Welcome everyone to another edition of my China Tech Law Newsletter. Today’s edition is a quick post not about China but about its neighbor Vietnam, and mostly on how to remit funds out. I previously wrote about the process for remitting funds out of China here.

For those of you who have migrated or thinking of migrating some of your business to Vietnam from China, you'll surely need local counsel, but you’ll also see some very similar challenges in navigating regulations there.

For example, unlike the US but like China, employment is not “at-will.” Vietnam labor law is employee friendly, although severance is about half of China’s statutory requirement (50% of monthly salary X number of years worked compared to 100% in China plus 1 month).

Another similarity, companies need an authorized business scope and foreign investment is restricted in certain sectors, similar to China and its foreign investment catalogue.

One of the very interesting similarities is the floating peg and currency controls in Vietnam. Maybe not as strict as say China, but you cannot just move money in and out of the country at will and on demand. There is a process. If you’ve done business in China, you can make an educated guess what that process can look like.

Similar to China, funds can be remitted for bona fide commercial obligations overseas via contract. But for remitting profits out as dividends, similar to China you must settle outstanding tax obligations including for corporate income tax, VAT, etc.

Similar again to China, you need to have an audit that shows profitability as a pre-requisite to dividending funds out. Like China, this creates a one-time annual opportunity to remit funds out after the company’s audit.

Unlike China, withholding tax is not due on corporate dividends but is on other payments out like interest and service fees.

Final step is the actual remittance process itself at the bank. You’ll have to evidence relevant documentation from above, and then a quasi-fixed exchange rate will be applied (a generally fixed rate with some bandwidth to float, again just like China). Also with some limited leeway for the bank to provide a better rate.

If you’re using Vietnam as a manufacturing hub as part of a China +1 strategy, you may not be remitting profits out as much, but if it’s a potential market for your products, you hopefully would.

A quick post today, just a simple example mostly to show how while some companies are diversifying from China, the know-how they’ve built up from China even from a regulatory process perspective can be valuable in new markets like Vietnam.

*This blog may be considered attorney advertising. It is for informational purposes only and does not constitute legal advice.