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Profit Repatriation: Vietnam vs China (Tax and Foreign Exchange)

17 min readFLAT LAW FIRM
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Repatriating profits to the home country is a problem almost every cross-border group must solve at least once per fiscal year: profits earned at the subsidiary — how to bring them home to the parent lawfully, at the lowest tax cost and with the least procedural friction. Both Vietnam and China allow foreign investors to remit profits abroad, but the two countries design the "exit gate" for cash flows on two different philosophies — one centered on tax notification duties and direct-investment capital account discipline, the other on withholding tax at source and bank verification of authenticity. This article places the two systems side by side across eight comparison axes, with the specific legal basis on each side, so investors can see clearly where they converge, where they diverge, and the most common traps in Vietnam–China profit repatriation.

Table of contents

1. Background: why compare

Three reader groups need this comparison. First, Chinese groups operating factories in Vietnam that periodically remit profits to the parent — they need to know how Vietnamese procedures differ from "home turf" China so they do not misapply experience. Second, Vietnamese companies with subsidiaries or affiliates in China, or Vietnamese investors contributing capital to projects in China who want to bring profits home — they face China's 10% withholding tax at source and its foreign-exchange administration. Third, the in-house legal, accounting and tax teams of multinationals who must explain to management why the tax cost and processing time for the same dividend differ so much between the two countries. This article does not replace advice for specific cases, but it gives readers a complete map for asking the right questions before acting. This article belongs to FLAT's foreign investment in Vietnam series — a collection of the legal issues foreign investors most often encounter.

2. Overview comparison table

<table> <thead> <tr><th>Criterion</th><th>Vietnam</th><th>China</th><th>Remarks</th></tr> </thead> <tbody> <tr> <td><strong>Legal framework guaranteeing the right to remit profits</strong></td> <td>Article 11 of Investment Law 143/2025/QH15 guarantees foreign investors may remit abroad capital, profits and other lawful income after fulfilling financial obligations.</td> <td>No single investment statute with equivalent content; the right to remit profits is secured through the foreign-exchange administration system of the State Administration of Foreign Exchange (SAFE), notably Circular Huifa [2014] No. 2 simplifying outbound profit remittance procedures.</td> <td>Both countries recognize the right to remit profits, but Vietnam enshrines it at investment-law level while China operates through foreign-exchange administration documents.</td> </tr> <tr> <td><strong>Withholding tax at source on outbound profits</strong></td> <td>Investor is an organization: after-tax profits on which CIT has been fully paid (standard rate 20% under Article 10 of Law 67/2025/QH15) may be remitted with no further CIT in Vietnam. Investor is an individual: capital-investment income bears 5% personal income tax under Article 12 of Law 109/2025/QH15 (effective 01/7/2026).</td> <td>A non-resident enterprise receiving dividends from a Chinese resident enterprise bears 10% CIT withheld at source under the PRC Corporate Income Tax Law (the payer withholds). Non-resident individuals: domestic law applies 20%, reducible by treaty.</td> <td>The biggest tax difference: outbound from Vietnam is "lighter" for institutional investors (no further tax at source); outbound from China always bears 10% withholding at source.</td> </tr> <tr> <td><strong>Vietnam–China double tax treaty</strong></td> <td colspan="2">Treaty signed 17/5/1995, effective 18/10/1996; Article 10 caps withholding tax on dividends at 10%. This ceiling matches China's domestic rate, so the treaty benefit for dividends is mainly a rate guarantee, with clearer benefits for interest and royalties.</td> <td>To enjoy treaty benefits, the treaty-application procedure must be completed with the tax authority and beneficial-owner status proven.</td> </tr> <tr> <td><strong>Administrative procedure before remittance</strong></td> <td>Notify the directly managing tax authority using the form under Circular 186/2010/TT-BTC, at least 07 working days before remittance (Article 5). This is a notification duty, not an approval procedure.</td> <td>No fixed-form tax notification duty as in Vietnam; instead the company submits an authenticity-supporting dossier to the bank: profit distribution resolution, tax filings, audited financial statements. For amounts above USD 50,000, Article 7 of SAFE Circular 3/2017 specifies the document checklist the bank must review.</td> <td>Vietnam manages by "tax notification", China by "bank document review" — two entirely different control mechanisms.</td> </tr> <tr> <td><strong>Foreign-exchange channel</strong></td> <td>Mandatory via the direct investment capital account (DICA) opened at a licensed bank (Article 11(1) of the amended Foreign Exchange Ordinance; Article 9 of Circular 06/2019/TT-NHNN). Where the DICA must be closed, use the investor's own payment account at a licensed bank (Articles 7(2) and 9(2), Circular 06/2019/TT-NHNN).</td> <td>No DICA concept as in Vietnam; companies remit profits through ordinary foreign-exchange accounts at banks, which verify authenticity and process directly under Circular Huifa [2014] No. 2 without prior SAFE approval.</td> <td>Chinese investors in Vietnam stumble most on this point: in Vietnam every direct-investment cash flow must "pass through" a dedicated capital account.</td> </tr> <tr> <td><strong>Accumulated-loss offset principle</strong></td> <td>Article 3(3) of Circular 186/2010/TT-BTC: the profit distributed for a profit-making year may not be remitted abroad if that year's financial statements still show accumulated losses after loss carry-forward under CIT rules.</td> <td>Article 7 of SAFE Circular 3/2017: profits may be remitted abroad only after prior years' losses are fully offset.</td> <td>Same principle, different wording — neither country allows "remitting profits while carrying accumulated losses".</td> </tr> <tr> <td><strong>Timing of remittance</strong></td> <td>After the fiscal year ends and the company has fulfilled financial obligations (audited financial statements filed, CIT finalization return submitted); or upon termination of direct investment activity in Vietnam after financial obligations are fulfilled (Articles 3 and 4, Circular 186/2010/TT-BTC).</td> <td>After the company's profit distribution resolution and completion of related tax obligations; not rigidly tied to "fiscal year end" as in Vietnamese wording, but in practice still based on the year's audited financial statements.</td> <td>Both sides require financial obligations to be completed first; the difference lies mainly in how the documents phrase "timing".</td> </tr> <tr> <td><strong>Enforcement at the bank</strong></td> <td>The licensed bank checks compliance with foreign-exchange administration rules: cash flows must go through the DICA, with documents proving lawful source. Breach of account discipline can get the transaction rejected.</td> <td>The bank is the main "control gate": it verifies authenticity and legality of the transaction under know-your-customer principles and understanding of the customer's business, especially strict for amounts above USD 50,000. Incomplete or inconsistent dossiers are returned for supplementation.</td> <td>In both countries, the commercial bank is the practical checkpoint — preparing the file carefully with the bank matters as much as complying with the written law.</td> </tr> </tbody> </table>

3. Detailed analysis of each difference

3.1. Tax at source: "outbound from Vietnam" is lighter; "outbound from China" always costs 10%

This is the difference with the most direct financial impact. In Vietnam, profits on which the company has fully paid corporate income tax (standard rate 20% under Article 10 of Law 67/2025/QH15) may be remitted abroad to an institutional investor with no further corporate income tax in Vietnam. In other words, the only tax "gate" at company level is the CIT already paid before profit distribution. However, if the profit recipient is an individual, 5% personal income tax arises on capital-investment income under Article 12 of Law 109/2025/QH15 (effective 01/7/2026) — a point many individual investors miss when planning cash flows.

In China, by contrast, dividends paid by a Chinese resident enterprise to a non-resident enterprise bear 10% corporate income tax withheld at source — the payer must withhold before remitting. So for the same USD 1 million profit: remitting from a Vietnamese subsidiary to a (corporate) parent in China costs 0% further tax in Vietnam after CIT; remitting from a Chinese subsidiary to a parent in Vietnam costs an extra 10% withholding at source in China. The practical consequence: when designing a Vietnam–China cross-border ownership structure, the direction of the dividend flow directly determines tax cost, and this variable must go into the financial model from the start — not be "calculated later". Choosing the ownership structure and optimizing withholding tax for each specific case falls within tax advisory for FDI enterprises.

3.2. Control mechanism: Vietnam uses "tax notification", China uses "bank document review"

Vietnam manages through a notification duty: at least 07 working days before remittance, the investor (directly or authorizing the invested enterprise) sends a notification on the Circular 186/2010/TT-BTC form to the directly managing tax authority (Article 5). The key point to grasp: this is a notification procedure — the document creates no "review and approval" mechanism for the tax authority within the 07-day window. But do not dismiss it for that reason — the notification is the basis for post-remittance inspection, and every figure in it must reconcile with the audited financial statements and the CIT finalization return.

China takes the other path: no fixed tax notification form; instead the commercial bank where the company holds its account plays "gatekeeper". The company submits a dossier — profit distribution resolution, tax filings, audited financial statements — for the bank to verify authenticity; for amounts above USD 50,000, Article 7 of SAFE Circular 3/2017 lists the specific document checklist the bank must examine. Since Circular Huifa [2014] No. 2, banks process directly without submitting to SAFE for prior approval — legally faster, but in exchange banks' authenticity-review standards keep tightening, especially as China strengthens outbound capital-flow management.

3.3. Account discipline: the DICA is the mandatory "railway" in Vietnam

What disorients Chinese investors most in Vietnam is the direct investment capital account (DICA). Article 11(1) of the Foreign Exchange Ordinance (amended by Ordinance 06/2013/UBTVQH13) requires foreign direct-invested enterprises to open a DICA at a licensed credit institution, and remittance of original investment capital, profits and other lawful income must go through this account; Article 9 of Circular 06/2019/TT-NHNN spells out the principle. VND-denominated receipts to be remitted abroad may be converted into foreign currency at a licensed credit institution (Article 11(2)). Where the DICA must be closed in the prescribed cases, the law allows the investor to use its own foreign-currency or VND payment account at a licensed bank to buy foreign currency and remit capital and lawful income abroad (Articles 7(2) and 9(2), Circular 06/2019/TT-NHNN).

For how to open, maintain and close this account in each specific case, see the detailed guide at Direct Investment Capital Account (DICA).

China has no equivalent direct-investment capital account concept; companies use ordinary foreign-exchange accounts and face bank review under SAFE rules. The practical consequence for Chinese investors in Vietnam: open and maintain the DICA from the capital-contribution stage; every inflow and outflow connected with direct investment activity must pass through it — remitting profits through another account breaches foreign-exchange discipline and the bank may refuse the transaction. Where the entire investment capital (not just profits) needs to be withdrawn, see also Withdrawing FDI capital: investment capital accounts and foreign exchange.

3.4. Common principle: no accumulated losses, no profit remittance

Both countries share a principle of "financial morality": profits may not be remitted abroad while the company still carries accumulated losses. In Vietnam, Article 3(3) of Circular 186/2010/TT-BTC bars remitting abroad the distributed profit of a profit-making year if that year's financial statements still show accumulated losses after loss carry-forward under CIT rules. In China, Article 7 of SAFE Circular 3/2017 requires prior years' losses to be fully offset before profits may be remitted. In practice: before each remittance round, accounting must review the audited financial statements, confirm the loss carry-forward plan complies with each country's tax rules, and only then adopt the profit distribution resolution on the remaining "clean" profit. Skipping this step is a common reason files get questioned by the bank (China side) or by post-remittance tax inspection (Vietnam side).

4. Similarities worth noting

Three points look different but are alike — investors should not misread them. First, neither country requires a "profit remittance license" in the sense of prior approval — Vietnam only requires notification, China leaves document review to the bank. Second, both countries allow profits to be remitted in foreign currency or in local currency (with local currency converted at a licensed bank for outward transfer). Third, both systems tie remittance tightly to completed financial obligations: audited financial statements and tax filings/finalizations are the indispensable "entry ticket" on both sides. Grasping these three similarities helps investors avoid the "the other side must be easier" mindset — in reality each side is difficult in a different way.

5. Common investor risks

Risk 1: Applying "home turf" thinking to the other country. Chinese investors, used to bank document review, often forget the 07-day tax notification duty when they come to Vietnam; conversely, Vietnamese investors used to the notification procedure fail to prepare the authenticity-supporting dossier for the bank when receiving dividends from China. Each such "forgetting" delays cash flow by at least several weeks. This is why groups usually build a dedicated standard process for Vietnam–China profit repatriation instead of mechanically applying experience from only one side.

Risk 2: Missing the 5% personal income tax when the recipient is an individual. Many individual investors plan cash flows on the assumption that "after-tax profit can be fully remitted", but from 01/7/2026, an individual's capital-investment income in Vietnam bears 5% personal income tax (Article 12 of Law 109/2025/QH15). On the China side, non-resident individuals receiving dividends face a higher domestic rate than enterprises — calculate correctly before committing to a net amount with counterparties.

Risk 3: Skipping the double tax treaty application procedure. The Vietnam–China treaty caps dividend tax at 10%, but the benefit is not automatic — the company must complete the treaty-application procedure with the tax authority and prove beneficial-owner status. Skipping this procedure means bearing a higher domestic rate unnecessarily.

Risk 4: Remitting profits while carrying accumulated losses. This is an accounting-technical error with legal consequences: breach of Article 3(3) of Circular 186/2010/TT-BTC (Vietnam side) or Article 7 of SAFE Circular 3/2017 (China side). The usual cause is a profit distribution resolution adopted before the audit finalizes its figures.

Risk 5: Cash flows not going through the right account. In Vietnam, remitting profits outside the DICA breaches foreign-exchange discipline; in China, remitting through a channel inconsistent with the declared dossier makes the bank doubt authenticity and possibly report a suspicious transaction. Both cases can lead to temporary freezing of the cash flow for verification.

Risk 6: Exchange-rate gaps and foreign-currency purchase timing. Profits are denominated in local currency but remitted in foreign currency; the gap between the profit-booking date and the bank's actual foreign-currency purchase can create material exchange differences on large amounts. This risk sits in no statute but directly affects the net amount received — agree clearly in the profit distribution resolution on conversion principles and who bears the exchange risk.

6. Practical recommendations

Before investing (structuring stage): Identify the expected dividend-flow direction for the next 3–5 years and feed China's 10% withholding at source into the financial model; consider an intermediate holding structure in a jurisdiction with a more favorable tax treaty where consistent with anti-treaty-abuse principles. Open the DICA in Vietnam from the capital-contribution stage — do not wait until profits need remitting.

During operations: Maintain "one cash flow – one account" discipline: every direct-investment-related transaction in Vietnam goes through the DICA; in China, keep profit distribution resolutions, tax filings and audit reports filed by year, ready for bank review. Check accumulated losses before each remittance round.

When executing the remittance: In Vietnam, notify the tax authority at least 07 working days before the transfer date and reconcile figures with the audit report; in China, work with the bank in advance on the document checklist, especially for amounts above USD 50,000. At the same time, start the double tax treaty application procedure where eligible. A unified checklist for the entire Vietnam–China profit repatriation process helps avoid missing time markers like the 07-day tax notification or China's USD 50,000 bank threshold.

When problems arise: If the bank rejects or returns the dossier, ask for the reasons in writing and cross-check against the prescribed document checklist (Article 7 of SAFE Circular 3/2017 on the China side; foreign-exchange administration rules on the Vietnam side) instead of supplementing documents by feel. For large amounts or complex structures, consult counsel versed in both systems before signing the profit distribution resolution — advisory fees are always cheaper than fixing a stuck cash flow.

7. Frequently asked questions

1. Is profit repatriated from Vietnam to a parent company in China subject to withholding tax?

Short answer: if the parent is an organization, no further corporate income tax arises in Vietnam after the company has fully paid CIT; if the recipient is an individual, 5% personal income tax applies.

Legal basis: remittable profit is after-tax profit under Article 2 of Circular 186/2010/TT-BTC; 5% personal income tax on capital-investment income under Article 12 of Law 109/2025/QH15 (effective 01/7/2026).

Practical note: many companies assume "after tax means no more tax" in all cases — wrong when the recipient is an individual. Identify the recipient's status correctly before planning cash flows.

Need your company's tax obligations reviewed for its specific case? Contact our advisory team for a source-text cross-check.

2. How does the Vietnam–China double tax treaty reduce tax on repatriated profits?

Short answer: the treaty caps withholding tax on dividends at 10%, but the benefit is not automatic — the application procedure must be completed.

Legal basis: Article 10 of the Vietnam–China Double Tax Treaty (signed 17/5/1995, effective 18/10/1996).

Practical note: the 10% ceiling matches China's domestic withholding rate, so for dividends the treaty benefit is mainly a rate guarantee; the benefit is clearer for interest and royalties. The company must prove beneficial-owner status.

For guidance on the treaty-application procedure, companies may consult tax counsel before the remittance round.

3. Does remitting profits out of China require prior foreign-exchange approval?

Short answer: no prior approval is needed; the bank processes directly after document review.

Legal basis: SAFE Circular Huifa [2014] No. 2 simplifies the procedure — commercial banks verify authenticity and remit without prior SAFE approval; Article 7 of Circular 3/2017 sets the document checklist for amounts above USD 50,000.

Practical note: "no approval needed" does not mean "easy" — banks review authenticity very strictly, and incomplete or inconsistent dossiers are returned. Work with the bank in advance on the document list.

4. Can a company with accumulated losses remit profits abroad?

Short answer: no — both Vietnam and China bar remitting the year's profit while accumulated losses remain.

Legal basis: Article 3(3) of Circular 186/2010/TT-BTC (Vietnam); Article 7 of SAFE Circular 3/2017 (China).

Practical note: review the audited financial statements and the loss carry-forward plan before adopting the profit distribution resolution; adopting the resolution before final audit figures is a common cause of breach.

Where the company has a complex profit-and-loss history, have accounting and counsel review together before each round.

5. Must profit remittance from Vietnam go through a DICA account?

Short answer: yes — this is the mandatory rule, except where the DICA must be closed, in which case the investor's own payment account at a licensed bank is used.

Legal basis: Article 11(1) of the Foreign Exchange Ordinance (amended by Ordinance 06/2013/UBTVQH13); Articles 9, 7(2) and 9(2) of Circular 06/2019/TT-NHNN. The tax authority must also be notified at least 07 working days before remittance (Article 5, Circular 186/2010/TT-BTC).

Practical note: Chinese investors new to Vietnam are often unfamiliar with the DICA — open this account from the capital-contribution stage and ensure every direct-investment cash flow passes through it.

Need counsel who understands both the Vietnamese and Chinese systems?

Vietnam–China cross-border profit repatriation is a combined problem of tax, foreign exchange and accounting — one wrong step and cash flow can stall for weeks. Our China Desk accompanies companies from cash-flow structuring, tax-obligation review and bank-dossier preparation to double tax treaty application procedures. Call hotline 0988424851 for advice on your company's specific case.

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References

  • Investment Law No. 143/2025/QH15, Article 11.
  • Circular 186/2010/TT-BTC dated 18/11/2010 of the Ministry of Finance guiding outbound profit remittance.
  • Circular 06/2019/TT-NHNN of the State Bank of Vietnam on foreign-exchange administration for foreign direct investment into Vietnam.
  • Foreign Exchange Ordinance, as amended by Ordinance 06/2013/UBTVQH13, Article 11.
  • Corporate Income Tax Law No. 67/2025/QH15, Article 10.
  • Personal Income Tax Law No. 109/2025/QH15, Article 12.
  • Vietnam–China Double Tax Treaty (signed 17/5/1995, effective 18/10/1996), Article 10.
  • PRC Corporate Income Tax Law (中华人民共和国企业所得税法, promulgated 2007, amended 2018).
  • SAFE Circular Huifa [2014] No. 2 on simplifying foreign-exchange administration for capital accounts.
  • SAFE Circular 3/2017 (汇发[2017]3号), Article 7.