Circular No. 186/2010/TT-BTC dated November 18, 2010 of the Ministry of Finance guiding the offshore remittance of profits earned by foreign organizations and individuals from their direct investment in Vietnam under the Investment Law

CIRCULAR

GUIDING THE OFFSHORE REMITTANCE OF PROFITS EARNED BY FOREIGN ORGANIZATIONS AND INDIVIDUALS FROM THEIR DIRECT INVESTMENT IN VIETNAM UNDER THE INVESTMENT LAW

THE MINISTRY OF FINANCE

Pursuant to November 29, 2005 Investment Law No. 59/2005/QH11 and guiding documents;
Pursuant to November 29, 2006 Law No. 78/ 2006/QH11 on Tax Administration and guiding documents;
Pursuant to June 3, 2008 Law No. 14/2008/ QH12 on Enterprise Income Tax and guiding documents;
Pursuant to the Government s Decree No. 160/2006/ND-CP of December 28, 2006, detailing a number of articles of the Ordinance on Foreign Exchange;
Pursuant to the Government s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance,
The Ministry of Finance guides the offshore remittance of profits earned by foreign organizations and individuals from their direct investment in Vietnam under the Investment Law as follows:

Article 1.Subjects of application

Foreign organizations and individuals that make direct investment in Vietnam under Articles 21 thru 25 of the Investment Law (below collectively referred to as foreign investors) and remit abroad profits from investment in Vietnam under Article 2 of this Circular.

Foreign organizations and individuals that make indirect investment in Vietnam under Article 26 of the Investment Law may remit their profits abroad under relevant laws.

Article 2.Profits to be remitted abroad

1. Profits to be remitted abroad from Vietnam by foreign investors under this Circular are lawful profits they are shared or earn from direct investment in Vietnam under the Investment Law after fulfilling all financial obligations towards the Vietnamese State under regulations.

2. Profits to be remitted abroad from Vietnam may be in cash or in kind.

- Offshore remittance of profits in cash complies with the law on foreign exchange management;

- Offshore remittance of profits in kind and conversion of their value comply with the law on goods import and export and relevant laws.

Article 3.Determination of profits to be remitted abroad

1. Annual profits to be remitted abroad mean profits foreign investors are shared or earn in a fiscal year from their direct investment based on audited financial statements and enterprise income tax finalization declarations of enterprises in which they make investment plus (+) other profits such as profits carried forward from previous years minus (-) amounts they have used or committed to use for reinvestment in Vietnam and profits they have used to cover their expenses for production and business activities or for their personal needs in Vietnam.

2. Profits to be remitted abroad upon termination of investment in Vietnam means the total profits foreign investors earn from their direct investment in Vietnam minus (-) profits they have used for reinvestment, profits they have remitted abroad during their operation period in Vietnam and amounts they have used to cover other spending items in Vietnam.

3. Foreign investors may not remit abroad profits they are shared or earn from their direct investment in Vietnam in a year of profit generation in case that year s financial statements of enterprises in which they make investment still contain accumulative losses after such losses are carried forward under the law on enterprise income tax.

For example: Foreign investor A contributes capital to establish a company in Vietnam. In 2009, the company made a loss of VND 4 billion.

Presuming that in 2010, the company has a pre-tax income of VND 3 billion. After offsetting the loss amount carried forward from 2009 under regulations, in 2010 the company has a loss amount of VND 1 billion. The company may not share profits to its capital contributors and foreign investor A may not remit profits he/she/it is shared in 2010 to his/her/its home country.

Presuming that in 2010. the company has a pre-tax income of VND 5 billion. After offsetting the loss amount carried forward from 2009 under regulations, in 2010 the company has a remaining income of VND 1 billion liable to enterprise income tax. If the enterprise income tax rate applicable to the company is 25%, the company shall pay an enterprise income tax amount of VND 250 million (VND 1 billion x 25%). The company may share after-lax profits to its capital contributors and foreign investor A may remit profits he/she/it is shared in 2010 to his/her/its home country.

Article 4.Time for offshore remittance of profits

1. Annual offshore remittance of profits

Foreign investors may annually remit abroad profits they are shared or earn from their direct investment in Vietnam at the end of a fiscal year after enterprises in which they make investment have fulfilled financial obligations towards the Vietnamese State under law and submitted audited financial statements and enterprise income tax finalization declarations of that year to managing tax offices.

2. Offshore remittance of profits upon termination of direct investment activities in Vietnam

Foreign investors may remit abroad profits upon terminating their direct investment activities in Vietnam after enterprises in which they make investment have fulfilled financial obligations towards the Vietnamese State under law, submitted audited financial statements and enterprise income tax finalization declarations to managing tax offices and fulfilled all the obligations under the Law on Tax Administration.

3. Responsibilities of enterprises in which foreign investors make capital investment

Enterprises in which foreign investors make capital investment shall fulfill all financial obligations towards the Vietnamese State under law with regard to their incomes forming profits they remit abroad.

Article 5.Notification of offshore remittance of profits

Foreign investors may directly make, or authorize enterprises in which they make investment to make, notices on the offshore remittance of profits according to a set form and send them to tax offices directly managing these enterprises at least 7 working days before the profit remittance.

Article 6.Organization of implementation

This Circular takes effect 45 days from the date of its signing and replaces the Finance Ministry s Circular No. 124/2004/TT-BTC of December 23, 2004, guiding the offshore remittance of profits earned by foreign economic institutions or individuals from their investment in the forms specified in the Law on Foreign Investment in Vietnam.

Any problems arising in the course of implementation should be reported to the Ministry of Finance for additional guidance.-