With continuous investment waves into Vietnam in the past years, the demand from foreign investors has had no sign of stopping. Accordingly, transferring profit abroad become inevitable by the end of the journey when investment activities have earned investors’ profits.
Foreign investors who make a direct investment in Vietnam are permitted to repatriate profit generating from such investment after completion of their financial obligations to the State of Vietnam. Such profits may be repatriated in cash or in-kind complying with applicable laws and may be remitted annually or after the termination of investment in Vietnam, whichever is determined by the investors. Formulas for calculating repatriated profits are as easy as shown below:
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Annual repatriated profits |
= | Profits are shared to or earned by foreign investors in a financial year from their direct investment (based on audited financial statements) | + | Other profits (e.g.: profits which have not been remitted yet from previous years) | – |
Profits foreign investors have used or committed using to reinvest in Vietnam and profits which foreign investors have used for expenditure for production of business activities or for their personal demands in Vietnam |
| Repatriated profits after terminating investment activities in Vietnam | = | The total profits earned by foreign investors during their direct investment in Vietnam | – | Profits which have been used for reinvestment and profits which were already remitted abroad during their operation period in Vietnam | – | Profits which have been used for other expenditures of foreign investors in Vietnam |
Under the laws of Vietnam, to be entitled to remit earnings abroad, foreign investors must meet the following conditions:
- All financial obligations to the State of Vietnam must be fulfilled by enterprises where foreign investors invest capital before conducting abroad remittance. Profits that investors are permitted to repatriate are earnings after tax, therefore such profits shall not be liable to tax on the transfer of profits abroad.
- There is no accumulated loss. Under the circumstance where the financial statement of one profit-generating year of enterprises in which foreign investors make investment shows accumulated losses after such losses have been transferred from previous years, foreign investors shall not be allowed to remit abroad profits they are shared or earned from their direct investment in Vietnam in such profit-generating year.
- The enterprises where foreign investors make business investment shall complete submission of audited financial statements and enterprise income tax finalization declarations to direct tax-managing authorities and/or of other obligations on tax administration prior to the time of profit remittance
Taking into account above conditions, time of profit repatriation is only legally possible after the enterprises that foreign investors invest in have (1) fulfilled financial obligations and (2) submitted audited financial statements and enterprise income tax finalization declarations to direct tax-managing authorities and/or of other obligations in accordance with the law on tax administration. Regulation of Vietnam also requires foreign investors to either directly complete or authorize their invested enterprises to complete notification on off-shore remittance of profits and submit such notification to the direct tax-managing authority of the enterprises. The notification form must be submitted at least 07 working days before the profits are remitted abroad.
It should be noted that profit repatriation in cash shall be carried out via a bank account used for direct investment in Vietnam. In case of closure of direct investment bank account due to justified reasons, foreign investors are entitled to use their lawful revenues in Vietnamese dong generated from their foreign direct investment activities in Vietnam to purchase foreign currency at authorized credit institutions and transfer this foreign currency amount overseas within a period of 30 working days from the date foreign currency procurement is completed.
Regarding profit repatriation in kind, profits can be remitted abroad in kind which does not fall under the list of goods banned from export and is converted of objects’ value in accordance with the law on import and export.
Don’t forget that there is a long way from the beginning of business establishment before foreign investors can reach to step of profit transfer. Vietnam Visa Easy is always here, being willing and ready to give our clients some peace of mind with our high-quality and trustable assistance in threshold requirements for long-term visa business visa, work permit, permanent resident card, etc.
Fiona