Foreigners transfer capital to Vietnamese people

Currently, our country is attracting a lot of foreign investment capital, so more and more foreign investors are investing in Vietnam. Therefore, the demand for transferring capital contributions from foreigners to Vietnamese organizations and individuals is also increasing. In the article below, Viet An Law would like to introduce to customers the legal regulations that need to be noted when transferring capital from foreigners to Vietnamese people (including individuals and legal entities) in companies established in Vietnam.

How are contributed capital and contributed assets regulated?

According to Clause 27, Article 4 of the Enterprise Law 2020, the capital contribution is defined as the total value of assets that a member has contributed or committed to contribute to a limited liability company or partnership. The capital contribution ratio is the ratio between the capital contribution of a member and the charter capital of the limited liability company or partnership.

Contributed capital assets according to current regulations in Article 34 of the Enterprise Law 2020 may include the following types of assets:

• Vietnamese Dong;
• Freely convertible currency;
• Gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese Dong.

Note that only individuals and organizations who are legal owners of assets have the right to use them to contribute capital to economic organizations. Thus, the owner of the asset cannot authorize other individuals or organizations to contribute their capital to any economic organization.

Required Procedures when foreigners transfer capital to Vietnamese people

When a foreigner transfers the capital of this individual in a certain enterprise to a Vietnamese person, it means that there will be a change in personnel and capital in this enterprise. Specifically, it is divided into cases of companies with Investment Registration Certificates and companies without Investment Registration Certificates.

Company with Investment Registration Certificate

According to the provisions of Point a, Clause 1, Article 23 of the Investment Law 2020, economic organizations with investors being foreign individuals or organizations holding more than 50% of charter capital or with the majority of general partners being foreign individuals (for general partnerships) must apply for an Investment Registration Certificate.

In this case, it will be divided into two smaller cases, which are:

• After the transfer, there is still capital of foreign investors;
• After the transfer, there is no more foreign investor capital.

After the transfer, there is still capital of foreign investors.

In this case, the company will have to carry out 02 procedures, including procedures to change the Investment Registration Certificate and procedures to change the Enterprise Registration Certificate.

Procedures for changing the Investment Registration Certificate, specifically changing the investor of an investment project, it is carried out according to the provisions of Clause 4, Article 36 of Decree 31/2021/ND-CP. The dossier includes:

• Document requesting adjustment of the investment project;
• Documents on the legal status of the investor: Copy of personal legal documents for individual investors, copy of Enterprise Registration Certificate for institutional investors;
• Documents proving the financial capacity of the investor include at least one of the following documents: financial statements of the investor for the last 2 years; financial support commitment of the parent company; financial support commitment of a financial institution; guarantee of the financial capacity of the investor; other documents proving the financial capacity of the investor;
• Other documents related to the investment project, requirements on conditions, and capacity of investors according to the provisions of law (if any).

The company will apply to the Investment Registration Agency. Within 10 working days from the date of receiving the complete application as prescribed, the Investment Registration Agency will adjust the Investment Registration Certificate for the investor.

After that, the company needs to carry out the procedure to change the Certificate of Business Registration at the Department of Planning and Investment where the company is headquartered. Specifically, the company needs to submit the following documents to carry out the procedure to change the Certificate of Business Registration:

• Notice of change of business registration content;
• Assignment contract or documents proving completion of assignment;
• List of members of a multiple members LLC or list of shareholders of a joint stock company;
• A copy of the individual’s legal documents in case the new member is an individual or a copy of the organization’s legal documents, a copy of the individual’s legal documents for the authorized representative, and a copy of the document appointing the authorized representative in case the new member is an organization.
• Power of Attorney for an organization to carry out procedures.

Please contact Viet An Law for support in performing all of the above procedures.

After the transfer, there is no more foreign investor capital.

If an enterprise no longer has foreign investor capital, the project to establish that enterprise is no longer subject to the requirement of an Investment Registration Certificate. Therefore, after changing the Enterprise Registration Certificate at the Department of Planning and Investment related to the transfer of capital like domestic enterprises, the company can carry out the procedure to terminate the implementation of the investment project under the case specified in Point a, Clause 1, Article 48 of the Investment Law 2020.

The dossier for the termination of the investment project includes:

• Decision to terminate investment project activities;
• Original IRC.

Investors must submit this dossier to the Investment Registration Authority within 15 days from the date of the decision to terminate operations.

The company does not have an Investment Registration Certificate

In case a company has foreign capital but does not need an Investment Registration Certificate, when foreigners transfer their capital contribution to other Vietnamese individuals or organizations, they only need to carry out procedures to change the Enterprise Registration Certificate.

For business registration procedures, it is necessary to carry out procedures to change business licenses, including the following procedures:

• Procedures for changing capital contributing members;
• Procedures for changing the legal representative of the company (if the transferor is the legal representative).

Tax obligations arise when foreigners transfer capital to Vietnamese people

Regarding tax obligations, it is necessary to carry out procedures for declaring and paying personal income tax (in case the transferor is an individual) or corporate income tax (in case the transferor is an enterprise) from capital transfer.

Declaration and payment of personal income tax from capital transfer

Income from capital transfer is a type of income subject to personal income tax according to the provisions of Article 3 of the Law on Personal Income Tax 2007 as amended and supplemented in 2014. Therefore, individuals conducting capital transfer activities must fulfill their obligation to pay personal income tax according to the provisions of the law.

According to the provisions of Point g, Clause 4, Article of Decree 126/2020/ND-CP, personal income tax from capital transfer activities is declared for each occurrence.

How to calculate personal income tax from capital transfer as follows:

Tax payable = Taxable income x Tax rate 20%

In which, income from capital transfer is calculated as follows:

Please note that within 10 days after the capital transfer activity occurs, the transferor must submit a personal income tax declaration to the tax authority and pay personal income tax.

Declaration and payment of corporate income tax from capital transfer

Income arising from capital transfer by an enterprise is one of the types of taxable income specified in Clause 2, Article 3 of the Law on Corporate Income Tax 2008, amended and supplemented in 2014.

Income from capital transfer includes the following two basic types of income:

• Income from the transfer of part or all of the capital invested in an enterprise, including the sale of an enterprise, transfer of securities, and transfer of capital contribution rights;
• Income from other forms of capital transfer as prescribed by law;

Corporate income tax arising from capital transfer is declared for each occurrence and is determined from the time of transfer of capital ownership.

The calculation of corporate income tax from capital transfer is as follows:

Tax payable = Taxable income x Tax rate

In which, income from capital transfer is calculated as follows:

Unlike individuals, the tax rate that enterprises must pay when having income arising from capital contribution transfer is stipulated in Article 10 of the Law on Personal Income Tax 2007, amended and supplemented in 2014, specifically as follows:

• Enterprises with total revenue of no more than twenty billion VND/year: 20%
• Enterprises conducting activities of searching, exploring and exploiting oil, gas and other rare resources in Vietnam: 32% to 50%
• Enterprises eligible for tax incentives: 10%

Above is the advice of Viet An Law on foreigners transferring capital to Vietnamese people. If you need more detailed advice on the procedures to be performed when transferring capital, please contact Viet An Law Firm for the best support.

Update: 9/2024