One provision of the relevant law says foreign investors need not pay tax on overseas remittance of profits. — Photo cafef

To create a safe investment environment for foreign investors, Vietnamese laws guarantee their right to legally transfer profits abroad after completely discharging their financial obligations to the State.

One provision of the relevant law says foreign investors need not pay tax on overseas remittance of profits. This aims to prevent double taxation because only profits after tax can be remitted abroad, which means foreign investors are required to pay income tax before transferring profits overseas.

In this case, the responsibility to pay such income tax does not belong to the foreign investors individually, but to the enterprise through which they make their investment.

Profits that can be remitted abroad are net profits gained from direct investment activity. Foreign investors may remit eligible income overseas either annually or on termination of corresponding investment activities in Viet Nam. Such profits are determined in audited financial statements and corporate income tax (CIT) finalisation declarations lodged by the enterprise (in which the foreign investors contribute capital) to the tax authority directly managing it.

Profits eligible for annual overseas remittance are those that are distributed to or obtained by foreign investors from direct investment activity in a fiscal year, plus (+) other amounts including profits that have not been remitted in previous years, minus (-) the amounts foreign investors have used or committed to use for reinvestment in Viet Nam and other amounts spent on expenses for production and business activities or on their personal needs in Viet Nam.

Profits that qualify for remittance abroad on termination of direct investment activity in Viet Nam are the total profits earned by foreign investors during the implementation of such activity, minus (-) the amount used for reinvestment, the amounts remitted overseas throughout the operation of the investors in Viet Nam, and the amounts used for other expenditures in Viet Nam.

It should be noted that foreign investors are permitted to remit overseas the profit portions earned from direct investment activity of a profit-making year only when the enterprise in which foreign nationals participate by investment has completely deducted accumulated losses in accordance with CIT laws and regulations.

In case the pre-tax profit earned by an enterprise in a fiscal year is less than losses carried over from previous years, it cannot be remitted abroad by foreign investors. — PLF- LAW FIRM