Violating the Law When Renting a Virtual Office

by Huy
January 13, 2022
Office administration Tips
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Page Contents

Renting a “virtual office” is a cost-effective solution for many businesses, mainly small and medium-sized or start-ups. Although it is a very popular activity, it is also a controversial activity about legality.

1. Renting a virtual office is a popular activity

In recent years, Vietnam’s economy has continuously developed along with the start-up movement is also very strong. For startups or small and medium-sized companies, cost-saving is a top criterion in the operation organization. Therefore, the form of renting offices and common spaces (Co-working) on working floors are very popular. This job not only saves costs but also helps this business take advantage of available office facilities such as printing, tea, reception…, in addition, contact with other businesses on the same floor. Working also brings many opportunities to expand partnerships or find customers.

Renting a virtual office means that the company only borrows the address to register information on the Business Registration Certificate, but does not even operate the actual business at the aforementioned location because the business location is located. sometimes located in apartment buildings, dormitories that cannot be registered there.

2. Common forms

There are two forms of office rental on common working floors:

Actual rental (shared workspace): That is, the company rents a certain amount of working space and has people working on the floor.
Renting a virtual office: That is, not renting the actual space, but only renting the office address information to do business registration procedures and hang nameplates only.
The form of a virtual office, as mentioned, is to put a “virtual” address in the rented place and do business in another place.

3. Legality for each case

In case of actual office rental (shared workspace): This is a very normal activity and completely follows the provisions of the law. Because the law on enterprises does not limit the number of businesses operating in the same location. As long as this business secures a workspace, it is eligible to set up its headquarters.

The case of renting a “virtual office”: This is a controversial activity because, in addition to bringing many benefits, it also has many potential legal risks and is therefore easy to be administratively sanctioned.

4. Penalties when renting a virtual office

As mentioned, the form of renting a virtual office is a form that is currently controversial, but the law stipulates that:

The enterprise must operate at the registered office location
The opening of a new business location must be notified to the Department of Planning
Renting a virtual office is essentially setting up a location in one place and doing business in one place. Therefore, it is easy to be inspected and administratively sanctioned by state agencies:

Fine of 10 – 15 million: for not declaring the location truthfully (Article 24 Decree 50/2016/ND-CP)
A fine of 5 – 10 million: for not declaring a new business location (Article 35 of Decree 50/2016/ND-CP)
When being inspected by the tax authority, it is easy to be penalized by closing the tax code (Article 30 of Decree 39/2014/ND-CP).

For Foreign companies that want to start or expand businesses and look for an office in Vietnam: