Does the owner of a single-member limited liability company with profits remittance abroad from direct investment activities in Vietnam have to pay personal income tax?

Does the owner of a single-member limited liability company with profits remittance abroad from direct investment activities in Vietnam have to pay personal income tax (PIT)?

Pursuant to Point c, Clause 3, Article 2 of Circular 111/2013/TT-BTC (amended by Clause 6, Article 11 of Circular 92/2015/TT-BTC) regulating taxable income for PIT as follows:

Taxable Income

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3. Income from capital investment

Income from capital investment is the income received by an individual in the following forms:

a) Interest received from lending to organizations, enterprises, households, individual businesses, or groups of individual businesses under loan contracts or agreements, excluding interest from deposits received from credit institutions, foreign bank branches as guided at Item g.1, Point g, Clause 1, Article 3 of this Circular.

b) Dividends received from capital contribution in purchasing shares.

c) Profits received from participating in capital contribution to limited liability companies, partnerships, cooperatives, joint ventures, business cooperation contracts, and other business forms as prescribed by the Law on Enterprises and the Law on Cooperatives; profits received from participating in capital contribution to credit institutions as prescribed by the Law on Credit Institutions; capital contribution to securities investment funds and other investment funds established and operating under the law.

Profits of private enterprises, single-member limited liability companies owned by an individual are not counted as taxable income from capital investment.

d) The increase in contributed capital value received when dissolving an enterprise, converting the operating model, dividing, splitting, merging, consolidating an enterprise, or withdrawing capital.

dd) Income received from interest on bonds, treasury bills, and other valuable papers issued by domestic organizations, except for income as guided at Item g.1 and g.3, Point g, Clause 1, Article 3 of this Circular.

e) Income received from capital investment under other forms, including cases of capital contribution investment in kind, by reputation, by land use rights, by inventions, and patents.

g) Income from dividends paid in shares, income from profits recorded as increased capital.

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Additionally, according to Official Dispatch 2043/TCT-DNNCN of 2024 issued by the General Department of Taxation regarding the PIT policy on profit transfer abroad, it is stipulated that for a single-member limited liability company owned by a foreign individual, after fulfilling its financial obligations to the State as prescribed in Article 4 of Circular 186/2010/TT-BTC, the distributed profits of the individual, as the owner, after paying corporate income tax, are not subject to personal income tax.

Thus, the owner of a single-member limited liability company with profits remittance abroad from direct investment activities in Vietnam, after completing corporate income tax and other financial obligations to the state, will not have to pay personal income tax.

Does the owner of a single-member limited liability company with profits remittance abroad from direct investment activities in Vietnam have to pay personal income tax? (Image from Internet)

When is the time for profits remittance abroad?

According to Article 4 of Circular 186/2010/TT-BTC, there are regulations on the timing for profits remittance abroad. Specifically:

- Annual transfer of profits abroad.

Foreign investors are allowed to annually transfer the profits distributed or earned from direct investment activities in Vietnam abroad at the end of the fiscal year, after the enterprise which the foreign investor participates in has fulfilled its financial obligations to the Vietnamese State as prescribed by law, submitted audited financial statements, and annual corporate income tax finalization declarations to the direct tax management agency.

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

Foreign investors are allowed to transfer profits abroad upon terminating direct investment activities in Vietnam after the enterprise in which the foreign investor has participated has fulfilled financial obligations to the Vietnamese State as prescribed by law, has submitted audited financial statements, and corporate income tax finalization declarations to the direct tax management agency and fully complied with obligations prescribed by the Tax Administration Law.

- Responsibilities of the enterprise where the foreign investor participates in capital investment.

The enterprise where the foreign investor participates in capital investment is responsible for fully performing financial obligations to the Vietnamese State concerning income generated as profits that the foreign investor transfers abroad.

How to determine the annual profits remittance abroad by the foreign investor in Vietnam?

According to Clause 1, Article 3 of Circular 186/2010/TT-BTC, the method for determining the annual profits remittance abroad by the foreign investor is specified as follows:

Annual profits remittance abroad are equal to the profits distributed or earned by the foreign investor from the fiscal year from direct investment activities based on the audited financial statements, the enterprise's corporate income tax finalization declaration, plus (+) other profits such as those not fully transferred from previous years, minus (-) amounts that the foreign investor has used or committed to reinvest in Vietnam, and profits used by the foreign investor to cover expenses for production and business activities or personal needs of the foreign investor in Vietnam.