Profits remittance to investor’s home country is one of the important obligations and commitments that investors should comply with during the implementation of the overseas project to ensure the effectiveness of the capital investment abroad. At the same time, investors are eligible to update information registered for overseas investment projects since it is also a critical obligation of investors to ensure the consistency of project information registered with state agencies in accordance with Vietnamese laws for overseas investment. Therefore, this article shall provide readers with an overview of profit remittance to investor’s country and updating registered information of overseas investment project after approval by the competent state agencies
Remittance of profits and other legal revenue of an overseas investment projects is one of the important financial obligations arising after an overseas investment project is approved by the Ministry of Planning and Investment (“MPI“) and the State Bank of Vietnam (“SBV“).
Accordingly, the investment law stipulates that all profits and income must be transferred to Vietnam within six months from the date on which the overseas business issued the tax settlement report or other documents with equivalent legal value in the host country.
However, please note that in case the investor is unable to transfer profits and other legal revenue on time, such investors are only allowed to obtain one extension for an additional 12 months from the above-mentioned time limit.
In addition, remittance of profits and other revenue to investor’s country involves payment of corporate taxes for arising income. According to the guidelines in ‘Official Letter No. 1552/TCT-DNL’ of the General Department of Taxation and ‘Decree No. 96/2015/TT-BTC’, if the host country has an agreement with the investor’s home country on avoidance of double taxation, the investor must comply with the provisions of such Agreement. However, if there is no such agreement with Vietnam, investors need to check the Vietnamese tax laws since in such a case, the amount of tax paid abroad or paid on behalf of investors by the host country’s partner (including tax on overseas share interest) shall be deductible. However, this deductible tax amount does not exceed the amount of income tax as prescribed by Vietnam’s Law on Corporate Income Tax.
If the investor paid taxes in the host country with a lower corporate income tax rate, the tax authority shall collect the difference in amount between the tax paid abroad and the amount of corporate income tax calculated under the Law on Corporate Income Tax of Vietnam. Precisely, the corporate income tax rate on foreign income is 22% (from January 1, 2016, it is 20%) in accordance with Vietnamese laws.
Simultaneously, investors should prepare the documents proving the amount of tax paid abroad to carry out the regulatory procedures with tax authorities.
During the implementation of an overseas investment project, if there are any adjustments to the form of investment, investment capital amount, investment location, main objectives of the investment, use of profits abroad, or information about Vietnamese investors, investors are obligated to change the investment registration certificates at MPI and notify or register such changes in all foreign exchange transactions related to overseas investment project at State Bank according to the law.
For updating the information, investors must provide documents related to the charter, list of shareholders, business licenses of the overseas investment economic organization or other documents related to changed contents for providing further explanation to state agencies if requested. If there are changes related to investment capital, documents proving the financial capacity of investors should be submitted for approval from MPI and SBV.
In fact, while considering the application for adjusting overseas investment registration certificate and registering foreign exchange transactions, MPI and SBV shall examine submission of periodic reports by the entity. The authorities may examine reports on foreign exchange transactions or reports on the transfer of profits to the country to check for violations by the investor (if any) and evaluate the effectiveness of the project. Therefore, investors must ensure compliance with the law during the implementation of the project.
In short, after an overseas investment project is approved, investors should follow the legal provisions on profit remittance to host country based on their commitments, and tax regulations applicable to other legal revenue or profits transferred to Vietnam in addition to periodic reports on implementation of the project and foreign exchange reports. If the change in the information of the project is registered, the investor is obligated to carry out corresponding adjustment procedures to ensure compliance with the provisions of investment law and relevant foreign exchange laws, and avoid the administrative sanctions by state agencies.
The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.