VI Attracting foreign investment capital for economic development is one of the top important economic development goals in Vietnam’s annual economic development policy. Among the economic sectors, foreign-invested enterprises are an important part promoting the strong development of the economy. One of the top goals of foreign investors when investing in Vietnam is to seek profits. When a business has stable production and business activities, generating stable annual profits, it is also the time when foreign investors recover profits from their investment capital. Transferring profits abroad is an inevitable and important stage in the life cycle of a foreign investment project. To ensure that business activities run smoothly and effectively, mastering the current legal regulations on procedures for transferring profits abroad is a mandatory requirement. A clear, legally compliant process will help investors optimize cash flow, minimize risks and increase confidence in the Vietnamese market. Let’s learn about this topic with Pham Consult!
1. Concept of profits transferred abroad
According to Article 2 of Circular No. 186/2010/TT-BTC of the Ministry of Finance, profits transferred by foreign investors from Vietnam to foreign countries are legal profits shared or earned from direct investment activities in Vietnam according to the Investment Law, after fully performing financial obligations to the State of Vietnam as prescribed.
Profits transferred from Vietnam to foreign countries can be in cash or in kind:
– Profits transferred abroad in cash according to the provisions of the law on foreign exchange management;
– Profits transferred abroad in kind and converted in kind value according to the provisions of the law on import and export of goods and relevant laws.
2. Determining the amount of profits transferred abroad
a. Annual profits transferred abroad
Profits transferred = (profits that foreign investors receive or receive in the fiscal year from direct investment activities of enterprises in which foreign investors participate in investment (*) + other profits such as profits not yet transferred from previous years) – amounts that foreign investors have used or committed to use for reinvestment in Vietnam; used to cover expenses of foreign investors for production and business activities or for personal needs of foreign investors in Vietnam
(*) Determined according to audited financial statements, corporate income tax finalization declarations of enterprises in which foreign investors participate in investment.
b. Profits transferred abroad upon completion of investment activities in Vietnam
Profits transferred = total profits earned by foreign investors during direct investment in Vietnam – profits used for reinvestment, profits transferred abroad during the operation of foreign investors in Vietnam and amounts used for other expenses of foreign investors in Vietnam
Note: Foreign investors are not allowed to transfer abroad profits shared or earned from direct investment activities in Vietnam in the year in which profits arise in the case where the financial statements of the enterprise in which the foreign investor invested in the year in which profits arise still have accumulated losses after transferring losses in accordance with the provisions of the law on corporate income tax.
3. Conditions for transferring profits abroad
Foreign investors who are allowed to transfer profits abroad annually or upon the end of direct investment activities in Vietnam must simultaneously ensure the following conditions:
(i) The enterprise has fulfilled its financial obligations to the Vietnamese State in accordance with the provisions of law after the end of the fiscal year.
(ii) The enterprise has submitted audited financial statements and corporate income tax finalization declarations for the fiscal year to the direct tax authority.
(iii) The financial statements of the enterprise in which the foreign investor invested in the year of profit generation do not contain accumulated losses after transferring losses in accordance with the provisions of the law on corporate income tax.
4. Time of transferring profits abroad
– Time of transferring profits abroad annually: Foreign investors are allowed to transfer profits distributed or earned from direct investment activities in Vietnam abroad annually at the end of the fiscal year, after the enterprise in which the foreign investor participates in investment has fulfilled its financial obligations to the Vietnamese State in accordance with the provisions of law, has submitted audited financial statements and corporate income tax finalization declarations for the fiscal year to the direct tax authority.
– Time of transferring profits abroad at the end of direct investment activities in Vietnam: Foreign investors are allowed to transfer profits abroad at the end of direct investment activities in Vietnam.
