1. Legal grounds

• Ordinance on Foreign Exchange 2005;
• Ordinance amending the Ordinance on Foreign Exchange 2013;
• Circular 16/2014/TT-NHNN guiding the use of foreign currency accounts and Vietnamese dong accounts of residents and non-residents at authorized banks;
• Circular 06/2019/TT-NHNN guiding foreign exchange management for foreign direct investment activities in Vietnam;
• Circular 186/2010/TT-BTC guiding the transfer of profits abroad by foreign organizations and individuals that have profits from direct investment in Vietnam in accordance with the Law on Investment

2. Legal provisions on the transfer of business profits

2.1. Business profits must be made through direct investment capital account

According to the provisions of Clause 4, Article 1 of the Ordinance on Amending the Ordinance on Foreign Exchange 2013, amending and supplementing Article 11 of the Ordinance on Foreign Exchange 2005:

Enterprises with foreign direct investment capital and foreign investors participating in business cooperation contracts must open a direct investment capital account at an authorized credit institution. The contribution of investment capital, the transfer of the original investment capital, profits and other lawful revenues must be done through this account.”

According to the above regulations, in order to transfer profits of enterprises, it must be done through the direct investment capital account.

2.2. The transfer of business profits must be remitted abroad

Profits of the enterprise must be made through the direct investment capital account as stated in Section 1.1 of this document. According to the provisions of Clause 2, Article 6, Clause 2, Article 7 of Circular 06/2019/TT-NHNN, the direct investment capital account is used to conduct expenditure transactions related to investment activities. In which, expenditure transactions related to the transfer of profits are regulated as follows:

a) Transactions for profit transfer on direct investment capital accounts in foreign currencies

Payment transactions related to the transfer of profits on the foreign currency direct investment capital account are made within the scope specified at Point d, Clause 2, Article 6 of Circular 06/2019/TT-NHNN: profits and legitimate sources of income in foreign currencies from foreign direct investment activities in Vietnam by foreign investors abroad.

According to the above regulations, the transfer of profits on direct investment capital accounts in foreign currencies is only allowed to be remitted abroad.

b) Transactions for profit transfer on direct investment capital accounts in Vietnam dong

Payment transactions related to the transfer of profits on direct investment capital accounts in Vietnam dong shall be performed within the scope specified at point c, clause 2, Article 7 of Circular 06/2019/TT-NHNN: currency transfer to transfer profits and lawful revenue sources in Vietnam Dong to foreign investors abroad.

According to the above regulations, the transfer of profits on the direct investment capital account in Vietnam dong is only allowed through the purchase of foreign currency by transfer, in order to carry out the transfer of profits in foreign currency purchased abroad. .

Thus, expenditure transactions related to the transfer of profits of the Enterprise must be carried out abroad.

3. Procedures for transferring business profits abroad

Payment transactions related to the transfer of profits of the enterprise must carry out the transfer abroad as analyzed. Procedures for transferring profits abroad shall comply with the provisions of Article 5 of Circular 186/2010/TT-BTC:

“Foreign investors directly or authorize enterprises in which foreign investors participate to make a notice of the transfer of profits abroad according to the form promulgated together with this Circular and send it to the direct tax authority. continue to manage enterprises in which foreign investors invest, at least 07 working days before transferring profits abroad.”

Thus, in order to remit profits abroad, enterprises must carry out procedures for notifying profits abroad with tax authorities at least 07 working days before remitting profits abroad. After completing the procedures with the tax authority, the enterprise will transfer profits abroad at the bank opening a direct investment capital account.

Above is the advice of Khoa Tin “How does a 100% foreign-owned enterprise withdraw profits?”.

In case customers have unclear problems or need to discuss further, please call us immediately at 0983.533.005 for a free consultation.

Best regards./.