Foreign investors transfer capital to foreign investors

Adjusting the ownership structure, transferring capital or changing partners in FDI enterprises is a complicated process, requiring enterprises to carry out many administrative procedures in accordance with Vietnamese law. These procedures include notifying the investment regulator, registering changes to the business registration, fulfilling relevant tax obligations, and may even include applying for a license in some special cases. Viet An Law would like to provide preliminary guidance to customers on the process of foreign investors transferring capital to foreign investors through the article below.

Adjustment of investment projects when foreign investors transfer capital to foreign investors

Conditions for transfer of investment projects

According to Clause 1, Article 46 of the Law on Investment 2020, investors are entitled to transfer investment projects in the following cases:

“Investors have the right to transfer the whole or part of the investment project to another investor when the following conditions are met:

a) The investment project or part of the transferred investment project is not terminated;

b) The foreign investor receives the transfer of the investment project or part of the investment project in the form of capital contribution, purchase of shares, purchase of contributed capital….”

…. and cases in which customers can refer to more legal documents

Thus, before transferring an investment project or transferring a part of an investment project, investors need to carry out investment registration procedures in the form of capital contribution, purchase of shares, purchase of contributed capital in advance.

Investment capital transfer dossier

Case 1: In case of capital transfer of less than 50%

Documents to be prepared

• Notification of changes in business registration contents;
• Decision on the change of the company;
• Minutes of the meeting on the change of the company;
• The transfer contract and documents certifying that the transfer has been completed with the certification of the company’s legal representative;
• List of capital contributors or list of shareholders being foreigners;
• A notarized copy of the investor’s passport/business registration certificate.

Case 2: In case of capital transfer of more than 50%

Documents to be prepared

• A document on registration of capital contribution, purchase of shares, purchase of contributed capital includes the following contents: information on enterprise registration of the economic organization to which the foreign investor is expected to contribute capital, purchase shares, purchase contributed capital; business lines; list of owners, members and founding shareholders, list of owners, members and shareholders being foreign investors (if any); the rate of ownership of charter capital of foreign investors before and after capital contribution, purchase of shares, purchase of capital contributions to economic organizations; the expected transaction value of the capital contribution, share purchase, or capital contribution purchase contract; information on investment projects of economic organizations (if any);
• Copies of legal documents of individuals and organizations contributing capital, purchasing shares, purchasing contributed capital and economic organizations with foreign investors contributing capital, purchasing shares, purchasing contributed capital;
• A written agreement in principle on capital contribution, share purchase or purchase of contributed capital between a foreign investor and an economic organization in which a foreign investor contributes capital, purchases shares, or purchases contributed capital or between a foreign investor and a shareholder or member of such economic organization;
• A copy of the land use right certificate of the economic organization in which the foreign investor contributes capital, buys shares, buys contributed capital (for cases where the economic organization has the land use right certificate in the island, commune, ward, border township and commune, ward, coastal towns; other areas affecting national defense and security);

The foreign investor submits the dossier at the Investment Registration Agency;

• If the company is headquartered in an industrial park, it is the Industrial Park Management Board.
• If the company is headquartered outside the industrial park, it is the Department of External Economics – Department of Planning and Investment at the provincial level.

Within 15 working days from the date of receipt of a valid dossier, the business registration authority shall issue a notice of satisfaction of the conditions for capital contribution, purchase of shares, contributed capital and enterprises.

Guidance on tax declaration when foreign investors transfer capital to foreign investors

After the notice of meeting the conditions for capital contribution, purchase of shares, contributed capital and enterprises, the two parties shall conduct capital transfer activities and tax declaration.

When foreign investors transfer capital in Vietnam, they will be subject to certain taxes, depending on the type of transfer, type of business and current legal regulations.

For the case of the transferring legal enterprise:

Corporate Income Tax (CIT)

• Tax payers: Normally, the company receiving the capital transfer will be obliged to declare and pay CIT on the profit earned from the capital transfer.
• Tax rate: Applied according to general regulations on CIT in Vietnam, currently 20% on taxable profits.

Value Added Tax (VAT)

• Tax payers: Legal entities transferring capital will have to issue invoices and be subject to value-added tax
• Tax rate: Applied according to general regulations on VAT, currently 0% for legal entities transferring capital.

For the case of individual transfer

Personal Income Tax (PIT)

• Taxpayers: If foreign investors are individuals, they will have to pay PIT on the profits earned from capital transfers.
• Tax rate: Applies according to the partial progressive tariff or the full tariff schedule, depending on the gross income and allowable deductions.

Adjustment of investment projects when foreign investors transfer capital to foreign investors

Dossier of adjustment of investment project

• A written request for adjustment of the investment project;
• Report on the implementation of the investment project up to the time of transfer of the investment project;
• Report on supervision and evaluation of the investment project up to the time of transfer of the investment project;
• Contract or principle contract on the transfer of part or the whole of an investment project;
• Copies of documents on the legal status of the transferor and transferee;
• A copy of the Investment Registration Certificate;
• A copy of one of the following documents of the investor receiving the transfer of the investment project: financial statement of the last 02 years or the investor’s equity audit report, commitment to financial support of the parent company, commitment to financial support of the financial institution, guarantee of the investor’s financial capacity, documents explaining the investor’s financial capacity.

Process of processing dossiers of adjustment of investment projects

The investor transferring the investment project submits 01 set of dossier to the Investment Registration Agency, then the External Economic Relations Division will review the dossier and handle it according to regulations. The investment registration agency shall consider the conditions for transfer of the investment project specified in Clause 1, Article 46 of the Law on Investment to adjust the investment project according to the provisions of Article 47 of Decree 31/2021/ND-CP

Results received: The investment registration authority shall issue an adjusted investment registration certificate to the transferor investor and the transferee investor.

Update: 10/2024