Transferring profits from Vietnam to the parent company in the country of origin, also known as remittances, is essential for investors when they conduct foreign investment transactions. However, Vietnam is not an easy country to send money out of the country, especially in comparison to its more developed neighbors like Singapore or Malaysia. This is due to two main reasons: 1. The regulations involving foreign investment are always changing and 2. A thorough understanding of the tax regulations is needed
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This article will give investors a comprehensive insight into remitting their profits from Vietnam to overseas. It is a summary of Circular No. 186/2010/TT-BTC which was approved in November 2010
Definition of Profit Remittance in Vietnam
As defined by the Ministry of Finance’s latest regulations: Following the completion of all financial responsibilities and finalizing your taxes, earnings from Vietnam can be transferred overseas by foreign investors. These remittances are defined as legitimate gains that are earned through direct investment operations in Vietnam under the Investment Law.
Governmental Bodies Oversight
A successful business setup and operation means that foreign investors must first be familiar with who are the authorities and regulatory bodies taking charge of the remittance process.
In addition to that, you need to understand the existing and most updated laws and regulations, restrictions, and permission to ensure full compliance. Here are the government departments and regulatory bodies and compliance procedures you need to know before setting up your foreign business in Vietnam.
Ministry of Finance of Vietnam (MOF)
The MOF in Vietnam is one of the main governmental bodies you need to know of. They have the authority to regulate your profit remittance and adjust taxation for your business in Vietnam. The following details what the MOF can do in regard to profit remittance from Vietnam:
- Regulate a variety of tax rates. They are corporate income tax, value-added tax, special consumption tax, among many
- Modify the remittance conditions that foreigners must comply with in order to transfer their profits from Vietnam to abroad
State Bank of Vietnam (SBV)
All regulations of financial banking and foreign exchange are under the control and supervision of the SBV. With regard to profit remittance from Vietnam, SBV is authorized by the government to perform the following activities:
- Establish requirements for bank account setups
- Issue licenses to banks for the purpose of operating foreign exchange accounts
- Release official exchange rates between Vietnamese Dong and other foreign currencies from around the world
Required Documentation Needed for Remitting Profits
According to the following documents, annual earnings remitted abroad refer to the gains foreign investors share or make from their direct investments throughout a fiscal year:
- Audited financial statements
- Enterprise income tax balance sheets
Restrictions on Profit Remittance in Vietnam
There are some restrictions that foreign investors must be aware of when remitting their profits from Vietnam. Even though Vietnam has quite an open policy that allows firms to transfer profits to their home markets and countries.
In order to operate profitably and smoothly in Vietnam, a basic understanding of these limitations is necessary.
Time Frame Limitation
In accordance with investment Laws in Vietnam, foreigners can only remit their profits once every year. The audit requirements limit the remittance time frame, allowing foreigners to remit their profits only from March of the following year, which is the date that all companies in Vietnam must submit their tax finalizations to the government. Essentially, you cannot transfer your profits out of the country until you have finalized your taxes which is after March 31st.
Company’s Financial Position Limitation
Vietnamese Law states that foreign companies are not allowed to give out dividends when the company has not generated any profits during the fiscal year, or their profits are negative.
For the full regulations as written in the law click here.
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