Currently, many foreign investors in Vietnam wish to reduce the investment capital of their projects. So, does the current law allow investors to do so? Please follow the article below by the lawyers of Ky Vong Viet Law Firm.
Legal Basis
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The Investment Law 2020 does not contain specific provisions regarding the reduction of investment capital for FDI companies.
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However, Clause 2, Article 41 of the law provides a general regulation:
“2. Investors shall carry out procedures to adjust the Investment Registration Certificate in case the adjustment of the investment project changes the content of the Investment Registration Certificate.”
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The Enterprise Law 2020, on the other hand, has specific provisions on reducing charter capital:
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Article 68: Reduction of capital for a multi-member LLC
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Article 87: Reduction of capital for a single-member LLC
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Article 112: Reduction of capital for a joint-stock company
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Lawyer’s Opinion
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Reduction of investment capital alters the Investment Registration Certificate (IRC)
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While the Investment Law does not explicitly regulate the reduction of investment capital, it also does not prohibit FDI companies from doing so.
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FDI companies are subject to both the Investment Law and the Enterprise Law
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As FDI companies fall under one of the business entity types regulated by the Enterprise Law, they are allowed to reduce their charter capital in accordance with its provisions.
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Charter capital and investment capital relationship
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Charter capital of an FDI company may be part of or equal to the total investment capital. Therefore, when reducing charter capital on the Enterprise Registration Certificate (ERC), the investor must also adjust the IRC accordingly.
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Practical Experience
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In practice, provinces and cities in Vietnam do not prohibit FDI companies from reducing their investment capital.
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However, investors must provide convincing legal and business justifications for the reduction.
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This is necessary because, in the past, some investors have attempted to repatriate profits through investment capital reductions to avoid taxation.
🔹 This legal advice is intended for informational and research purposes. Some cited regulations may no longer be in effect at the time you read this article. For the most accurate guidance, please contact us at 1900 633 298. Thank you!
