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Profits remitted abroad are profits legally divided or obtained from direct investment activities in Vietnam according to the Law on Investment, after fulfilling financial obligations to the State of Vietnam in accordance regulations.
Profits transferred from Vietnam to foreign countries can be in cash or in kind. Profits shall be remitted abroad in cash in accordance with the law on foreign exchange management. Profits shall be remitted abroad in kind and converted into in-kind values according to the provisions of the law on import and export of goods and relevant laws.
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We have successfully advised many foreign-invested enterprises and foreign investors in determining the amount of profits to be remitted abroad, procedures for transferring profits abroad and other issues.
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In the article below, we would like to quote some Vietnamese legal regulations related to remitting profits abroad for your convenience.
Determining the amount of profit remitted abroad
Annual profit remitted abroad is the profit that a foreign investor is divided or earned in the fiscal year from direct investment activities based on audited financial statements, corporate income tax finalization declarations of enterprises in which foreign investors participate plus (+) other profits such as profits that have not yet been carried over from previous years; minus (-) amounts foreign investors have used or committed to use to reinvest in Vietnam, profits that foreign investors have used to cover expenses of foreign investors for production and business activities or for personal needs of foreign investors in Vietnam.
Profit remitted to abroad at the end of investment activities in Vietnam is the total profit earned by the foreign investor during the process of direct investment in Vietnam, minus (-) the profits used for reinvestment, profits remitted to abroad during the operation of foreign investors in Vietnam and amounts used for other expenditures of foreign investors in Vietnam.
Foreign investors are not allowed to remit abroad the amount of profit divided or earned from direct investment activities in Vietnam in the year where the profit is generated in cases where the financial statements of the enterprise in the year the profit is generated show that there are still accumulated losses after the losses have been carried forward in accordance with the law on corporate income tax.
Example: Foreign investor A contributes capital to establish a Company in Vietnam. In 2009, the company incurred a loss of 4 billion dong.
Assume that in 2010, the Company has a pre-tax income of VND 3 billion. Thus, after clearing and transferring losses from 2009 pursuant to regulations, in 2010 the Company had a loss of 1 billion dong. The company is not allowed to distribute profits to the capital contributors and the foreign investor A is not allowed to repatriate the distributed profits of 2010 back home.
Assume that in 2010, the Company has a pre-tax income of VND 5 billion. Thus, after clearing and carrying forward losses from 2009 pursuant to regulations, in 2010 the Company has a remaining taxable income of VND 1 billion. If the corporate income tax rate applied by the Company is 25%, the Company shall pay corporate income tax of VND 250 million (= VND 1 billion x 25%). The company is entitled to distribute the profit after tax to the capital contributors and investor A is entitled to repatriate the distributed profit of 2010 back to his/her home country.
Determining when to remit profits abroad
Remitting profits abroad annually.
Annually, foreign investors are entitled to transfer profits distributed or obtained from direct investment activities in Vietnam abroad at the end of the fiscal year, after the enterprise in which the foreign investor invested in has fulfilled its financial obligations to the State of Vietnam in accordance with the law, has submitted audited financial statements and corporate income tax finalization declarations for the fiscal year to the direct tax administration authority.
Remittance of profits abroad at the end of direct investment activities in Vietnam.
At the end of direct investment activities in Vietnam, foreign investors are allowed to remit profits to the state after the enterprise in which foreign investors invested in has fulfilled its financial obligations to the State of Vietnam in accordance with the law, has submitted audited financial statements and corporate income tax finalization declarations to the direct tax administration authority and has fulfilled all obligations under the provisions of the Law on Tax Management.
Responsibilities of enterprises where foreign investors participate in capital investment.
Enterprises where foreign investors participate in capital investment are responsible for fulfilling their financial obligations to the State of Vietnam in accordance with the provisions of law related to the income which forms the profits remitted abroad by the foreign investors.
Obligation to notify the remittance of profits abroad
The foreign investor directly or authorizes the enterprise in which the foreign investor invested in to make a notice of the remittance of profits abroad pursuant to the form prescribed by law and send it to the direct tax administration authority of the enterprise at least 07 working days before remitting the profits abroad.
