In the context of profound international economic integration, Vietnam continues to be one of the most attractive investment destinations in Southeast Asia. Alongside the strong wave of foreign investment, Foreign-Invested Enterprises (FIEs) are increasingly growing in both number and scale. However, during the investment lifecycle, capital withdrawal—meaning the termination of a part or the entirety of the capital contribution in an enterprise—is an inevitable strategic step. This often occurs when investors wish to restructure their investment portfolios, change business strategies, or divest after achieving expected returns.

This article provides a comprehensive and in-depth analysis of Vietnam’s current legal regulations regarding the withdrawal of capital by foreign investors from FDI enterprises, thereby providing a clear and complete legal basis for businesses and foreign investors.

Governing Legal Basis for Capital Withdrawal

The capital withdrawal activities of foreign investors from FDI enterprises are governed by a multi-sectoral legal framework, including:

• Law on Investment 2020;

• Law on Enterprises 2020;

• Decree No. 31/2021/ND-CP guiding the implementation of the Law on Investment;

• Law on Tax Administration, Law on Corporate Income Tax, and Law on Personal Income Tax;

• Circular No. 06/2019/TT-NHNN regulating foreign exchange management for foreign direct investment activities;
• Free Trade Agreements and Double Taxation Avoidance Agreements (DTAAs) to which Vietnam is a signatory.

Capital withdrawal must strictly comply not only with investment and enterprise regulations but also with tax and foreign exchange rules to ensure the legality, security, and transparency of capital flows.

Lawful Forms of Capital Withdrawal for Foreign Investors

Vietnamese law does not have a single specific legal definition for “capital withdrawal” but recognizes divestment activities under various legal forms, including:

(i) Transfer of Capital Contribution or Shares
This is the most common form when a foreign investor wishes to withdraw capital. The investor may transfer their capital contribution to another organization or individual, whether Vietnamese or foreign. This form requires carrying out procedures to register the change of members/shareholders under the Law on Enterprises, and simultaneously complying with conditions on foreign investment (if applicable). In certain cases, the capital transfer requires the procedure of registering capital contribution or share purchase at the Department of Planning and Investment if the transferee is a foreign investor and the enterprise operates in a conditional investment sector for foreign investors.

(ii) Reduction of Charter Capital
Investors may withdraw capital through the mechanism of reducing the enterprise’s charter capital. However, this form can only be executed if it meets the conditions prescribed by the Law on Enterprises. Specifically, an enterprise may only reduce its capital by: returning a portion of the capital contribution to members if the company has operated continuously for more than 2 years and ensures the full payment of debts and other financial obligations; the company repurchasing a member’s capital contribution; or reducing charter capital upon a decision to dissolve, divide, or separate the company.

(iii) Dissolution or Transfer of the Entire Enterprise

This constitutes a total capital withdrawal. If an investor wishes to completely exit the enterprise, they can do so by transferring their entire capital share to another party or by dissolving the enterprise. In both scenarios, the enterprise must fully fulfill its obligations regarding taxes, finances, social insurance, and asset liquidation, and receive confirmation of procedure completion from the business registration authority.

Legal Sequence and Procedures for Capital Withdrawal

The legal process varies depending on the form of withdrawal. Below is the procedural sequence for the two most common forms:

Transfer of Capital Contribution/Shares

• The investor and the transferee sign a Transfer Agreement.

• Determine whether the transfer is subject to the registration of capital contribution/share purchase under Article 26 of the Law on Investment 2020.

• Execute procedures at the competent authority (e.g., Department of Finance/Department of Planning and Investment, if applicable) to register the capital contribution/share purchase; subsequently, execute procedures to change members/shareholders at the Business Registration Office.

• Pay the income tax arising from the capital transfer at the managing tax authority.

• Execute payment and transfer funds via the Direct Investment Capital Account (DICA) in accordance with the regulations of the State Bank of Vietnam.

Reduction of Charter Capital

• Draft and pass a resolution/decision by the owner/shareholders/members regarding the capital reduction.

• Prepare financial statements and obtain confirmation of no outstanding tax debts or financial obligations.

• Submit a notification dossier for the change of charter capital to the Business Registration Office.

• Update the information on the Enterprise Registration Certificate (ERC).

• Transfer the refunded capital (if any) back to the investor via the Direct Investment Capital Account (DICA).

Tax Issues Related to Capital Withdrawal

Capital withdrawal activities may trigger tax obligations, including:

• Personal Income Tax (PIT) (for individual investors): A rate of 0.1% on the transfer value or 20% on the profit, depending on the specific case.

• Corporate Income Tax (CIT) (for institutional investors): The standard tax rate of 20% applies to the income derived from the capital transfer.

• Tax Treaty Benefits: If the foreign investor is from a country that has signed a Double Taxation Avoidance Agreement with Vietnam, they may be entitled to tax exemptions or reductions according to the treaty, provided they submit a Certificate of Residence and necessary documentation to the Vietnamese tax authorities.

Foreign Exchange Management and Repatriation of Funds

The repatriation of funds obtained from capital withdrawal must comply with the foreign exchange management regulations of the State Bank of Vietnam. Accordingly, foreign investors must execute transactions through a Direct Investment Capital Account (DICA) opened at a permitted commercial bank. They must also provide a complete dossier proving the lawful source of funds, the purpose of the transfer, and the fulfillment of all financial obligations.
Violating foreign exchange management regulations may result in administrative penalties or the refusal of the outward remittance.

Legal Recommendations When Executing Capital Withdrawal

Given the complex legal nature of capital withdrawal, foreign investors should note the following:

• Review Corporate Documents: Check the company’s charter, investment agreements, or internal commitments to clearly define the right to withdraw capital.

• Proper Valuation: Conduct a reasonable valuation of the capital contribution to avoid disputes and tax risks.

• Professional Consultation: Seek advice from lawyers or professional consultants to prepare a complete dossier, ensuring strict compliance with Vietnamese law and relevant international commitments.

Important Note: Upon completing the withdrawal of capital from an FDI enterprise, foreign investors must pay special attention to two matters.

• Terminating the Investment Project: If the entire capital contribution or shares have been transferred to Vietnamese individuals or organizations, the investor must take steps to terminate the registered project in accordance with the law.

• Declaring and Paying PIT (if applicable): Investors are obligated to declare income arising from the capital transfer and fulfill tax obligations as currently prescribed.

Support Services for Foreign Investors Withdrawing Capital from FDI Enterprises at BKC Law

At BKC Law, we provide comprehensive consulting and support services for foreign investors during the process of withdrawing capital from Foreign-Invested Enterprises (FIEs) in Vietnam. With a team of highly experienced lawyers who possess a profound understanding of investment law, we are committed to accompanying clients through every legal procedure—from capital transfer, termination of investment operations, and asset liquidation, to post-withdrawal procedures such as tax finalization and notifications to investment registration authorities and related agencies. BKC Law’s ultimate goal is to optimize our clients’ rights and ensure strict legal compliance throughout the entire divestment process.

For free legal consultation related to foreign investment and FDI enterprises, please contact our Lawyers via the following information:

• Phone: 0901 3333 41

• Email: info@bkclaw.vn

• District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, Sai Gon Ward, District 1, Ho Chi Minh City

• Binh Tan Office: 41 Ten Lua Street, An Lac Ward, Binh Tan District, Ho Chi Minh City

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