Circular No. 124/2004/TT-BTC guiding the implementation of provisions on transferring profits abroad by economic organizations or foreign individuals with profits from investment forms prescribed under the Law on Foreign Investment in Vietnam.

CIRCULAR

Guidelines for implementing provisions on transferring profits abroad by economic organizations or foreign individuals,

having profits from investment forms prescribed in the Law on Foreign Investment in Vietnam

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Pursuant to the Law on Foreign Investment in Vietnam adopted by the National Assembly of the Socialist Republic of Vietnam on November 12, 1996, and the Law Amending and Supplementing Certain Provisions of the Law on Foreign Investment in Vietnam adopted by the National Assembly of the Socialist Republic of Vietnam on June 9, 2000;

Pursuant to Decree No. 24/2000/NĐ-CP dated July 31, 2000 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam;

Pursuant to the Enterprise Income Tax Law No. 09/2003/QH11;

Pursuant to the provisions of Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government detailing the implementation of the Enterprise Income Tax Law;

The Ministry of Finance issues guidelines for implementing provisions on transferring profits abroad by economic organizations or foreign individuals obtained from participating in capital investments under the forms prescribed by the Law on Foreign Investment in Vietnam as follows:

I. APPLICABLE OBJECTS

This Circular applies to economic organizations or foreign individuals participating in capital investments under the forms prescribed by the Law on Foreign Investment in Vietnam (hereinafter referred to as foreign investors), who have profits to be transferred abroad from Vietnam.

Profits of foreign investors that can be transferred abroad according to this Circular are:

- Profits distributed or derived from investment activities under the Law on Foreign Investment;

- Profits derived from the transfer of capital after fulfilling corporate income tax obligations;

- Income is the amount of corporate income tax refunded due to reinvestment of profits or overpayment, now transferred abroad by foreign investors.

II. SPECIFIC PROVISIONS

1. Time of transferring profits abroad:

Foreign investors shall transfer profits abroad in the following cases:

1.1. Transfer annually and once fully at the end of the fiscal year after distributing profits or deriving profits and submitting final tax settlement reports to the tax authority.

1.2. Temporarily transfer within the fiscal year quarterly or semi-annually after paying corporate income tax in accordance with the Corporate Income Tax Law (except for cases where foreign investors are exempted from corporate income tax under the Law on Foreign Investment and the Corporate Income Tax Law).

1.3. Transfer profits when ending business operations in Vietnam as stipulated by the Law on Foreign Investment in Vietnam.

2. Determination of the amount of profits to be transferred abroad:

2.1. Annual profits transferred abroad: the amount of profits distributed to foreign investors in the fiscal year after completing corporate income tax obligations under the Corporate Income Tax Law, plus (+) other profits obtained during the year such as profits from capital transfers, asset transfers, corporate income taxes already paid and refunded to investors under the Corporate Income Tax Law; minus (-) amounts used or committed to be used for reinvestment in Vietnam, profits used by investors to cover business operation expenses or personal needs in Vietnam, and temporarily transferred profits during the year.

The amount of income that foreign investors can transfer abroad in the fiscal year is determined after the enterprise has submitted audited financial statements and annual tax settlement reports to the local tax authority managing the enterprise.

2.2. Quarterly or semi-annual temporary profits transferred abroad:

The amount of profits that foreign investors may temporarily transfer abroad quarterly or semi-annually during the fiscal year is based on the profit distribution report of the enterprise for the quarter or half-year, corresponding to the profit after declaring and paying corporate income tax, minus (-) the amount of profit used for other purposes of the investor such as reinvestment, spending on production and business activities or consumption of foreign investors in Vietnam.

In case the amount of profits temporarily transferred abroad and spent in Vietnam by foreign investors during the fiscal year is less than the profit distributed after the end of the fiscal year (as specified in Point 2.1 above), foreign investors may transfer the remaining unused or untransferred difference abroad. If the amount of profits temporarily transferred abroad and spent on other purposes in Vietnam exceeds the distributed profit, it must be deducted from the amount of profit to be transferred in subsequent periods.

2.3. Profits transferred abroad upon termination of operations in Vietnam is the total legal profits obtained by foreign investors during their investment in Vietnam after fulfilling corporate income tax obligations under the Corporate Income Tax Law, minus (-) amounts used for reinvestment, profits already transferred abroad during the operation of foreign investors in Vietnam, and amounts used for other expenditures of foreign investors in Vietnam.

In case foreign investors have settled corporate income tax and transferred profits abroad annually, they will settle taxes and determine the remaining profits to be transferred abroad upon termination of operations.

3. Conditions for temporarily transferring profits abroad:

3.1. Foreign investors participating in capital investments in enterprises with foreign investment and foreign parties engaging in business cooperation based on contracts may temporarily transfer profits abroad quarterly or semi-annually if they have declared corporate income tax for the fiscal year and temporarily paid corporate income tax quarterly in accordance with Point 1, Section II, Part D of Circular No. 128/2003/TT-BTC issued by the Ministry of Finance guiding the implementation of Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government detailing the implementation of the Corporate Income Tax Law.

3.2. Foreign investors shall not temporarily transfer profits abroad quarterly or semi-annually as guided by this Circular in the following cases:

- Profits to be distributed to foreign investors participating in capital investment in enterprises that have not declared corporate income tax for the fiscal year as specified in Point 3.1, Section II of this Circular;

- The amount of profits to be distributed does not comply with current Vietnamese laws on taxation and accounting;

- The amount of profits to be distributed in the final year before the expiration of the operating period according to the investment license or the termination of operations as decided by the investor or competent state agencies;

III. IMPLEMENTATION

1. When foreign investors proceed with the procedures to transfer profits abroad, they must prepare a Profit Repatriation Declaration Form (annexed to this Circular) to submit to the local tax authority directly responsible for collecting taxes from the enterprise in which the foreign investor participates in capital investment.

The local tax authority is responsible for providing confirmation of the corporate income tax paid related to the profit amount proposed by the foreign investor to be transferred abroad within seven working days for periodic temporary transfers, and fifteen working days for annual profit transfers and upon cessation of operations. The tax authority's confirmation is recorded on the Profit Repatriation Declaration Form.

2. The tax authority will not provide confirmation regarding the profit amount proposed by the investor to be transferred abroad in cases as specified in Point 3.2, Section II of this Circular and in cases where the enterprise in which the foreign investor participates in capital investment violates tax laws and other relevant laws concerning the fulfillment of financial obligations.

In cases where such confirmation is not provided, the tax authority must notify the foreign investor in writing of the reasons.

For profit amounts of enterprises that are not determined in compliance with current Vietnamese tax laws and accounting standards regarding revenue and expense determination, the tax authority managing the enterprise has the responsibility to require the enterprise to re-determine them in accordance with tax laws and current accounting standards. Based on this, the tax authority provides confirmation of the corporate income tax paid related to the profit amount that can be repatriated abroad by the foreign investor.

3. On the basis of the tax authority's confirmation of tax obligations fulfilled and the profit amount that can be transferred abroad by the foreign investor, the bank where the foreign investor has an account will execute the request to transfer the distributed profit of the investor abroad.

This Circular takes effect fifteen days after its publication in the Official Gazette. During implementation, if there are any difficulties, organizations and individuals are advised to report them to the Ministry of Finance for prompt resolution./.