any foreign national acting as the legal representative of a Vietnamese company, and further tightening of this regulatory framework is expected going forward.
08 - Does a Foreign National Serving as the Legal Representative of a Vietnamese Company Need a Work Permit?
Yes, in principle it does. Under Vietnamese labor law, where a company has only one legal representative, that person concurrently holds a managerial position (such as director, chairman, or general director) and is therefore treated as a "manager" (Nhà quản lý).
A foreign national falling within this "manager" category who performs legal acts within Vietnam is, in principle, required to obtain a work permit (basis: Article 3(4) of Decree No. 152/2020/NĐ-CP, effective 2020).
❓ Are There Exceptions Where a Work Permit Is Not Required?
Yes. A work permit is exempted if all of the following conditions are met:
The individual enters Vietnam as a manager, executive, expert, or technician
Each stay is for less than 30 days
The number of such stays does not exceed three per year
In these cases, a work permit is not required, but a "confirmation of work permit exemption" must still be obtained.
What Are the Practical Points to Note?
Because obtaining a work permit takes a relatively long time (approximately 2 to 2.5 months),
it is advisable, when applying for the ERC (Enterprise Registration Certificate) for a newly established company, or before carrying out a change of legal representative, to prepare in parallel for the foreign legal representative's work permit application.
If a work permit has not been obtained,
there is a risk that the salary and other costs paid to the worker (including the legal representative) will not be deductible as expenses for corporate income tax purposes.
The validity of the labor contract is also a concern.
In practice, there have been court decisions finding a labor contract invalid where its term did not align with the validity period of the work permit. Labor contracts should therefore be executed or renewed so that their term matches the work permit's validity period.
09 - Is the Legal Representative Required to Participate in Social Insurance?
Under the amended Social Insurance Law (Law No. 41/2024/QH15), which takes effect on July 1, 2025, a company's manager (including its legal representative) must participate in compulsory social insurance regardless of whether they receive a salary.
What About Foreign Legal Representatives?
Where a foreign national serves as legal representative, they are exempted from mandatory social insurance participation if any of the following applies:
① The labor contract term is less than 12 months
② The individual is on an intra-corporate transfer
③ The individual has already reached retirement age at the time the labor contract is signed
What Should Be Noted in Practice?
Caution is warranted for foreign legal representatives currently holding a work permit in Vietnam who are not enrolled in social insurance on the ground that they do not receive a salary.
Recheck the details stated on the work permit to confirm whether the individual is certified as an "intra-corporate transferee."
If the permit was granted on a basis other than intra-corporate transfer, either the work permit must be corrected, or enrollment in compulsory social insurance must be completed.
10 - Must the Legal Representative Pay Vietnamese Personal Income Tax on Worldwide Income?
In Vietnam, a company's legal representative represents the entity in all of its transactions and bears significant legal and tax responsibility as a result. In particular, where a foreign national serves as the legal representative of a subsidiary, it is not uncommon for that person not to actually reside in Vietnam, having merely obtained a Temporary Residence Card (TRC) for purposes of company formation. How, then, is "residence" status — and the resulting tax liability — determined in such circumstances?
[Who Qualifies as a "Tax Resident" in Vietnam?]
Under Vietnam's Personal Income Tax Law, a person is treated as a tax resident — and is therefore taxed on worldwide income, both inside and outside Vietnam — if either of the following applies:
① The individual is present in Vietnam for 183 days or more within a 12-month period.
Days present are counted with the day of entry and the day of exit each counting as one day, including where the 183 days accrue over 12 consecutive months.
② The individual has a "permanent residence" in Vietnam.
A permanent residence includes:
The address recorded on a temporary or permanent residence card
A rented dwelling (including hotel stays or company housing) under a lease of 183 days or more in total
However, even where a permanent residence exists, if the individual is present in Vietnam for fewer than 183 days and can produce proof of residence abroad (such as a Japanese certificate of residence), the individual may still be treated as a non-resident.
[Residence Status and Tax Risk Summary]
Condition
Status
Present in Vietnam 183 days or more
Resident
Present fewer than 183 days, no permanent residence
Non-resident
Has a permanent residence, and can prove residence abroad
Non-resident
Has a permanent residence, but cannot prove residence abroad
Resident
In other words, merely having an address recorded on a TRC does not automatically make someone a non-resident. Treatment depends on the actual facts and on whether supporting documentation is available.
[The Tension With the Residency Requirement for Legal Representatives]
Article 12(3) of the Enterprise Law requires that at least one legal representative reside in Vietnam. Consequently, if the sole legal representative does not, in substance, reside in Vietnam,
the company may be in breach of the Enterprise Law's requirement
the tax authorities may treat that individual as a tax resident, subjecting them to worldwide income taxation
a dilemma therefore arises.
Practical Points and Advice
Anyone becoming a legal representative in Vietnam should examine the tax implications carefully before obtaining a TRC.
If the individual wishes to avoid being taxed as a resident, appointing two legal representatives — with at least one who genuinely resides in Vietnam — can be an effective structure.
If a TRC records an address at which the holder does not actually reside, this carries a risk of being treated as a false declaration; appropriate measures (surrendering the TRC or correcting the information) should be taken.
Practical Points to Consider Before Appointing a Legal Representative
The role of legal representative in Vietnam is not merely that of a nominal figurehead — it is a key position that carries direct legal, tax, and administrative risk for the company. For this reason, planning in advance with the following considerations in mind is recommended:
Consistency between residence status, address, and tax residency
A schedule for obtaining the work permit, social insurance registration, and tax code
Whether a TRC has been obtained, and verification of its contents
Preparing the certificate of residence needed under the Japan-Vietnam tax treaty
Spreading risk by distributing the role across multiple legal representatives