Greetings, listeners! Welcome back to The Lawyers Talk channel of BLawyers Vietnam. I am pleased to see all of you on the new Podcast today. I am Truong Chieu Minh, and I will be accompanying you today.
Coming to the topic of today’s Podcast, I would like to invite listeners to learn more about the regulations related to the transfer of foreign investors’ profits from Vietnam to foreign countries, and to listen to some well as the practical notes that may arise from foreign investors’ profits transferred from Vietnam to foreign countries in the form of direct investment Attorney Tran Ngoc Thuyet, Senior Partner of BLawyers Vietnam, will discuss these matters.
Guest
Hi Mr. Minh and hello listeners to follow The Lawyers Talks channel. I’m Tran Ngoc Thuyet. For to today’s topic, we share an extremely important procedure in the business field. That is the profit of foreign investors remitted from Vietnam to abroad in the form of direct investment.
Host
Could you explain how Vietnamese law defines the profits of foreign investors remitted from Vietnam to abroad in the form of direct investment?
Guest
In the form of direct investment into Vietnam, pursuant to Article 2 of Circular 186/2010/TT-BTC, profits from Vietnam remitted abroad by foreign investors are legal profits that are shared or earn from direct investment activities in Vietnam under the Investment Law after fully finished financial obligations with the Vietnam State under prevailing laws.
Host
How are profits transferred from Vietnam to abroad?
Guest
Pursuant to clause 2, Article 2 of Circular 186/2010/TT-BTC, profits from Vietnam may be remitted abroad in cash or in kind, accordingly:
- Profits are remitted abroad in cash in accordance with the law on foreign exchange management; or
- Profits are remitted abroad in kind and converted from the objects ‘value in accordance with the law on goods import and export and the provisions of relevant laws.
Host
So, can you tell our listeners the principles used to determine the amount of profits to be remitted abroad? What should the investors notice about this issue?
Guest
According to Article 3 of Circular 186/2010/TT-BTC, there are 02 forms of determining the number of profits remitted abroad.
- Form 1: Annual profits remitted abroad mean that profits foreign investors shared or earned in a financial year from their direct investment based on audited financial statements, and enterprise income tax balance sheets in which foreign investors that joined the investment plus (+) other profit items such as the profit items have not remitted yet from previous years adding this year; minus (-) profit items foreign investors have used or committed using in order to reinvest in Vietnam, and the profit items foreign investors have used to pay for expenditure items of foreign investors for production and business activities or for foreign investors’ personal demands in Vietnam.
- Form 2: Profits that are remitted abroad when investment activities in Vietnam are over shall be the total profits earned by foreign investors in the process of direct investment in Vietnam, minus (-) profit items used for reinvestment, and profit items remitted abroad during foreign investors’ operation period in Vietnam and items used for other expenditures of foreign investors in Vietnam
Notice that, foreign investors shall not be allowed to remit abroad profits shared or earned from their direct investment in Vietnam in a raised profit year if the year financial statements of enterprises in which they made investments and profits still contained accumulated losses after such losses were carried forward under the law on enterprise income tax.
For example: Foreign investor A contributes capital to establish a company in Vietnam. In 2009, the company a raised a loss of VND 4 billion.
Assuming in 2010, the company has a pre-tax income of VND 3 billion. So that, after balancing the loss amount carried forward from 2009 under the provisions, in 2010 the company has a loss amount of VND 1 billion. The company is strictly prohibited from sharing its profits to capital contributors and foreign investor A shall not remit his shared profits in 2010 to A’s home country.
Assuming in 2010, the company has a pre-tax income of VND 5 billion. So that, balancing the loss amount was carried forward from 2009 under the provisions, in 2010 the company has the rest of income of VND 1 billion which requires enterprise income tax. If the enterprise income tax rate applicable to the company is 25%, the company shall pay an enterprise income tax amount of VND 250 million (= VND 1 billion x 25%). The company can share after-tax profits to capital contributors and foreign investor A can remit profits shared in 2010 to A’s home country.
Host
So, in your opinion, what is the time period for the remittance of profits abroad?
Guest
According to Article 4.1 and Article 4.2 of Circular 186/2010/TT-BTC, the time for profits remittance abroad is prescribed as follow:
- Form 1: Annual profits remittance abroad.
- Foreign investors can annually remit abroad profits that they are shared or earn from their direct investment in Vietnam when the fiscal year is over after enterprises in which foreign investors that joined the investment have completed financial obligations to the State of Vietnam under the provisions of law and have submitted audited financial statements and enterprise income tax finalization declarations of that year to direct managing tax offices.
- Form 2: Profits remittance abroad after finishing direct investment activities in Vietnam
- Foreign investors can remit abroad profits after finishing direct investment activities in Vietnam after enterprises in which foreign investors that joined the investment have accomplished financial obligations towards the Vietnam State under law, submitted audited financial statements and enterprise income tax finalization declarations to direct managing tax offices and implemented fully all the obligations under the Law on Tax Administration.
Host
When we remit profits abroad, are investors obligated to notify tax offices?
Guest
According to Article 5 of Circular 186/2010/TT-BTC, foreign Investors may directly make, or authorize enterprises in which they have joint investment to make notices on the profits remittance abroad according to the adopted forms attached to this Circular and send to direct managing tax offices of the enterprise in which foreign investors have joined investment at least 7 working days before the profit remitted abroad.
Host
Thank you very much for your overview of the profits remittance abroad from the direct investment.
Next, could you tell the listeners more specifically about the process for investors to remit profits abroad?
Guest
According to Article 5 of Circular 06/2019/TT-NHNN, to remit profits abroad, firstly, Investors must open a direct investment account in Vietnam as follows:
- Open a foreign currency account at one (01) authorized bank to receive and make payments in that currency during the process of foreign direct investment in Vietnam;
- Corresponding to the type of the currency implementing the investment, only 01 (one) direct investment account may be opened for a foreign currency at one (01) authorized bank;
- If of investing in Vietnamese dong, the investor open one (01) direct investment account in Vietnamese dong at the authorized bank where the direct investment account in foreign currency is opened in order to receive and make payment in VND during the process of foreign direct investment in Vietnam;
- If the foreign investor participates in several BCCs or directly implements several PPP projects, such foreign investor shall open a direct investment account for each BCC or PPP project.
When the investment account is opened in Vietnam, the investors can remit profits abroad according to the following 02-method:
1. Article 6.2 of Circular 06/2019/TT-NHNN, regarding revenues, expenditures transactions on a direct investment account by foreign currency:
- Overseas transfer of profits and legal revenues in foreign currency from foreign investors’ foreign direct investment in Vietnam;
- Overseas transfer of investment capital in foreign currencies by foreign investors in case of capital reduction, finishing, and termination of investment projects, BCC, and PPP contracts in accordance with the law on investment;
- Payment for currency exchange to transfer overseas capital, profits, and legal revenues if the currency used for transferring such items is different from the currency used to open the direct investment account.
2. Article 7.2 of Circular 06/2019/TT-NHNN, regarding revenues, and expenditure transactions on the direct investment account by Vietnamese dong:
- Payments for purchasing foreign currency at authorized credit institutions to transfer their capitals, profits, and legal earnings overseas;
- Transfer of direct investment in Vietnamese dong to Vietnamese investors or payments for purchasing foreign currencies to be transferred as direct investment to foreign investors in the case of capital reduction, finishing, or termination of investment projects, BCC, and PPP contracts in accordance with law on investment;
Accordingly, through the direct investment account, the investors can remit the profits and legal revenues related to direct investment activities in Vietnam and abroad.
Host
I would like to thank Mr. Thuyet sharing with us information about profits remitted from Vietnam to abroad in the form of direct investment. Mr. Thuyet and I hope that our during this episode has provided you with valuable information about the procedures, methods, and other relevant issues when investors implement profits remittances abroad. In addition, we hope it helps listeners as well as investors to implement profits remittances abroad.
Guest
Thank you, Minh, for raising questions and issues that are of interest to our listeners, giving me the opportunity to share about this field. Hopefully, through this topic, listeners will find useful information for themselves and their businesses.
Host
Once again, thank you, Mr. Thuyet, for taking the time to share the information and legal knowledge. Hopefully, the information will be useful to listeners.
At this point, The Lawyers Talk Podcast will stop here, thank you for your interest in listening, goodbye and see you again in the next Podcast.
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Date: 24 May 2024
