MECHANISM FOR REPATRIATION OF PROFITS ABROAD BY FDI ENTERPRISES

For foreign-invested enterprises (FDIs), the repatriation of profits abroad is not only a legitimate financial need but also an essential part of their global capital recovery and reinvestment strategy. However, this right cannot be exercised arbitrarily, but must comply with a strict legal framework to ensure transparency, fairness, and fulfillment of financial obligations in Vietnam. So, how is the mechanism for repatriating profits abroad regulated by law?

1. Legal Basis

Pursuant to Article 12 of the Law on Investment 2020, foreign investors are guaranteed the right to transfer assets from Vietnam abroad after fully fulfilling their financial obligations to the Vietnamese State. However, this right is limited to the following types of assets:

  1. Investment capital and proceeds from the liquidation of investments;
  2. Income earned from investment and business activities;
  3. Money and other lawful assets owned by the investor.

Specifically, according to Official Letter No. 4480/TCT-CS dated October 10, 2023, issued by the General Department of Taxation in response to inquiries about profit repatriation abroad:

Profits repatriated abroad by foreign investors are defined as lawfully earned profits distributed or derived from direct investment activities in Vietnam under the Law on Investment, after fulfilling all financial obligations to the Vietnamese State as prescribed.

These profits may be in the form of cash or in-kind:

  • If in cash → The repatriation must comply with the provisions of the law on foreign exchange management.
  • If in kind → The value must be converted in accordance with regulations on the import and export of goods and relevant legal provisions.

2. Determination of Profits Eligible for Repatriation

According to Article 3 of Circular No. 186/2010/TT-BTC, the formula for determining the amount of profits eligible for repatriation abroad is as follows:

Profits eligible for repatriation

= [ Profit after tax for the first financial year ] + [ Undistributed profits carried forward from previous years] – [ Profits committed or used for reinvestment in Vietnam ] – [ Profits used for business activities or private spending in Vietnam ]

Where:

  • Profit after tax refers to the remaining profit after the enterprise has finalized corporate income tax and fulfilled all other financial obligations.
  • Undistributed profits are those not yet repatriated in previous financial years.
  • Reinvested profits are amounts used for direct reinvestment in Vietnam.
  • Used profits refer to amounts already spent for business operations, private purposes, or other expenditures within Vietnam.

3. Conditions for Repatriating Profits Abroad

The repatriation of profits must comply with key conditions stipulated in the Law on Investment, Circular No. 186/2010/TT-BTC, and other relevant legal documents:

  • The profits must originate from lawful income sources and must not be used for personal purposes or for purposes unrelated to the investment.
  • The enterprise must have fulfilled all financial obligations relating to taxes, fees, and charges payable to the State of Vietnam.
  • The enterprise must have an independently audited financial statement and must have submitted complete finalization dossiers for the financial year to the tax authority.
  • A resolution or decision must be adopted by the owner, the Board of Directors, or the Members’ Council of the enterprise on the distribution of profits to be repatriated to the foreign investor.
  • A written notice must be submitted to the directly managing tax authority at least seven (07) working days prior to the intended date of profit remittance abroad.
  • According to Circular No. 06/2019/TT-NHNN, the enterprise must open and use a direct investment capital account in Vietnam to transfer lawful assets abroad. Additionally, all receipts and expenditures on this account must comply with foreign currency or Vietnamese dong transaction regulations, specifically as stipulated in Point d Clause 1, Point e Clause 2 Article 6 and Point d Clause 1, Points c and d Clause 2 Article 7.

The repatriation of profits abroad is a legitimate right of foreign investors and also reflects Vietnam’s commitment to fostering a transparent and investor-friendly business environment. However, this right is not absolute; it is subject to a well-defined legal framework that requires full compliance with tax, financial, and administrative procedures.

When conducted in accordance with the law, this mechanism not only safeguards the interests of investors but also strengthens confidence in the legal system and promotes the sustainable development of investment capital flows in Vietnam.

📞 CONTACT LEGAL CONSULTANT:

TLA Law is a leading law firm with a team of highly experienced lawyers specializing in criminal, civil, corporate, marriage and family law, and more. We are committed to providing comprehensive legal support and answering all your legal questions. If you have any further questions, please do not hesitate to contact us.

1. Lawyer Vu Thi Phuong Thanh, Ha Noi Bar Association

Email: vtpthanh@tlalaw.vn

2. Lawyer Tran My Le, Ha Noi Bar Association

Email: https://tlalaw.vn/

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