Regulations on transferring profits abroad of FDI enterprises

Article overview

Transferring profits abroad of FDI enterprises is the process of transferring legal profits from investment activities in Vietnam to foreign countries. Foreign-invested enterprises need to strictly comply with the provisions of Vietnamese law to carry out transparent and regulated profit transfers. The following article will explain in detail the specific conditions, procedures and requirements in the process of transferring profits abroad.

 Transferring profits abroad of FDI enterprises
Transferring profits abroad of FDI enterprises

What are profits transferred abroad? The importance of profit shifting

Pursuant to Article 2 of Circular 186/2010/TT-BTC, profits transferred by foreign investors from Vietnam to foreign countries are understood as legal profits shared or earned from direct investment activities in Vietnam under the Law on Investment, after fully performing financial obligations to the State of Vietnam as prescribed.

The importance of profit shifting

Transferring foreign investors’ profits abroad is important not only for investors but also for businesses. Here are some benefits of transferring profits abroad for investors:

  • Reinvest and develop profits into business activities to help businesses expand production scale; new product development; upgrading technology and facilities; enhance competitiveness.
  • Financial stability and reasonable profit management and transfer help maintain working capital; create financial buffers to cope with risks; ensure the solvency of the enterprise.
  • Encourage staff to use part of profits to pay bonuses and benefits; improve their lives and motivate employees; increase productivity and employee engagement.
  • Other benefits such as: increased opportunities to mobilize capital from investors; Enhance reputation and corporate image; create motivation for continuous development.

Conditions for transferring profits abroad of FDI enterprises

According to the provisions of Circular 186/2010/TT-BTC of the Ministry of Finance and related legal documents, foreign investors must meet the following conditions to transfer profits abroad:

  • Transfer profits abroad at the end of the fiscal year or end of investment activities in Vietnam;
  • Completed financial obligations to the Vietnamese government according to legal regulations;
  • Submitted audited financial statements and fiscal year corporate income tax finalization declaration to the direct tax authority.
Profits transferred abroad
Profits transferred abroad

Forms of profit transfer and time to transfer profits abroad

According to the current Law on Investment, after fulfilling all financial obligations to the State of Vietnam according to regulations.

Profits transferred from Vietnam to foreign countries can be in money or in kind.

  • Profits transferred abroad in money according to the provisions of law on foreign exchange management;
  • Profits are transferred abroad in kind and the value in kind is converted in accordance with the law on import and export of goods and relevant laws.

There are two times when profits are transferred from Vietnam to foreign countries:

  • Transfer profits abroad every year.
  • Transfer profits abroad when ending direct investment activities in Vietnam.

Procedures for transferring profits abroad of FDI enterprises

Step 1: Determine the amount of profits to be transferred abroad (Article 3 of Circular 186/2010/TT-BTC)

  • Profits transferred abroad annually are profits that foreign investors receive or receive in the fiscal year from investment activities plus (+) other profits such as profits that have not been fully transferred from previous years; minus (-) amounts that foreign investors have used or committed to use for reinvestment in Vietnam, profits that foreign investors have used to cover expenses of foreign investors for production and business activities or for personal needs of foreign investors in Vietnam.
  • Profits transferred abroad at the end of investment activities in Vietnam are the total profits earned by foreign investors during the direct investment process in Vietnam, minus (-) profits used for reinvestment, profits transferred abroad during the foreign investor’s operations in Vietnam and amounts used for other expenses of foreign investors in Vietnam.

Step 2: Determine when to transfer profits abroad (Article 4 of Circular 186/2010/TT – BTC)

  • Transfer profits abroad annually at the end of the financial year.
  • Transfer profits abroad when ending direct investment activities in Vietnam

Step 3: Notification of transferring profits abroad (Article 5 of Circular 186/2010/TT – BTC)

At least 07 working days before transferring profits abroad, the foreign investor directly or authorizes the enterprise in which the foreign investor participates in investing shall notify the transfer of profits abroad. sent to the tax authority directly managing the enterprise in which the foreign investor participates in investment, at least 07 working days before transferring profits abroad.

The content of the notification form to transfer profits abroad must provide complete, accurate, and detailed information as follows (notification form is specified in Circular 186/2010/TT-BTC):

  • Foreign investor (name, nationality);
  • Enterprises with foreign investors participating in capital investment;
  • Register investors’ profits transferred abroad;
  • Amount of profit proposed to be transferred abroad;
  • The investor’s commitment that the information in the notification form is completely true. If it is untrue, you will be responsible in accordance with the law.
Timeline for transferring profits abroad
Timeline for transferring profits abroad

Consulting services on procedures for transferring profits abroad for FDI enterprises in Long Phan

At Long Phan, we provide comprehensive support services in transferring profits abroad for FDI enterprises. Our services include:

  • Consulting on conditions for transferring profits abroad of FDI enterprises;
  • Consulting on when and how to transfer profits abroad;
  • Support in determining the exact amount of profits allowed to be transferred abroad;
  • Consulting on financial obligations to the state before transferring profits abroad;
  • Consulting on preparing financial statements for auditing;
  • Consulting on procedures for declaring and finalizing corporate income tax before transferring profits abroad;
  • Consulting and support in preparing all necessary documents and records for profit transfer;
  • Support in drafting profit transfer notices;
  • Support for submitting documents and carrying out procedures at competent agencies;
  • Consulting on handling problems that arise during the profit transfer process.

>>> Reference: Consulting on transferring profits from Vietnam to foreign countries for investors.

Accurate profit transfer and compliance with regulations help FDI enterprises ensure transparency and avoid risks. We provide professional solutions, helping the process of transferring profits abroad of FDI enterprises smoothly and effectively. Please contact the hotline 0906735386 for detailed advice and best support from the Long Phan team of experts.