Many of our Clients ask us about the remittance (to send profits abroad) from their company profits.
Is it possible to send profits abroad from Vietnam to my home country?
There appears to be a myth that once you have invested your money in Vietnam, it is almost impossible to get it back out again.
This article provides a brief overview of the possibilities, conditions, and procedures for overseas profit remittance. Along the way, we will find out whether that myth holds true or not.
THE RIGHT TO SEND YOUR PROFITS ABROAD.
The new Law on Investment, effective from 1 January 2021, provides a list of investment guarantees.
One of the more prominent guarantees is that foreign investors are permitted to transfer their assets overseas.
Assets include:
(a) investment capital and proceeds from the liquidation of investment.
(b) income obtained from business investment activities ( = profits).
(c) money and other assets under the investor’s legal ownership.
The main condition is that “all financial obligations to the Vietnamese Government” are fulfilled.
WHEN ARE YOU ALLOWED TO DISTRIBUTE PROFITS?
Let’s go one step back now. When is a Vietnam – registered company even allowed to distribute profits?
Well, the Law on Enterprises is clear about this: only after a company’s tax liabilities and other financial obligations have been fulfilled.
And only if the company is still able to pay its debts and other liabilities after profit distribution.
In simple terms: you can distribute profits after all of your taxes and fees towards the Government have been paid. As long as you would not put your company in debt because of the profit distribution.
Companies in Vietnam are legally allowed to carry forward their losses for a maximum of 5 years. You are not allowed to remit profits abroad if your company has an accumulated loss !!
Which taxes should be paid before sending your profits overseas?
There are three key taxes that must be paid before you can distribute and remit your profits overseas.
- Value added tax or “VAT”, which is normally paid every quarter.
- Corporate income tax or “CIT”, which is normally paid annually.
- personal income tax or “PIT” in case the profits are distributed to an individual.
In practice, this means that profits are only distributed and remitted at the end of the fiscal year. Or upon the liquidation of an investment project.
Following the correct procedure
If you intend to remit your profits overseas, then you must inform the Tax Authorities of such intention.
If there is no objection from them within 7 working days, then you can proceed. The actual remittance part must go via your so – called “foreign direct investment capital account” or “DICA”.
Your bank may ask you to show (audited) evidence of fulfilling your tax obligations before allowing you to send your profits overseas.
The profits cannot be remitted in VND, but instead you can convert your VND to a foreign currency via your DICA.
Did you know: that for a multi – member limited liability company, the profit distribution must be proportionate to each of the investors’ ownership percentage? For example: if you hold 50% of the ownership of your company, then you are legally allowed to receive only 50% of the profits !!
Applicable tax rates in Vietnam
The standard VAT rate in Vietnam for goods and services is 10%. The standard CIT rate is 20%, but some investments. (for example: software production) enjoy a lower incentivised rate.
The PIT for profits that are paid out to an individual is 5%. Depending on your home country, Vietnam may have a so – called “double tax avoidance agreement” or “DTA” in place.
This may protect you from paying any of the aforementioned taxes for a second time in your home country.
How about that myth?
So is it almost impossible to transfer your company profits out of Vietnam? Absolutely not!
It is actually one of the key guarantees that the Vietnamese Government has listed in its Law on Investment.
And for a good reason, of course: otherwise Vietnam would price itself completely out of the market. As long as you make sure that your accounting and taxation is in order.
Remitting your profits overseas is probably much easier than you expected.
We hope that this article has helped you to better understand the Vietnamese rules for profit remittance.
The Bizlen™ Team specialises in business start up and business consulting for foreigners in Vietnam.
If you have any further questions, or if you have any plans of registering your own company in Vietnam.
Don’t hesitate to let us know and we are happy to tell you all you need to know!
Bizlen.Team@gmail.com
If you are considering opening a business in Vietnam, and you would like to dig a bit deeper.
Click here and take a look at these short Videos that should explain some of the main fundamental information.
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