In recent years, business activities have no longer been tight within the territory of Vietnam. Enterprises with the desire to develop and access opportunities in other countries have conducted capital investment activities to establish or participate in executive management for owning capital overseas. Through overseas investment, the enterprise can gradually affirm its position in the international market. However, overseas investment is a complex activity and is strictly regulated by Vietnamese law. Accordingly, corresponding to each form of overseas investment, the investor will adjust by their own regulations, keeping in mind the legal regulations that will help investors choose the appropriate investment model as well as ensure the transfer of profits back home if needed. This article will generalize overseas investment activities based on domestic regulations with the aim to give an overview to investors before making investments.
Selection of investment forms
Investors rely on their development plans in foreign markets to choose the appropriate form of investment. However, the investors have to make sure to meet the conditions of the investment form according to the regulations in the chosen foreign country. Currently, Vietnam allows investors to carry out overseas investment activities in the following forms:
- Establish an economic organization in accordance with the law of the host country;
- Investment in the form of overseas contracts;
- Contribute capital, purchase shares, purchase contributed capital of an overseas economic organization to participate in the management of such economic organizations;
- Buying and selling other valuable securities and papers or investing through securities investment funds and other intermediary financial institutions abroad;
- Other investment forms as prescribed by the law of the host country.
Determination of the investor’s ability to meet the conditions
In addition to determining whether the investor meets the conditions of the host country, the Investor also needs to determine whether they have met the legal conditions under Vietnamese laws, specifically:
- Investors need to check if the expected overseas investment business sectors are prohibited.
- The investment should meet the corresponding conditions if the overseas investment sector is subject to conditional investment business sectors.
- There should be an investment Resolution as prescribed in the Investment Law;
- Confirmation should be obtained from the tax agency regarding the performance of the investor’s tax payment obligation.
In addition, investors should also note that the financial capacity of the enterprise is equivalent to the amount of overseas investment capital.
Implementation of procedures for offshore investment
On the basis of meeting the conditions prescribed by law, investors shall carry out procedures for the overseas investment registration certificate to be granted by the Ministry of Planning and Investment pursuant to Article 61 of the Investment Law.
In order to be able to transfer investment capital abroad such as receiving profits, investors are required to have one (01) overseas investment capital account opened at an allowed commercial bank and register with the State Bank. Accordingly, for each overseas investment project, the Investor must open one (01) corresponding investment capital account in order to clearly separate the cash flow and profit among the projects. Also, all transactions related to remittance of foreign currency abroad and receiving profits back home must be carried out through this account.
In addition, investors should also carry out procedures for registration of foreign exchange transactions related to overseas investment activities in accordance with foreign exchange laws and submit quarterly reports on investment projects and reports on forex transaction. Please note that many investors now miss out on periodical report but this greatly affects the stability of investment activities and attracts sanctions by investment management agencies and banks. It also makes it difficult for investors to apply for approval of new investment projects in the future.
Remittance of profits to Vietnam
The transfer of profits is based on the Decision of the investors after balancing the operation plan in host countries. Like most foreign investors investing in Vietnam, profits are used for reinvesting in Vietnam in the first phase, however once the business is stable, investors can consider transferring profits back home.
Vietnamese investors investing abroad are also allowed to retain profits from overseas investment activities to reinvest when they wish to continue contributing capital, increase investment capital or implement new investment projects abroad. However, before proceeding with this, investors need to adjust the overseas investment registration certificate. In case there is no need for reinvested investment, within 06 months from the date of making the tax finality report or equivalent document as prescribed by the host country, the investor must transfer all profits collected overseas to Vietnam.
In short, when starting an overseas investment project, investors should consider issues of investment forms, investment conditions, financial capacity, foreign currency rotation and administrative procedures performed with competent state agencies before investing abroad. In the course of implementing investment projects, investors should pay attention to issues of profit remittance and report on the implementation of overseas investment projects by law.
