PROFITS REMITTANCE ABROAD FROM DIRECT INVESTMENT ACTIVITIES

In connection with foreign direct investment in Vietnam, profits remittance abroad has always been a matter of particular concern to foreign investors. The prevailing laws of Vietnam impose relatively strict regulations on procedures, conditions, and methods of implementation in order to ensure the legitimate rights and interests of investors while simultaneously safeguarding the State’s fiscal obligations. In this article, LINCON will address some essential legal issues that foreign investors should take into account when conducting profit remittance abroad arising from direct investment activities in Vietnam.

Profits from foreign direct investment activities must be remitted through the DICA account

Enterprises with foreign direct investment capital, foreign investors participating in business cooperation contracts (BCCs), or public-private partnership projects (PPPs) in cases where no project enterprise is established (collectively referred to as foreign direct investment activities) are required to open a Direct Investment Capital Account (DICA) at a licensed credit institution.

The DICA serves as the sole account for conducting capital transactions of foreign investors, including the remittance abroad of profits and other lawful revenues derived from investment activities on an annual basis; reduction of investment capital; transfer of investment projects; as well as the termination, liquidation, or cessation of investment projects, BCCs, or PPP contracts.

>> OPEN DICA OR ICCA WHEN FOREIGN CAPITAL CONTRIBUTION IS BELOW 51%? https://linconlaw.vn/open-dica-or-icca-when-foreign-capital-contribution-is-below-51/

>> DIRECT INVESTMENT CAPITAL ACCOUNT (DICA), IMPORTANT ISSUES https://linconlaw.vn/direct-investment-capital-account-dica-important-issues/

Types of assets recognized as profits permitted for remittance abroad

In addition to monetary assets, profits that foreign investors are entitled to remit abroad from investment activities in Vietnam may also include in-kind assets.

It should be noted that, in cases where profits are remitted abroad in the form of money, the remittance shall be conducted in a foreign currency. Where profits are remitted abroad in kind, the value of such in-kind assets must be converted in accordance with the provisions of the laws on import and export of goods and other relevant regulations prior to the remittance abroad.

Conditions and timing for profits remittance abroad

Profits remittance abroad shall only be deemed lawful if all statutory conditions and obligations are fully satisfied, after the enterprise in which the foreign investor participates has: (i) fulfilled its financial obligations to the State; (ii) submitted audited financial statements; (iii) filed the corporate income tax finalization return; and (iv) discharged all other tax obligations in accordance with law.

It should be noted that profits distributed and remitted abroad must be consistent with the profit distribution or utilization plan duly approved internally (by the Members’ Council, General Meeting of Shareholders) of the enterprise in which the foreign investor participates.

The amount of profits eligible for remittance abroad shall be determined in accordance with Article 3 of Circular No. 186/2010/TT-BTC of the Ministry of Finance.

“Article 3. Determination the number of profits remitted abroad

1. Annual profits remitted abroad mean profits foreign investors are shared or earn in a financial year from their direct investment based on audited financial statements, enterprise income tax balance sheets in which fioreign investors join investment plus (+) other profit items example as profit items have not remitted yet from previous years adding this year; minus (-) profit items foreign investors have used or committed using in order to reinvest in Vietnam, the profit items foreign investors have used to pay for expenditure items of foreign investors for production and business activities or for foreign investors’ personal demands in Vietnam.

2. Profits are remitted abroad when investment activities in Vietnam are over shall be the total profits earned by foreign investors in the process of direct investment in Vietnam, minus (-) profit items have be used for reinvestment, the profit items were remitted abroad during foreign investors’ operation period in Vietnam and the items been used for other expenditures of foreign investors in Vietnam.

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Notification procedures for profits remittance abroad

At least seven (07) working days prior to the remittance of profits abroad, the foreign investor is obliged to notify the directly managing tax authority. Such notification may be made by the foreign investor personally or through a duly authorized representative, being the enterprise in which the investor participates.

Profits remittance abroad constitutes a lawful right of foreign investors; however, strict compliance with statutory provisions is required in order to ensure that the process is conducted transparently and lawfully, while minimizing potential legal risks and procedural obstacles that may arise during implementation.