Foreign investment activities in Vietnam” mentioned in this article are defined as when a foreign individual or enterprise establishes a business in Vietnam, contributes capital, purchases shares or capital contribution, or enters into a business cooperation contract with a Vietnamese enterprise.
Profits allowed to be remitted
Lawful profits shared or earned from direct investment activities in Vietnam after fulfilling all financial obligations (taxes and fees) towards the Vietnamese State.
Profits determined based on audited financial statements and corporate income tax finalization declarations where there is investment capital.
Article 2 of Circular 186/2010/TT-BTC
Cases where profit remittance cannot be made
Profits cannot be remitted abroad in the following cases:
- The financial statements of foreign-invested enterprises still contain accumulated losses from previous years.
- Foreign-invested enterprises have yet to fulfill their financial obligations towards the Vietnamese State.
Clause 3 Article 3 of Circular 186/2010/TT-BTC
Forms of profit remittance
Profits to be remitted abroad from Vietnam may be in cash or in kind.
Offshore remittance of profits in cash must be made through the bank account created for direct investment in Vietnam.
In case where FDI enterprises must close their direct investment accounts due to dissolution, termination, or transfer of the ownership of invested capital which results to the change in initial legal entity of these FDI enterprises, foreign investors have the right to use their foreign currency and VND accounts opened at authorized banks to purchase foreign currency and/or transfer their direct investment capital and legal earnings overseas.
Foreign investors are entitled to purchase foreign currency at authorized credit institutions, which then can be transferred overseas.
Offshore remittance of profits in kind must not include goods that are on the List of goods prohibited from export (such as rare animals or aquatic products, natural wood, toxic chemicals, etc.).
Article 2 of Circular 186/2010/TT-BTC, Article 9 of Circular 19/2014/TT-NHNN
Time for offshore remittance of profits
Annual profit remittance
Foreign investors are permitted to remit their profits annually at the end of the fiscal year and after satisfying the following conditions:
- Having fulfilled financial obligations towards the Vietnamese State.
- Having submitted audited financial statements and enterprise income tax finalization declarations of that fiscal year to direct-managing tax offices.
Profit remittance upon termination of investment activities in Vietnam
Foreign investors may remit profits upon terminating their investment activities in Vietnam after enterprises in which they invest have:
- fulfilled financial obligations towards the Vietnamese State.
- submitted audited financial statements and enterprise income tax finalization declarations to direct-managing tax offices.
- fulfilled all obligations under the Law on Tax Administration.
Article 4 of Circular 186/2010/TT-BTC
Determination of profits to be remitted
Profits to be remitted annually equal:
Profits shared or earned in a fiscal year plus (+) Other profits minus (-) Amounts that have been used or committed for reinvestment in Vietnam.
Example: Profits earned in 2017 is USD1,000,000. Profits carried forward from 2016 is USD220,000. Other expenses for production and business activities cost USD400,000.
Profits to be remitted: USD1,000,000 + USD220,000 – USD400,000 = USD820,000.
Profits to be remitted upon termination of investment in Vietnam equal:
The total profits earned from investment in Vietnam minus (-) Profits used for reinvestment, profits remitted during operational period in Vietnam and amounts used to cover other spending items in Vietnam.
Example:
A foreign investor purchased shares from a Joint Stock Company in Vietnam and from 2012 to 2017 earned a total of USD2,000,000 from this investment.
During said period, the investor has:
- remitted USD400,000
- used USD650,000 for production and business activities.
- contributed USD400,000 to a Limited Liability Company.
Therefore, profits to be remitted upon termination of the investment in Vietnam equal: USD2,000,000 – USD400,000 – USD650,000 – USD400,000 = USD550,000.
Article 3 of Circular 186/2010/TT-BTC
Profit remittance tax
In case of investors being foreign organizations, when profits are shared, companies do not need to pay taxes for profit remittance.
In case of investors being foreign individuals, when profits are transferred abroad, companies in which they invest are obliged to deduct 5% of the shared profits to submit to the state budget.
Clause 6 Article 8 of Circular 74/2014/TT-BTC
Article 19 of Circular 111/2013/TT-BTC
Dossier of profit remittance
After sufficiently satisfying certain conditions on remitting profits as prescribed by law, investors are required to provide dossiers and documents defining the amounts for remittance, including:
- Documents proving lawful source of the money: meeting minutes of the Board of Management or Members’ Council approving the distribution of profits, or contracts of contributed capital transfer, etc.
- Documents evidencing the fulfillment of financial obligations to the State of Vietnam: Audited financial statement, enterprise income tax, and personal income tax finalization declarations, etc.
Foreign investors are required to notify (in writing) direct-managing tax authorities of their plan to remit profits at least 7 working days prior to the scheduled remittance.
For clients using our In-house counsel service, M&A Vietnam will provide specific advice whenever a need to remit profits occurs.
