Profit repatriation is a regular and periodic activity of every enterprise, particularly those with foreign direct investment (FDI). Although this is a lawful activity, non-compliance with relevant regulations may result in the bank refusing to process the transaction, administrative penalties, or even tax-related risks in the future. 

In this article, Apolat Legal summarizes the legal procedures for repatriating profits and highlights common mistakes businesses should avoid. 

1. Profit Repatriation to Foreign Countries 

Profits earned by foreign investors from their investment activities in Vietnam may be repatriated abroad in the form of cash or in-kind, subject to agreements and relevant legal regulations. 

1.1. Repatriation in cash: 

The remittance of profits in cash must comply with Vietnam’s regulations on foreign exchange control, including: 

• Transfers through an investment capital account; 

• Using the correct foreign currency as registered; 

• Complying with procedures set by authorized commercial banks. 

1.2. Repatriation in kind: 

If profits are to be repatriated in-kind, the investor must: 

• Convert the value of the in-kind assets according to legal provisions; and 

• Comply with regulations on goods export and other relevant laws. 

2. Timing for Profit Repatriation 

2.1. Annual profit repatriation: 

Foreign investors are permitted to repatriate profits annually after the fiscal year ends, provided that: 

• The enterprise in which they have invested has fulfilled its financial obligations to the Vietnamese Government in accordance with the law; 

• The audited financial statements and corporate income tax (CIT) finalization declarations have been submitted to the competent tax authority. 

2.2. Profit repatriation upon termination of investment in Vietnam: 

Foreign investors may repatriate profits upon termination of their direct investment in Vietnam, provided that: 

• The invested enterprise has completed its financial obligations as required by law; 

• The audited financial statements and final CIT returns have been submitted to the tax authority; and 

• All tax management obligations under the Law on Tax Administration have been fulfilled. 

2.3. Responsibilities of enterprises where foreign investors participate in capital investment 

The enterprise receiving capital from foreign investors is responsible for fulfilling all financial obligations related to the income forming the basis of the repatriated profit. 

3. Profit Repatriation Process 

Step 1: Prepare a complete set of financial documents 

• Audited financial statements; 

• Minutes of the Members’ Council/General Meeting of Shareholders on profit distribution; 

• Decision of the Owner/Members’ Council/General Meeting of Shareholders on profit distribution; 

• Annual corporate income tax finalization declaration; 

• Tax clearance certificate (if any). 

Step 2: Work with the bank holding the investment capital account 

• Submit documentation proving the legality of the profits; 

• Provide a profit transfer plan and request confirmation of exchange rates and transfer currency. 

Step 3: Transfer profits via the investment capital account 

• The transfer must be made in the originally registered foreign currency; 

• If the transferred amount exceeds a certain threshold, a report to the State Bank of Vietnam may be required. 

4. Common Mistakes Leading to Legal Risks 

• Repatriating profits before the full charter capital is contributed; 

• Failing to use the designated investment capital account for the transaction; 

• Submitting unaudited or late financial statements; 

• Not retaining proper documentation to substantiate the source of the profit; 

• Making capital contributions through methods such as debt-to-equity conversion, capital contribution in kind, or share transfers without proper compliance with legal procedures—these actions may lead the commercial bank to reject the profit repatriation request. In such cases, banks typically require the enterprise to adjust investment records or contact competent state authorities (e.g., the State Bank of Vietnam, Department of Finance) for guidance on regulatory corrections, investment license amendments, and/or administrative penalties for non-compliant actions. 

5. Conclusion 

Profit repatriation is a legitimate right of foreign investors, but it must be carried out with careful planning, transparency, and strict compliance with legal procedures. Even minor mistakes in documentation or procedures can lead to significant financial and reputational consequences. 

If your business is planning to repatriate profits, contact Apolat Legal for assistance in reviewing legal documentation, working with banks, and ensuring that transactions are carried out safely and in compliance with the law. 

Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.