Official Dispatch 1750/CT-TTHT 2019 Hanoi on the offshore remittance of profits and debt offsetting

To: Key Consulting Vietnam Co., Ltd
(Address: 10^th Floor, Zodiac Building, Duy Tan Street, Dich Vong Hau, Cau Giay District, Hanoi - Tax Code: 0107426859)

In response to the unnumbered official dispatch dated December 5, 2018 of The Key Consulting Vietnam Co., Ltd (hereinafter referred to as the Company) on the offshore remittance of profits and debt offsetting, the Hanoi Tax Department has the following opinion:

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

+ In Article 2 defines 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  shall comply with the law on foreign exchange management;

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

+ In Article 3 defines 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...

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...”

+ In Article 4 defines 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 fiscal year to directly managing tax offices...

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.”

+ In Article 5 defines 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, using the form issued together with this Circular and send them to tax offices directly managing these enterprises at least 7 working days before the profit remittance.”

Based on the above-mentioned regulations, in case the Company needs to transfer all profits of 2016 and 2017 abroad to the parent company in France being Key Partners Co., ltd, by the method of three-party debt offsetting: Key Consulting France Company (a customer in France who owes the Company money) will transfer to Key Partners Co., ltd the amount of money corresponding to the amount of profits that the Company is allowed to remit offshore on behalf of foreign investors (according to the minutes or agreement between the parties). If it meets the conditions specified in the Ministry of Finance's Circular No. 186/2010/TT-BTC dated November 18, 2010, the Company will notify the offshore remittance of profits to the directly managing tax agency in accordance with the above provisions of Circular No. 186/2010/TT-BTC.

During the implementation process, if any problems arise, please contact Inspection Division 1 for guidance and support.

The Hanoi Tax Department hereby informs the Company for implementation./.