Circular No. 186/2010/TT-BTC guides the implementation of transferring profits abroad by foreign organizations and individuals with profits from direct investment in Vietnam as stipulated by the Investment Law.

Article 1. Scope of application

Foreign organizations and individuals investing indirectly in Vietnam according to Article 26 of the Investment Law shall transfer profits abroad in accordance with relevant laws.

Article 2. Transfer of Profits Abroad

1. The profits transferred abroad by foreign investors according to this Circular are legitimate profits distributed or obtained from direct investment activities in Vietnam under the Investment Law, after fulfilling all financial obligations to the State of Vietnam as prescribed.

2. Profits transferred abroad may be in the form of money or goods.

- Profits transferred abroad in the form of money shall comply with the regulations on foreign exchange management;

- Profits transferred abroad in the form of goods and the conversion of the value of such goods shall comply with the regulations on import and export of goods and related laws.

Article 3. Determination of the Amount of Profits to be Transferred Abroad

1. The amount of profits transferred abroad annually is the profit distributed or obtained by foreign investors from direct investment activities based on audited financial reports and corporate income tax finalization declarations of the enterprises in which foreign investors participate, plus any remaining undistributed profits from previous years, minus any amounts used or committed to be used for reinvestment in Vietnam, and any profits used to cover the investor's business expenses or personal needs in Vietnam.

2. The amount of profits transferred abroad upon termination of investment activities in Vietnam is the total profit obtained by foreign investors during the period of direct investment in Vietnam, minus any amounts used for reinvestment, any profits already transferred abroad during the period of operation in Vietnam, and any other expenses incurred by the foreign investor in Vietnam.

3. Foreign investors shall not transfer abroad profits distributed or obtained from direct investment activities in the year they were generated if the financial report of the enterprise in which the foreign investor invests still shows accumulated losses after transferring losses according to the Corporate Income Tax Law.

Example: Foreign investor A contributes capital to establish a company in Vietnam. In 2009, the company incurs a loss of 4 billion VND.

Assuming in 2010, the company has pre-tax income of 3 billion VND. Therefore, after offsetting the carried forward loss from 2009, the company still has a loss of 1 billion VND in 2010. The company cannot distribute profits to its shareholders, and foreign investor A cannot transfer the distributed profits of 2010 back home.

Assuming in 2010, the company has pre-tax income of 5 billion VND. Therefore, after offsetting the carried forward loss from 2009, the company has taxable income of 1 billion VND in 2010. If the corporate income tax rate applied by the company is 25%, then the company will pay corporate income tax of 250 million VND (= 1 billion VND x 25%). The company can distribute the post-tax profits to its shareholders, and foreign investor A can transfer the distributed profits of 2010 back home.

Assuming in 2010, the Company had pre-tax income of five billion VND. Accordingly, after offsetting losses carried forward from 2009 as prescribed, the Company's taxable income for corporate income tax in 2010 was one billion VND. If the corporate income tax rate applied by the Company is 25%, then the Company shall pay corporate income tax of 250 million VND (= one billion VND x 25%). The Company distributes its post-tax profits to the capital contributors and foreign investor A repatriates the distributed profit of 2010.

Article 4. Time for transferring profits abroad

1. Annual transfer of profits abroad.

Foreign investors are permitted to annually transfer out of the country the distributed profits or profits derived from direct investment activities in Vietnam at the end of the fiscal year, after the enterprise in which the foreign investor participates has fulfilled its financial obligations to the State of Vietnam as prescribed by law, submitted audited financial reports and final income tax declaration for the fiscal year to the direct tax management authority.

2. Transfer of profits abroad upon termination of direct investment activities in Vietnam.

Foreign investors are permitted to transfer profits abroad upon termination of their direct investment activities in Vietnam after the enterprise in which they participate has fulfilled its financial obligations to the State of Vietnam as prescribed by law, submitted audited financial reports and final income tax declaration to the direct tax management authority, and fully complied with the provisions of the Law on Tax Administration.

3. Obligations of the enterprise where the foreign investor invests capital.

The enterprise where the foreign investor invests capital shall be responsible for fulfilling all financial obligations to the State of Vietnam as prescribed by law related to the income forming the profit that the foreign investor transfers abroad.

Article 5. Notification of profit transfer abroad

Foreign investors directly or through authorization of the enterprise in which they participate in investment shall notify the tax authority directly managing such enterprise about the transfer of profits abroad according to the form issued together with this Circular, at least seven working days before implementing the transfer of profits abroad.

Article 6. Implementation Organization

This Circular takes effect forty-five days from the date of signature, replacing Circular No. 124/2004/TT-BTC dated December 23, 2004 of the Ministry of Finance guiding the implementation of regulations on the transfer of profits abroad by economic organizations or individuals from foreign countries with profits from investment forms prescribed in the Law on Foreign Investment in Vietnam.

During the implementation process, if there are any difficulties, organizations and individuals are advised to report to the Ministry of Finance for supplementary guidance./.