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Introduction
Similar to the established investment protocols and regulatory frameworks within Vietnam, a discerning focus among investors is directed toward the intricate facet of profit remittance. The complexity of this process is further underscored by the stringent protocols governing money laundering and foreign currency control, rendering it a markedly intricate procedure compared to the relatively straightforward capital injection process.
To address this matter, Circular 186/2010/TT-BTC, issued by the Ministry of Finance, delineates the legal parameters governing the overseas remittance of profits. These profits, derived from direct investment activities in Vietnam as per the stipulations of the Investment Law, become eligible for remittance subsequent to the fulfillment of financial obligations to the Vietnamese Government.
The determination between direct and indirect investment in Vietnam is a pivotal consideration, a topic thoroughly explored within the confines of this article.
The forthcoming discourse unfolds a comprehensive exploration of the intricacies involved in remitting profits abroad. Additionally, a concise guide is presented to safeguard against common pitfalls, contributing to an informed and error-free implementation of this critical financial action.
Sequential actions
2.1 Calculate the profits and decide the remittance time
No. | Type of remittance | Calculate the profits | Remittance time |
Annual remittance | (Legal profits earned from direct investment + other profits) - (used amount + re-invested amount + other expenditures) | End of the fiscal year, after completing all financial obligations to Vietnam Government, including the submission of audited financial statements and declaration of company income tax | |
When terminating the investment activities in Vietnam | (Legal profits earned from direct investment) - (re-invested amount + other expenditures) | After completing all financial and tax obligations to Vietnam Government, including the submission of audited financial statements and declaration of company income tax |
2.2 Fulfill all pertinent commitments
Profit repatriation is permissible for investors solely upon the satisfactory completion of all requisite documentation and commitments to pertinent regulatory bodies. Specifically, the corporate entity is mandated to furnish audited financial statements and settle its corporate income tax obligations. Simultaneously, individual investors must fulfill their personal income tax obligations in Vietnam if they are subjected to Personal Income Tax (PIT) responsibilities in the country. This stringent procedural adherence is imperative since the quantification of profits eligible for remittance is contingent upon the data presented in the financial statements and the corporate income tax declaration.
2.3 Notify the tax authority of profit remittance
Prior to remitting profits, investors must formally notify the tax authority using the regulated template. The prescribed template serves as a regulated framework, ensuring that the tax authority receives comprehensive and standardized information pertaining to the impending profit remittance.
This notification can be undertaken individually or delegated to the invested company. It is imperative to initiate this process no later than 7 working days before the scheduled remittance date, ensuring compliance with regulatory timelines.
2.4 Proceed with the banks
Upon the successful completion of step 2.3, investors can commence the remittance process at the banks. The profits earmarked for remittance must be transacted through the dedicated direct investment capital account of the company in which the investors have invested, facilitating a streamlined transfer to their overseas accounts. This procedural adherence ensures the proper routing of funds, maintaining financial integrity and aligning with prevailing regulations.
Key considerations
To ensure the seamless and error-free progression of the remittance process, investors are advised to bear in mind:
3.1 Restrictions on profit remittance:
Foreign investors are prohibited from remitting abroad profits derived from direct investments in Vietnam if, in the financial statements of the enterprises wherein they have invested, there exist accumulated losses after the lawful carry-forward of such losses as per the regulations on enterprise income tax. This restriction underscores the necessity for a thorough assessment of the financial health of the invested enterprises.
3.2 Vigilant monitoring of company reports:
Stay abreast of crucial reports issued by companies operating in Vietnam to maintain the compliance status of the companies and prevent any potential penalties imposed by relevant authorities, particularly tax agencies. link
Engage with a qualified tax expert to navigate the intricacies of potential double taxation obligations if you are required to fulfill income tax responsibilities in Vietnam. This proactive measure is crucial for mitigating financial complications.
3.4 Precision in profit calculation:
Exercise meticulous care during profit calculations and carefully proofread the template submitted to the tax authority. The banks facilitating the remittance will only permit the transfer of the notified amount. Any inaccuracies, whether stemming from a misplaced comma or numerical error, necessitate the repetition of the entire procedural step.
3.5 Timely submission of announcement template:
Submit the announcement template promptly after finalizing profits earmarked for remittance. The stipulated seven working days equate to almost ten calendar days, potentially impacting the tax finalization cycle in the investor's home country. Timely submissions are crucial to align with regulatory timelines and avoid inadvertent delays in the financial cycle.
Here are some relevant hashtags for the given document about global profits repatriation regulations and practices in Vietnam:
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