OUTWARD INVESTMENT AND THE ISSUE OF CAPITAL OVERSEAS TRANSFER

In recent years, Vietnam has witnessed a robust wave of outward investment by domestic enterprises across a wide range of sectors, from high-tech industries to processing and manufacturing. According to statistics from 2024, investors from Vietnam invested abroad with a total registered capital of nearly USD 664.8 million, comprising 164 new projects and 26 instances of capital adjustment. To facilitate outward investment while ensuring transparency and strict control over capital inflows and outflows, such activities are governed by a comprehensive legal framework concerning investment management and foreign exchange control. For ensuring the smooth implementation and to avoid potential risks or business disruptions, investors engaging in outward investment must thoroughly understand the relevant legal and regulatory provisions.

Regarding legal procedures for outward investment

According to the prevailing Investment Law of Vietnam, outward investment projects are categorized into two types: projects requiring approval of investment policy, and projects subject only to outward investment registration.

An outward investment project falls under the authority of the National Assembly for investment policy approval if it involves capital from VND 20,000 billion, or if it necessitates the application of special mechanisms or policies. The Prime Minister is responsible for approving the investment policy of projects operating in conditional business sectors (such as banking, insurance, securities, press, telecommunications, etc.) with capital from VND 400 billion, or for projects outside of these sectors with capital from VND 800 billion.

For all other projects, investors are only required to carry out the procedure for obtaining an Outward investment registration certificate in accordance with laws.

In addition to complying with the regulations of Vietnam, investors must also ensure the completion of all legal procedures required under the laws of the host country and any other applicable legal frameworks (if any).

Permissible sources of capital for outward investment

Investors may contribute or mobilize capital for outward investment on the principle of self-responsibility, while complying with regulations on borrowing, and the transfer of foreign currency in accordance with the laws on banking and foreign exchange management.

Permissible capital sources for outward investment include monetary assets and other lawful assets of the investor, formed from equity capital, loans obtained within Vietnam and transferred abroad, or retained earnings derived from overseas investment projects. In addition to cash, capital may also comprise machinery, equipment, intellectual property rights, technology, trademarks, or shares/equity interests in a domestic project (whether as payment or through equity swaps), all of which are considered lawful assets eligible for forming outward investment capital.

It is important to note that in the case of a Vietnamese economic organization in which foreign investors hold more than 50% of charter capital, the outward investment capital must derive from the investor’s equity and must not include capital already contributed for domestic business operations. If additional capital contributions are used, the investor must first obtain an Outward investment registration certificate, and only then proceed with increasing the charter capital and fully contributing the required capital domestically.

Procedures for outward capital transfer and important notes on bank accounts used for investment

Following the issuance of the Outward investment registration certificate, investors are required to open an outward investment capital account in foreign currency (in cases where capital is transferred in foreign currency), or both a foreign currency capital account and a Vietnamese dong account (in cases where capital is transferred in VND), at a licensed credit institution. Investors must also complete the corresponding foreign exchange transaction registration procedures with the State Bank of Vietnam.

All payment and receipt transactions related to the outward investment, such as capital remittance, lending to the foreign project enterprise, investment guarantees, repatriation of capital, profit remittance, and other lawful receipts, must be carried out via the designated investment capital account. Any change related to the account or foreign exchange transactions for outward investment purposes must be registered with the State Bank of Vietnam in accordance with the applicable regulations.

However, to cover expenses for the establishment of the foreign investment project prior to the issuance of the corresponding Investment registration certificate, the laws of Vietnam allows investors to transfer foreign currency through a pre-investment foreign currency account. The investor must provide sufficient valid documentation and shall bear full responsibility for the proper use of the funds transferred abroad, ensuring they are aligned with the registered investment purpose.

It is important to note that the total amount of capital transferred abroad, both before and after the investment registration certificate is issued, must not exceed the total registered investment capital stated in the Certificate. Investors are also required to submit quarterly reports, or ad-hoc reports upon request, to the competent authorities on the status of outbound capital transfers.

Compliance with the obligation to repatriate profits

All profits derived from outbound investment activities, including profits generated by the project and other income arising from the investment, must be repatriated to Vietnam in accordance with applicable regulations.

The statutory deadline for fulfilling the profit repatriation obligation is six (06) months from the date of issuance of the tax finalization report or an equivalent legally recognized document under the laws of the host country. In the event that an extension is needed, the investor must submit a prior written notice to the competent authority in Vietnam; however, the total extended period shall not exceed twelve (12) months.

In cases where the investor intends to retain profits abroad for the purpose of reinvestment, such as contributing additional capital in projects where the registered capital has not yet been fully contributed, increasing investment capital, or implementing new investment projects overseas, the repatriation requirement may be waived. Nevertheless, the investor must proceed with either amending the existing Outward investment registration certificate or applying for a new one in accordance with the relevant legal provisions.

>> OUTWARD INVESTMENT, WHAT SHOULD BE NOTED? https://linconlaw.vn/outward-investment-what-should-be-noted/

>> DO INVESTORS MUST EXECUTE OUTWARD INVESTMENT REPORT? https://linconlaw.vn/do-investors-must-execute-outward-investment-report/