Reducing investment capital is far more sensitive than increasing it: it is not just adjusting a figure on the IRC but also involves the investor’s right to withdraw capital, the obligation to ensure payment of debts, and the ability to transfer funds abroad. The law permits charter capital reduction only under strict conditions — the company has operated continuously for at least 2 years and must ensure full payment of debts and other asset obligations after the reduction — while the project’s total investment capital on the IRC must be correspondingly amended.
For FDI projects, capital reduction also raises foreign exchange and tax questions: the withdrawn capital is transferred abroad through the investment capital account, and depending on the structure (capital withdrawal vs transfer of contributed capital), corporate income tax may arise on the difference. Getting the sequence wrong — withdrawing funds before completing the amendment — is a punishable violation and causes trouble when settling with the bank and tax authority.
Quick summary
| Topic | Reducing FDI project investment capital: IRC amendment and charter capital reduction on the ERC |
|---|---|
| Who this is for | FDI companies downsizing or restructuring capital, foreign investors withdrawing part of their capital, and in-house finance/legal teams. |
| Key checkpoints | Charter capital reduction conditions (2 years of continuous operation, debt payment assurance), IRC amendment sequence, outbound transfer channel, tax obligations on withdrawn capital. |
| Desired outcome | The IRC and ERC consistently recording the new capital level, withdrawn capital lawfully transferred abroad, and tax and debt obligations fully settled. |
Core legal issue: reducing FDI project investment capital in Vietnam
Total investment capital is mandatory IRC content; reducing a project’s capital scale means the IRC must be amended. At the enterprise level, charter capital reduction is only permitted when the conditions in the Law on Enterprises 2020 are met, including that the company has operated continuously for at least 2 years (from the establishment registration date) and must ensure full payment of debts and other asset obligations after the reduction.
The core difference from a capital increase is that state authorities will closely examine the company’s solvency after the reduction. The file therefore includes not only the reduction decision but also financial statements, debt status confirmations and a plan to protect creditors’ and employees’ interests. Reducing capital while owing taxes, social insurance or supplier debts without a settlement plan is grounds for rejection.
For foreign investors, withdrawn capital is transferred abroad through the investment capital account at a licensed bank. Depending on the withdrawal form — charter capital reduction with repayment to the investor, or transfer of contributed capital to another party — tax obligations differ: transferring contributed capital may trigger corporate income tax on the difference between the transfer price and the original cost. Designing the wrong withdrawal form can leave the company paying more tax than legally necessary.
Legal basis and verification sources
- Law on Investment 2025
- Law 76/2025/QH15 amending the Law on Enterprises
- Decree 168/2025/ND-CP on enterprise registration
- Decree 29/2025/ND-CP on the functions and tasks of the Ministry of Finance
- Resolution on the 2025 rearrangement of provincial-level administrative units
- Resolution 203/2025/QH15 amending the Constitution on administrative units
Procedure and dossier checklist
Step 1 — Check reduction eligibility: confirm the company has operated continuously for at least 2 years; review all debt obligations (tax, social insurance, suppliers, banks) and prepare a post-reduction payment assurance plan; determine the most tax-efficient withdrawal form (charter capital reduction with repayment vs transfer of contributed capital).
Step 2 — Internal decisions and ERC dossier: adopt the decision/meeting minutes on the charter capital reduction; the change registration dossier includes the change notice, the decision/meeting minutes, the amended charter, the latest financial statements and evidence of debt payment assurance after the reduction; the processing time is 3 working days from receipt of a complete valid dossier.
Step 3 — Amend the total investment capital downward on the IRC: file the investment project amendment with the investment registration authority that issued the IRC, including the amendment request, the investor’s capital reduction decision, a copy of the IRC and documents on the post-amendment capital use plan; 15 days from receipt of a complete valid dossier for projects not subject to investment in-principle approval.
Step 4 — Handle tax obligations and outbound transfer: declare and pay taxes arising from the capital withdrawal/transfer (if any); transfer funds abroad through the investment capital account at a licensed bank, with complete vouchers evidencing the transaction’s legality for bank approval.
Step 5 — Post-reduction updates: update the charter and the member/shareholder register; review capital commitments in land leases, credit agreements and enjoyed investment incentives for timely adjustment where incentive conditions are tied to minimum capital scale.
Common risks
Risk 1 — Not yet eligible for charter capital reduction: the company has not operated continuously for 2 years or has debts without a payment assurance plan; the change registration is rejected, wasting preparation time.
Risk 2 — Withdrawing funds before procedures are complete: transferring money abroad before the IRC/ERC is amended; the bank refuses the transaction or it is treated as an improper-purpose transfer, with possible foreign exchange penalties.
Risk 3 — Missing tax obligations on withdrawal: failing to declare corporate income tax on the difference when transferring contributed capital; additional assessments and penalties upon tax inspection.
Risk 4 — Capital reduction affecting investment incentives: the project enjoys tax incentives or land rental exemptions tied to minimum capital scale conditions; post-reduction ineligibility leads to incentive clawback and additional assessments. Review before deciding.
Risk 5 — Amending only one side, IRC or ERC: reducing charter capital on the ERC without amending total investment capital on the IRC (or vice versa); the legal file is misaligned, causing trouble in periodic investment reporting or subsequent procedures.
Competent authorities and filing bodies
The IRC investment capital reduction amendment is handled by the investment registration authority that issued the IRC (the provincial/municipal Department of Finance or the Industrial Park, Export Processing Zone, Hi-Tech Park or Economic Zone Management Authority). Charter capital reduction registration is handled by the business registration authority under Decree 168/2025/ND-CP. Outbound fund transfers go through the licensed bank where the company holds its investment capital account; tax obligations are handled with the directly managing tax authority.
When to contact a lawyer
Engage a lawyer in three cases: (1) before deciding on the reduction — to check eligibility, design the most tax- and foreign-exchange-efficient withdrawal form, and assess impacts on enjoyed investment incentives; (2) when the company has complex debts — a payment assurance plan and proper handling of creditors’ and employees’ rights are needed; (3) when the withdrawn capital must be transferred abroad — to prepare legality evidence as required by the bank and foreign exchange regulators.
How FLAT LAW FIRM helps
FLAT LAW FIRM assists with checking capital reduction eligibility, designing tax- and foreign-exchange-efficient withdrawal plans, and standardizing IRC amendment and ERC change dossiers, in Vietnamese, Chinese and English.
See also: Amending an Investment Registration Certificate | Increasing investment capital of an FDI project | Changing investors in a project in Vietnam
FAQ
May an FDI company reduce its charter capital?
Yes, when the Law on Enterprises 2020 conditions are met: the company has operated continuously for at least 2 years and ensures full payment of debts and other asset obligations after the reduction.
Does reducing investment capital require an IRC amendment?
Yes. Total investment capital is IRC content; reducing a project’s capital scale requires the IRC amendment procedure — 15 days for projects not subject to investment in-principle approval.
How is withdrawn capital transferred abroad?
Through the company’s investment capital account at a licensed bank, with complete vouchers evidencing the transaction’s legality (the reduction decision, the amended IRC/ERC, tax vouchers).
Is withdrawing capital taxable?
It depends on the form: charter capital reduction with repayment of contributed capital usually triggers no CIT on the original capital; transferring contributed capital may subject the difference between the transfer price and the original cost to corporate income tax. Each plan needs specific calculation.
Does capital reduction affect enjoyed investment incentives?
It can. If incentive conditions (tax, land rental) are tied to a minimum capital scale that is no longer met after the reduction, the company may face incentive clawback and additional assessments. Review before deciding.
May capital be withdrawn before the amendment is complete?
It should not. Transferring money abroad before the IRC/ERC is amended may be refused by the bank and penalized as a foreign exchange management violation.
How long does a charter capital reduction take?
The change registration with the business registration authority takes 3 working days from receipt of a complete valid dossier; plus the IRC amendment time (15 days) and tax handling and bank transfer time.
