Answering personal income tax issues for profits transferred abroad

Foreign investors in Vietnam are allowed to transfer their profits abroad at the end of the fiscal year, after fulfilling financial obligations and submitting necessary documents to the tax department. Income from capital investment, including dividends from participating in limited liability companies, partnerships, cooperatives, joint ventures, and other business forms, is considered individual income and subject to individual income tax. However, profits from private enterprises or one-member limited liability companies owned by individuals are exempt from individual income tax. Therefore, in the case of a foreign individual owning a one-member limited liability company in Vietnam, the profit distributed to them after paying corporate income tax is not subject to individual income tax. Before the concerns related to personal income tax on the transfer of profits abroad for investors who are individuals as owners of a limited liability company, LLC, recently, the General Department of Taxation has provided specific clarifications. According to the General Department of Taxation, Clause 1, Article 4 of Circular No. 186-2010-TTBTC issued on November 18, 2010 by the Ministry of Finance guiding the transfer of profits abroad by foreign organizations and individuals with profits from direct investment in Vietnam as prescribed by the investment law stipulates, foreign investors shall be allowed to annually remit abroad the profits distributed or earned from direct investment activities in Vietnam at the end of the fiscal year, after the enterprise in which the foreign investor participates in investment has fulfilled its financial obligations to. The State of Vietnam in accordance with the provisions of law has submitted audited financial statements and corporate income tax declaration form for the fiscal year to the Direct Tax Management Agency. Clause C.3, Article 2 of Circular No. 111-2013-TTBTC issued on August 15, 2013 by the Ministry of Finance amended and supplemented at Clause 6, Article 11, Circular No. 92-2015-TTBTC issued on June 15, 2015 stipulates, income from capital investment is individual income received in the following forms, C, dividends received from participation in contributing capital to a limited liability company, a partnership, a cooperative, a joint venture, a business cooperation contract and other business forms as prescribed by the law on enterprises and the law on cooperatives, dividends received from participation in contributing capital to establish a credit institution as prescribed by the law on credit institutions, contributing capital to a securities investment fund and other investment funds established and operated in accordance with law. The profits of a private enterprise or a one-member limited liability company owned by an individual shall not be included in the taxable income from capital investment. Based on the above regulations, in principle, from January 1, 2015, in the case of a one-member limited liability company owned by a foreign individual, which has generated profits after fulfilling its financial obligations to the state as prescribed in Article 4 of Circular No. 186-2010-TTBTC, the profit distributed to the individual owner of the one-member limited liability company after paying corporate income tax is not subject to individual income tax.