Forms of Overseas Investment Advised by Specialized Attorneys – Latest 2024 Update

Outbound investment has become increasingly common as investors seek opportunities to expand and diversify their investment portfolios. Forms of outbound investment include purchasing shares in foreign companies, participating in global investment funds, or making direct investments in international projects and enterprises, each offering distinct opportunities and challenges. Understanding these forms enables investors to make informed decisions, optimize returns, and minimize risks in today’s globalized environment.

Principles of Outbound Investment

The State currently encourages investors to engage in outbound investment activities to expand market access. However, when conducting outbound investment, investors must ensure compliance with the principles stipulated in Article 51 of the Investment Law 2020, including:

– Investors must comply with the provisions of the Investment Law, other relevant laws, the laws of the host country or territory, and international treaties to which the Socialist Republic of Vietnam is a party.

– Investors bear sole responsibility for the effectiveness of their outbound investment activities.

Permitted Forms of Outbound Investment

Pursuant to Clause 1, Article 52 of the Investment Law 2020, investors may engage in outbound investment activities in the following forms:

– Establishing an economic organization in accordance with the laws of the host country;

– Investing in the form of contracts abroad;

– Contributing capital, purchasing shares, or purchasing capital contributions in foreign economic organizations to participate in the management of such organizations;

– Purchasing or selling securities, other valuable papers, or investing through securities investment funds or other intermediary financial institutions abroad;

– Other forms of investment as permitted by the laws of the host country.

Sectors and Lines Prohibited for Outbound Investment

Identifying permitted business lines is one of the most important steps in the outbound investment process. Countries typically impose specific regulations to ensure that investment activities not only comply with legal standards but also do not harm national interests or the international community. Below are some sectors and lines commonly prohibited or restricted for outbound investment under the laws of many countries:

• Trading in narcotics.
• Trading in chemicals and minerals.
• Trading in specimens of wild flora and fauna sourced from nature under the Convention on International Trade in Endangered Species of Wild Fauna and Flora; specimens of endangered, precious, and rare forest flora, fauna, and aquatic species.
• Prostitution-related business activities.
• Trading in humans, human tissues, corpses, body parts, or human embryos.
• Activities related to human cloning.
• Trading in explosive fireworks.
• Debt collection services.
• Sectors or lines involving technologies or products prohibited from export under foreign trade management laws.
• Sectors or lines prohibited from investment and business under the laws of the host country.

Each country maintains its own legal system, resulting in varying regulations on prohibited investment sectors.

Key Considerations When Engaging in Outbound Investment

Transfer of Investment Capital Abroad

Pursuant to Article 66 of the Investment Law 2020, investors are permitted to transfer investment capital abroad to carry out investment activities when the following conditions are met:

– An Outbound Investment Registration Certificate has been issued, except in cases where foreign currency, goods, machinery, or equipment is transferred abroad for market survey, research, exploration, or other preparatory investment activities as prescribed by the Government.

– The investment activity has been approved or licensed by the competent authority of the host country. In cases where the laws of the host country do not require investment licensing or approval, the investor must provide documents proving the right to carry out investment activities in the host country.

– An outbound investment capital account has been opened. Specifically, the investor must open an outbound investment capital account at a permitted credit institution in Vietnam in accordance with foreign exchange management regulations.

All transactions involving the transfer of funds from Vietnam abroad and from abroad to Vietnam related to outbound investment activities must be conducted through the aforementioned outbound investment capital account in accordance with foreign exchange management regulations.

Repatriation of Profits to Vietnam

Pursuant to Article 68 of the Investment Law 2020, the repatriation of profits is regulated as follows:

– Within 06 months from the date of issuance of the tax finalization report or a document of equivalent legal value under the laws of the host country (hereinafter referred to as the tax finalization report), the investor must transfer all profits and other income earned from investment abroad back to Vietnam, except where profits are retained abroad for reinvestment under Article 67 of the Investment Law 2020.

– If the investor fails to repatriate profits and other income within the aforementioned period, the investor shall:

+ Notify in writing the Ministry of Planning and Investment and the State Bank of Vietnam (notification must be made within 06 months from the date of the tax finalization report).

+ After notification, the investor may extend the repatriation period, but not exceeding 12 months from the expiry of the initial 06-month period from the date of the tax finalization report.

– In cases where the investor fails to comply with the above provisions, sanctions shall be imposed in accordance with the law.

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