In business, profits are often considered as one of the top priorities of investors. This is certainly not an exception for consideration when foreign investors engage in direct investment activities in Vietnam (in  direct investment activities, investors will contribute capital to and manage their investment activities). However, many foreign investors have been concerning about issues such as: What conditions applicable for these issues; Which profits will be repatriated; How many forms of profits can be repatriated; What time, conditions, tools and procedures involved in repatriating profits?

This article can help foreign investors resolve and have a better understanding of major issues, as shown above, relating to profits repatriation from Vietnam (hereinafter referred to as “Profit repatriation”) 

1. Legal grounds on profits repatriation

• Circular No. 186/2010/TT-BTC guiding the profit repatriation by foreign organizations and individuals from direct investment in Vietnam in accordance with the Law on Investment (“Circular 186/2010/TT-BTC“)
• Circular No. 06/2019/TT-NHNN guiding the foreign exchange management for the foreign direct investment in Vietnam (“Circular No. 06/2019/TT-NHNN“)

2. Profits which can be repatriated

Profits (of a foreign investor) which can be repatriated are lawful profits, shared or earned from direct investment activities in Vietnam under Law on Investment after the foreign investor fulfill its financial obligation to the State of Vietnam.

Profit can be money or in kind. In case of money, it must subject to the law on foreign exchange control. In case of being in kind, its value shall be converted into money according to the provisions on goods import, goods export, and other relevant sectors.

3. Forms of profit repatriation

There are two forms of profit repatriation:

• Annual profits repatriated (at the end of a financial year)
• Profits which are repatriated after investment activities in Vietnam are ended with, for example, dissolution of a foreign-invested enterprise; or ending, liquidating, terminating the operation of an investment project or a business cooperation contract; or investment capital transfer to change the original shareholder of a foreign-invested enterprise.

Wait for a second! Do you know the procedure for the establishment of a representative office when a foreigner invests in Vietnam?

4. Time for profit repatriation

• For profit repatriated annually: The time for repatriating this profit is when the fiscal year is ended, and foreign-invested companies have completed their financial obligations to the State of Vietnam and submitted their audited financial statements and finalization declarations of that fiscal year to a tax bureau.
• For profit repatriated when ending direct investment activities in Vietnam: When a foreign-invested enterprise has completed its financial obligations to the State of Vietnam under the law, submitted its audited financial statement and tax finalization declaration for company income tax of the ending year of these investment activities to a tax bureau, and fulfilled all the obligations under the Law on Tax Administration.

5. Conditions for profit repatriation

If a foreign investor would like to repatriate profits from Vietnam, the company, where the foreign investor invest in, must satisfy the following conditions to repatriate its profit:

• Fulfilling its financial obligations to the State of Vietnam under the law.
• Submitting its audited financial statement and declaration of its company income tax to a competent tax bureau.
• Fulfilling other obligations in accordance with the law on tax administration (if any).

Note: The foreign investor might only repatriate its profits earned from its investment activities in Vietnam when its company has been deducted from all accumulated losses under the law on enterprise income tax

6. Tools for profit repatriation

A foreign investor must repatriate its lawful profits and other revenue sources related to its direct investment activities in Vietnam via a direct investment capital account.

In particular, according to the provisions of Circular 06/2019/TT-NHNN: “Account of direct investment capital” is a payment account in foreign currency or in Vietnam Dong, opened by a foreign-invested enterprise with an authorized bank, or opened by a foreign investor with an authorized bank in case the foreign investor does not establish its project enterprise or engage in BCC or PPP.

7. Procedure for profit repatriation

According to Article 5 of Circular No. 186/2010/TT-BTC, before repatriating profits, a foreign investor need to follow procedures for Notification of profit repatriation as follows:

a) Application components:

• Profit repatriation of an institutional foreign investor (e.g the foreign investor is a company)

–  A Notice of the profit repatriation

– A meeting minutes of the Board of Directors (if the foreign-invested enterprise is a joint-stock company), or that of the Board of Members (if the foreign-invested enterprise is a Limited Liability Company) approving the distribution of profits

– Audited financial statements, declarations of company income tax finalization and personal income tax finalization of the foreign-invested enterprise

• Profit repatriation of an individual foreign investor

– A Notice of the profit repatriation

– A meeting minutes of the Board of Directors (if the foreign-invested enterprise is a joint-stock company), or that of the Board of Members (if the foreign-invested enterprise is a Limited Liability Company) approving the distribution of profits

– Audited financial statements, declarations of company income tax finalization and personal income tax finalization of the foreign-invested enterprise

– A declaration of deduction of personal income tax and personal income tax receipts from the capital investment of the foreign investor

b) Time limit for notification: at least 07 (seven) working days before repatriating profits

c) The foreign investor, or its foreign-invested enterprise (if authorized by the foreign investors), will carry out this procedure.

d) Licensing authority: A tax bureau competent to govern the foreign-invested enterprise

Conclusion

The above are some issues related to the profit repatriation of foreign investors from their direct investment activities in Vietnam. We hope that this article will equip some important legal knowledge to foreign investors when investing in Vietnam. Our client should also refer to the article about popular investment forms in Vietnam to have a better overview.

Bizlawyer is catering to legal services relating to profit repatriation. Should our clients have any questions or are interested in our legal service, please contact us through our email: Info@bizlawyer.vn or Hotline Call: +8486.888.1900 for timely advice and support.