Circular No. 124/2004/TT-BTC dated December 23, 2004 of the Ministry of Finance guiding the implementation of the regulations on transfer of profits abroad by foreign economic organizations or individuals, that earn profits from their investment in forms prescribed in the Law on foreign investment in Vietnam

CIRCULAR

GUIDING THE IMPLEMENTATION OF THE REGULATIONS ON TRANSFER OF PROFITS ABROAD BY FOREIGN ECONOMIC ORGANIZATIONS OR INDIVIDUALS, THAT EARN PROFITS FROM THEIR INVESTMENT IN FORMS PRESCRIBED IN THE LAW ON FOREIGN INVESTMENT IN VIETNAM

Pursuant to the Law on Foreign Investment in Vietnam, which was passed on November 12, 1996 by the National Assembly of the Socialist Republic of Vietnam and the Law Amending and Supplementing a Number of Articles of the Law on Foreign Investment in Vietnam, which was passed on June 9, 2000 by the National Assembly of the Socialist Republic of Vietnam. Pursuant to the Government’s Decree No. 24/2000/ND-CP of July 31, 2000 detailing the implementation of the Law on Foreign Investment in Vietnam;

Pursuant to Enterprise Income Tax (EIT) Law No. 09/2003/QH11; Pursuant to the provisions of the Government’s Decree No. 164/2003/ND-CP of December 22, 2003 detailing the implementation of the EIT Law,

The Ministry of Finance hereby guides the implementation of the regulations on transfer of profits abroad by foreign economic organizations or individuals, which are earned from the capital investment in forms prescribed in the Law on Foreign Investment in Vietnam as follows:

I. SUBJECTS OF APPLICATION

This Circular applies to foreign economic organizations or individuals that invest capital in forms prescribed in the Law on Foreign Investment in Vietnam (hereinafter referred collectively to as foreign investors), that transfer their profits from Vietnam.

Profits, which can be transferred abroad by foreign investors, as guided in this Circular, include:

- Profits distributed or earned from investment activities under the Law on Foreign Investment in Vietnam;

- Profits earned from the capital transfer after the fulfillment of EIT obligations;

- Incomes being the EIT amounts overpaid or refunded for the reinvested profits which are now transferred abroad by foreign investors.

II. SPECIFIC PROVISIONS

1. Time for transferring profits abroad:

Foreign investors may transfer their profits abroad in the following cases:

1.1. Transferring annually or in lump sum all distributed or earned profits at the end of a fiscal year and after the submission of tax settlement reports to the tax offices.

1.2. Temporarily transferring profits quarterly or biannually right in the fiscal year after the EIT has been paid in accordance with the EIT Law (except for cases where foreign investors are exempt from EIT under the Law on Foreign Investment in Vietnam and the EIT Law).

1.3. Transferring profits upon the termination of business activities in Vietnam according to the provisions of the Law on Foreign Investment in Vietnam.

2. Determination of profit amounts to be transferred abroad:

2.1. Profits to be transferred abroad annually mean the profit amounts distributed to foreign investors in the fiscal year after the fulfillment of tax obligations under the EIT Law, plus (+) other profits earned in the year such as profits from the transfer of capital or assets, the paid EIT amounts refunded to investors under the EIT Law, minus (-) the amounts used or committed to use by foreign investors for reinvestment in Vietnam, profit amounts used by foreign investors to cover the expenses for their production/business activities or personal needs in Vietnam, and profit amounts temporarily transferred in the year.

The income amounts to be transferred abroad by foreign investors in the fiscal year shall be determined after the enterprises submit their audited financial statements and tax settlement reports of the fiscal year to the local tax offices managing the enterprises.

2.2. Profits to be temporarily transferred abroad quarterly or biannually:

The profit amounts to be temporarily transferred abroad by foreign investors quarterly or biannually right in the fiscal year mean the profit amounts distributed to the investors on the basis of the enterprises’ quarterly or biannual financial statements, equivalent to the profit amounts after EIT has been declared and paid, minus (-) the profit amounts used by foreign investors for other purposes such as reinvestment, expenses for production/business activities or consumption in Vietnam.

In cases where the profit amounts temporarily transferred abroad and spent in Vietnam by foreign investors in the fiscal year are smaller than the profit amounts distributed to them after the fiscal year ends (to be determined under Point 2.1 above), the foreign investors may continue to transfer abroad the unused or non-transferred difference amounts. In cases where the profit amounts temporarily transferred abroad and spent in Vietnam for other purposes by foreign investors are larger than the distributed profit amounts, the difference thereof must be deducted into the profit amounts to be transferred in the subsequent periods.

2.3. Profits to be transferred abroad upon the termination of activities in Vietnam mean the total profit amounts lawfully earned by foreign investors in the process of their investment in Vietnam after the fulfillment of EIT obligations under the EIT Law, minus (-) the profit amounts already used for reinvestment, profit amounts already transferred abroad in the course of foreign investors’ operation in Vietnam and amounts used for other expenditures of foreign investors in Vietnam.

In cases where foreign investors have made EIT settlement and transferred their profits annually, they shall make tax settlement and determine the remaining profit amounts to be transferred abroad upon the termination of their operation.

3. Conditions for temporary transfer of profits abroad:

3.1. Foreign investors that invest capital in foreign-invested enterprises and/or foreign parties to business cooperation contracts may temporarily transfer profits abroad quarterly or biannually if they have made EIT declaration of the fiscal year and temporarily paid quarterly EIT strictly according to the provisions of Point 1, Section II, Part D of the Finance Ministry’s Circular No. 128/2003/TT-BTC guiding the implementation of the Government’s Decree No. 164/2003/ND-CP of December 22, 2003 which details the implementation of the EIT Law.

3.2. Foreign investors must not temporarily transfer the profits abroad quarterly or biannually as guided in this Circular in the following cases:

- Profits are distributed to foreign investors investing capital in enterprises which fail to make EIT declaration for the fiscal year as mentioned at Point 3.1, Section II of this Circular;

- The distributed profit amounts are determined as not compliant with Vietnam’s current law provisions on taxes and accounting;

- The distributed profit amounts are of the last year before the end of the operation duration under investment licenses or upon the operation termination under decisions of investors or competent State agencies;

III. ORGANIZATION OF IMPLEMENTATION

1. Foreign investors, when carrying out the procedures for the transfer of profits abroad, must make declarations on the transfer of profits abroad (according to a set form) and send them to the local tax offices directly managing tax collection from the enterprises which the foreign investors have made investments in.

The local tax offices shall have to certify the paid EIT amounts related to the profit amounts requested for overseas transfer by foreign investors within 7 working days, for cases of periodical temporary transfer, or 15 working days, for cases of annual transfer of profits and upon the operation termination. The tax offices’ certification shall be inscribed in declarations on the transfer of profits abroad.

2. The tax offices shall not certify the profit amounts requested to be transferred abroad by foreign investors for cases mentioned at Point 3.2, Section II of this Circular and cases where enterprises, which the foreign investors invest their capital in, have violated tax legislation or other law provisions related to the enterprises’ fulfillment of financial obligations.

In case of refusal to give such certification, the tax offices must notify the foreign investors in writing of the reasons therefor.

For enterprises’ profit amounts not determined as compliant with Vietnam’s current tax law provisions and accounting standards on the determination of revenues and expenditures, the tax offices managing the enterprises shall have to request the enterprises to re-determine them in compliance with current tax legislation provisions and accounting standards; on that basis, the tax offices shall certify the paid EIT amounts related to the profit amounts to be transferred abroad by foreign investors.

3. Basing themselves on the tax offices’ certification of tax obligation fulfillment and the foreign investors’ profit amounts to be transferred abroad, the banks where the foreign investors open their accounts shall transfer the foreign investors’ distributed profits abroad.

This Circular takes effect 15 days after its publication in the Official Gazette. In the course of implementation, if any problems arise, organizations and individuals should report them to the Ministry of Finance for timely settlement.

APPENDIX

(To Circular No. 124/2004/TT-BTC of December 23, 2004)

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

DECLARATION ON REMITTANCE OF PROFITS ABROAD

1. Name of investing foreign organization or individual: ……………

Nationality: …………………….........................................................

2. Having invested capital at ………………… (

Under investment license

3. Address of the enterprise's headquarters:

………………………………………………………….......................

4. Declaration of incomes earned:

- From business establishment A:

Year:

Year:

- From business establishment B:

Year:

Year:

5. Incomes used:

- Already remitted or retained overseas in the previous period: ……

- Already reinvested in Vietnam: ……………....................................

- Already used for other purposes: ………………..............................

6. Incomes to be remitted abroad this time:

If in currency, to be withdrawn from account No.…. opened at…...... (

We undertake that the aforesaid statements are accurate and truthful.

Tax office's certification:

- The investor has fulfilled all tax obligations related to the income amount to be remitted abroad.

- The income amount allowed for transfer abroad: ………….......

Date:

Director of the Tax Department of .........… province/city

(Signature, stamp)