Date: 2 December 2021
Currently, several Vietnam-based entities have conducted successfully outbound investments. Some notable investors include Vingroup, Masan Vonfram Company Limited (under Masan Group), Vietnam Rubber Group, Viettel Group, etc.
By this 30 Frequent Questions and Answers, BLawyers Vietnam would like to provide an overview of the outbound investment procedure. Which introduces the terms and conditions for transferring capital for outbound investment, and profit remittance when carrying out outbound investment pursuant to the prevailing laws of Vietnam.
1. What is the outbound investment activity?
Outbound investment activity means an investor transferring investment capital from Vietnam to overseas and using the profit obtained from such investment capital to carry out investment and business activities overseas.
2. Who can carry out procedures for outbound investment?
The following investors are permitted to carry out outbound investment procedures:
- Enterprises established and operating under the Law on Enterprises and Law on Investment;
- Cooperatives and cooperative unions established and operate under the Law on Cooperatives.
- Credit institutions established and operating under the Law on Credit Institutions.
- Household businesses registered under Vietnam’s laws.
- Vietnamese individuals, except for individuals with no right to establish and manage enterprises in Vietnam.
- Other organizations making business investments under Vietnam’s laws.
3. What types of outbound investment are there?
The investors can carry out the outbound investment in the following forms:
- Establishment of a business organization in accordance with laws of the host country;
- Investing based on an overseas contract;
- Contribution of capital to, purchase of shares or stakes of an overseas business organization to participate in the management of such business organization;
- Trading in securities, other financial instruments, or investing in securities investment funds and other intermediary financial institutions in a host country; or
- Other forms of investment are prescribed by the law of the host country.
4. What should investors consider about the business lines according to Vietnamese law when carrying out outbound investment procedures?
Investors cannot conduct business lines in which outbound investments are banned, such as:
- Banned business lines specified in the Law on Investment and relevant international treaties;
- Business lines with technologies and products banned from export under legal provisions; and
- Banned business lines in accordance with regulations of laws of the host countries.
Investors must meet business conditions for conditional business lines when carrying out outbound investment, including:
- Press, radio, and television; and
- Real estate business.
5. How is the forms of outbound investment capital?
The outbound investment capital is in the following forms:
- Foreign currencies on the accounts opened at licensed credit institutions or purchased from licensed credit institutions under legal provisions;
- Vietnamese Dong;
- Machinery, equipment, supplies, raw materials, fuels, finished and semi-finished goods;
- Value of intellectual property rights, technologies, brands, and rights to assets;
- Shares, capital contributions, and projects of investors are exchanged at economic organizations in Vietnam and overseas economic organizations; and
- Other legal assets prescribed by regulations of civil law.
6. What conditions must investors meet before carrying out outbound investment procedures?
Investors must meet the following conditions before carrying out outbound investment procedures:
- Having an outbound investment project;
- Committing to finance rights and obligations to the Vietnamese Government;
- Seeking approval of the Ministry of Planning and Investment and being granted the Outbound Investment Registration Certificate (“OIRC”); and
- Committing to comply with the provisions of the terms in the case of using state loans for foreign direct investment.
7. What are the procedures for carrying out outbound investment?
Investors can refer to the process of outbound investment procedures as follows:
(i) Step 1: Applying for an outbound investment approval if the project is subject to investment policy approval;
(ii) Step 2: Applying for obtaining the OIRC;
(iii) Step 3: Applying for an outbound investment approval in the host country in accordance with the law of the host country;
(iv) Step 4: Opening an outbound direct investment account at the commercial banks in Vietnam to transfer investment capital from Vietnam to overseas;
(v) Step 5: Opening an investment account in the host country to receive the investment capital transferred from Vietnam; and
(vi) Step 6: Registering for the outbound capital transfer.
8. What are the conditions for obtaining the OIRC?
To be issued the OIRC, the investors must satisfy the following conditions:
- Outbound investment activities shall comply with the principles of outbound direct investment;
- Outbound investment activities do not fall in the banned business lines from outbound investment and meet the conditions in conditional outbound investment business lines;
- The investors commit to arranging foreign currency amounts for carrying out outbound investment activities by themselves or arranging at a licensed credit institution;
- There is an outbound investment decision in accordance with the law; and
- There is a tax authority’s document certifying the investors’ fulfillment of the tax payment obligation. Such documents must be issued by the tax authority within 03 months till the date of submission of the investment project dossier.
9. What are the procedures for obtaining the OIRC?
The procedures for obtaining the OIRC are as below:
- Step 1: Submitting the application to the Ministry of Planning and Investment (the “Licensing Authority”);
- Step 2: The Licensing Authority shall check the dossier and request for a supplement (if any) within 05 working days; and
- Step 3: Obtaining the OIRC from the Licensing Authority within 15 days from the date of receiving the valid dossier.
10. What documents investors shall prepare for obtaining the OIRC?
If the project is not subject to the investment policy approval, investors shall prepare the following documents:
- A written registration for outbound investment;
- A document certifying the investors’ legal status;
- The outbound investment decision under legal provisions;
- A written commitment to arrange foreign currency amounts by themselves or a written commitment to arrange foreign currency amounts for investors issued by the licensed credit institution under legal provisions; and
- For outbound investment projects in the conditional business lines, investors shall submit a competent state agency’s written approval stating their satisfaction with the outbound investment conditions (if any).
11. Which projects must have documents stating the location of the investment project? What documents certify the location of the investment project?
Investment projects that must have documents stating project location include:
- Projects subject to approval for their outbound investment guidelines by the Prime Minister or the National Assembly;
- Energy projects;
- Projects on livestock production, cultivation, afforestation, and aquaculture;
- Projects on exploration, extraction, and processing of minerals;
- Project(s) on the construction of factories and manufacturing and processing facilities;
- Projects on investment in the construction of works and infrastructure; projects on investment in real estate business, except for the provision of the following services: real estate brokerage, real estate exchange, real estate consulting, and real estate management.
A document stating the project location is one of the following papers:
- Investment license or equivalent document of the host country or territory;
- Decision on land allocation or land lease of the competent authority in the host country or territory;
- Contract awarding agreement; land allocation or land lease agreement; investment and business cooperation contract enclosed with a document proving relevant parties’ competence in the location in the contract; or
- Principal agreement on land allocation, land lease, business location lease, transfer of the rights to use land or property on land; agreement on investment and business cooperation contract enclosed with a document proving relevant parties’ competence in the location in the contract.
12. Can investors transfer investment capital overseas by using their bank account opened in Vietnam?
No. Investors cannot use the bank account opened in Vietnam to transfer investment capital overseas but must instead open an outbound investment capital account at a licensed credit institution in Vietnam under laws on foreign exchange control. All investment capital transfer transactions from Vietnam to overseas and from overseas to Vietnam related to outbound investment activities must go through this outbound investment capital account.
13. What currency is usable for transfer of outbound investment capital?
The currency is useable for transfer of outbound investment includes the following:
- Foreign currency; or
- Vietnamese Dong may be used if the host country or territory and Vietnam have concluded an agreement, or bilateral agreement, or multilateral agreement which allows using Vietnamese Dong to make payments and remittance.
14. How to use outbound investment capital account?
Investors must open an outbound investment capital account in foreign currency/Vietnamese Dong in accordance with the demand of outbound investment capital transfer at a licensed credit institution in Vietnam. Investors transfer investment capital to overseas from this account to carry out outbound investment projects.
Regarding capital contribution in foreign currency, investors must purchase foreign currency at a licensed bank or use their foreign currency with the assurance that the source of foreign currency is legal.
15. Can investors with multiple outbound investment projects use the same investment capital account?
No. If investors engage in several different outbound investment projects, each project will require its particular investment capital account.
16. Conditions for investors to transfer investment capital to overseas
Investors may transfer investment capital for carrying out investment activities when meeting the following conditions:
- Having obtained the OIRC;
- The investment activities have been approved or licensed by a competent authority of the host country. In case the law of the host country does not require investment licensing or approval, the investors shall have a document proving their right to carry out investment activities in the host country; and
- Having a capital account under the laws.
17. How do investors use profits overseas? Can investors re-invest profits in the projects?
Investors may use profits earned from outbound investment for use in the following cases:
- Continuing to contribute outbound investment capital in case of insufficient capital contribution according to registration;
- Increasing outbound investment capital;
- Implementing new outbound investment projects.
Therefore, to use profits earned from investment activities overseas for reinvesting in the projects such as increasing capital or expanding investment activities overseas, investors shall carry out procedures for modification of OIRC and report such to the State Bank of Vietnam.
18. Is it compulsory for investors to transfer profits from outbound investment activities to Vietnam? Is there any legislation about penalties for failing to transfer profits to Vietnam that investors should be concerned about?
Investors shall transfer all profits and other incomes earned from outbound investment activities (if any) to Vietnam. Within the time limit, if failing to transfer profits and other incomes to Vietnam, investors shall report in writing such to the Licensing Authority and the State Bank of Vietnam.
If investors do not transfer all profits and other income earned from outbound investment activities to Vietnam within the specified time limit, they will be administratively sanctioned with a fine of up to VND30,000,000 for institutional investors. Individual investors will be fined half of the mentioned amount.
19. When will the profits from outbound investment projects be transferred to Vietnam? What is the time limit for transferring profits to Vietnam?
Within 6 months from the date of issuance of a tax finalization statement or a document of equivalent legal validity under the law of the host country, investors shall transfer all profits and other incomes earned from outbound investment activities to Vietnam.
The time limit for transferring profits to Vietnam may be extended not more than 12 months from the expiration date of the prescribed period.
20. Do outbound investment projects have to pay Corporate Income Tax (“CIT”) in Vietnam after paying CIT overseas?
If outbound investment projects generate profits and have already paid CIT overseas, investors do not need to pay CIT in Vietnam; tax authorities will deduct it under the provisions of the Double Taxation Treaty, specifically as follows:
- If Vietnamese investors in overseas transfer their income to Vietnam after paying CIT in countries that have signed a Double Taxation Treaty, regulations of such Treaty shall be applied;
- For the host countries that have not signed a Double Taxation Treaty with Vietnam, if the rate of CIT paid in the host countries is lower than the rate of CIT paid in Vietnam, the CIT difference amount shall be obtained under laws on CIT of Vietnam.
In case an income earned from outbound investment projects has been paid the CIT (or a similar tax) overseas, investors may deduct the tax paid overseas or paid by the foreign partners (including the tax on dividends) from the amount of CIT payable in Vietnam, however, the deducted tax must not exceed the amount of CIT calculated under the Law on Corporate Income Tax of Vietnam.
21. Can investors transfer the entire investment capital of outbound investment projects to other parties overseas?
Yes. However, before terminating the projects and transferring the entire outbound investment capital to other parties overseas, investors must notify the State Bank of Vietnam and apply for termination of the OIRC’s validity at the Licensing Authority.
22. When do outbound investment projects expire?
The outbound investment projects shall be terminated in the following cases:
- Investors decide to terminate the projects;
- The projects’ operation duration expire in accordance with the law of the host country;
- Under the termination conditions stated in the contract or enterprises charter;
- Investors transfer the whole outbound investment capital to other parties overseas;
- Past 24 months from the date of granting the investment registration certificate, investors fail or are unable to implement the projects according to the schedule registered with a state management agency and fail to carry out procedures for extension of the investment period;
- The economic organizations overseas are dissolved or go bust in accordance with the law of the host country; or
- Under a court judgment or decision or an arbitral award.
Upon termination of outbound investment projects, investors must follow procedures for terminating the outbound investment projects under the law of the host country, as well as procedures for invalidating the OIRC.
23. What documents shall be prepared to terminate an OIRC’s validity?
The dossier for termination of an OIRC’s validity includes the following documents:
- An application form for termination of the OIRC’s validity;
- OIRC (original);
- Decision on termination of the outbound investment project;
- Documents proving that the investors have completed the project termination, liquidation, and transfer of all money, assets, revenues from the project’s termination and liquidation activities to Vietnam; and
- Documents about the investor’s legal status.
24. What reporting regime must OIRC-granted investors adhere to? What is the implementation time for each report and form of submission?
After the OIRC is issued, investors shall implement the reporting regime as follow:
- Notice of the implementation of outbound investment activities. Investors shall send a written notice of the implementation of outbound investment activities within 60 days from the date an investment project is approved or licensed in accordance with the law of the host country;
- Quarter report on the operation of the investment project. Investors shall send a report on the operation of the investment project quarterly before the 20th day of the last month of the reporting quarter;
- Annual report on the operation of the investment project. Investors shall send an annual report on the operation of investment projects before 20 December of the reporting year;
- Report on the operation of the investment project for the fiscal year. Investors shall send a report on the operation of the investment project for the fiscal year within 06 months from the date of issuance of a tax finalization statement or another paper of equivalent legal validity in accordance with the law of the host country;
These reports are made in writing and through the National Foreign Investment Information System.
25. Is a notarized Vietnamese translation a must-have if the report is submitted with foreign language documents?
Yes, it is. The report is with foreign language documents (investment license/document, financial statement, overseas tax finalization statement, etc.), investors must provide a valid copy and a notarized Vietnamese translation.
26. Must an investor submit reports for the outbound investment project that is currently pending or newly granted an OIRC without being implemented overseas?
Yes, it must. Investors must submit reports under regulations from the time the project is granted OIRC, whether it is implemented in foreign countries or not, even if it is under suspension until terminating the validity of the OIRC.
27. Will investors report to a Vietnamese government if an outbound investment project closes but the procedures for terminating the OIRC’s validity have not been implemented or completed?
Yes, they will. Investors must implement the outbound investment reporting regime from the time of issuing the OIRC until terminating the OIRC’s validity. If the investors have terminated the project’s implementation in a host country but have not implemented or completed the procedures for terminating the invalidation of the OIRC, the investors must implement the reporting regime until terminating the OIRC’s validity.
28. What if an investor fails to submit reports on outbound investment activities or submit them late?
If an investor fails to comply with the reporting regime on outbound investment activities or report insufficiently, it maybe bear a fine of up to VND10,000,000/ time of violation. Individual investors will bear half of the mentioned fine amount.
29. What are the rights and responsibilities of investors when assigning Vietnamese workers to work in outbound investment projects?
Investors have the following rights and obligations:
- Assigning Vietnamese workers to work for their outbound investment projects according to laws of Vietnam, and laws of the host country;
- Completing all procedures for assigning Vietnamese workers to work for outbound investment projects; protect the legal rights of overseas Vietnamese workers; assume responsibility for handling issues arising from assigning Vietnamese workers to work for outbound investment projects under the regulations of law on Vietnamese workers working overseas under contracts and other relevant regulations.
30. Must the assigned employees to work in outbound investment projects who have already paid personal income tax (“PIT”) pay PIT again in Vietnam?
Employees who work at outbound investment projects, receive their salaries overseas, and pay PIT in accordance with foreign regulations must not pay PIT in Vietnam. However, the tax authority will deduct the paid tax amount in Vietnam (the deducted tax amount does not exceed the payable tax amount calculated according to Vietnam’s tax schedule).
Maybe you want to read: