Virtual office providers face concrete obstacles

More and more businesses have chosen to use virtual offices and are happy with their choice. However, they face obstacles because government agencies don’t seem to know how to treat them.

Vietnam now has about 20 virtual office service providers; there are ten in HCM City alone. The service providers say business is good; in fact, the economic downturn has driven many more small companies to economize by using a virtual office rather than maintain a downtown office suite for their exclusive use.

For many firms, the virtual office is a great idea, reports the newspaper Nguoi Lao Dong, but for some government agencies, it’s a headache.

Terra Incognita

At a recent workshop on reform of tax procedures, the head of a company that provides virtual office service to nearly 600 clients startled participants by entreating government agencies to set up more administrative procedures. Right now, she said, clients of virtual office service providers are having a terrible time registering their businesses and meeting tax obligations.

Virtual office services are still an unfamiliar business in Vietnam, though they have been proliferating around the world for some 20 years.

What’s called a ‘virtual office’ in Vietnam is a set of services that allows a business to have a presence in a particular location with a phone number, receptionist, business mailing address and other business related services. Typically, a business is also able to rent certain facilities, such as a room to meet with clients, on an as-needed basis.

Some companies in HCM City complain that the city’s Department of Planning and Investment (DPI) is reluctant to license businesses which register virtual office addresses. They say it takes an extremely long time to obtain a business registration certificate even though their documents are in order.

DPI points out that there’s no regulation that tells it how to grant licenses to several hundreds of businesses which occupy the same address and office space.

Tax agencies have hesitated to sell invoices to the tenants of virtual offices because they find it hard to manage the invoice use and tax payments of businesses whose members only gather ‘virtually.’ Some tax offices will only agree to sell invoices to businesses if the businesses can show they have contracts with clients. “We don’t know if such businesses fall under the Enterprise Law or not,” laments a tax official.

A certain household appliance trading company, which has a branch in the Mekong Delta and is renting a virtual office in district 1, HCM City, complained that it applied to buy invoices [so that it could pay tax at the HCMC tax office] three months ago, but their application has not been accepted yet.

“Because of this, we have to make all our transactions through our branch in the Delta,” a representative of the company said.

A company trading in construction materials, which has the workshop in HCMC’s District 7, rents a virtual office in downtown District 1, because District 7 is too far from the centre of the city and thus inconvenient for the meetings with clients. If it were to rent a regular office in District 1, it would have to pay at least $1,000 a month. The good news is that by using a virtual office, it cuts its cost by 75 percent. The bad news is that the company is not treated like other businesses, and it is just because of the virtual office.

So, are more regulations needed here?

A prominent economist, Dr. Dinh The Hien, says that DPI and the tax office are just too timid. In his view, there’s no need to set up new regulations to manage virtual offices.

The Enterprise Law does not say that the addresses that businesses register to government agencies must also be the places where the businesses’ staffs work, Hien points out. Nor does the law stipulate how large the offices must be. No law or regulation says that businesses must not work in virtual offices.

Taking the view that whatever is not prohibited is allowed, Hien concludes that businesses at virtual offices should be treated like all other businesses. He emphasized that government agencies should adduce a lack of the regulations to create difficulties for enterprises.

VietNamNet/NLD

Tags: Vietnam business news, vietnam real estate market