In this article
- What are accumulated losses and where do they appear in the financial statements?
- Worked example: accumulated losses and profit repatriation over 3 years
- Three year-3 profit scenarios and the distributable amount
- How to calculate accumulated losses yourself before repatriating profits
- How can you clear accumulated losses sooner?
- FAQ
Many parent companies ask the same question: our Vietnamese subsidiary made a profit this year, so why does the accountant say profits cannot be remitted yet? The answer usually lies in accumulated losses: profits can be repatriated only once past losses have been fully offset. This article uses a hypothetical three-year case to explain how accumulated losses affect profit repatriation (and how much can be remitted while losses remain), with a calculation you can apply right away. Prepared by the accounting team at ACCA Consulting Vietnam.
1. What are accumulated losses and where do they appear in the financial statements?
Accumulated losses are a negative balance of undistributed profit after tax (retained earnings) on the balance sheet. The balance is the cumulative total of each year's after-tax results, less amounts already distributed. One profitable year does not necessarily wipe out the losses of previous years.
Under the rules on remitting profits abroad, an investor may repatriate profits only when the company has fulfilled its financial obligations and the distribution does not leave the company with accumulated losses. The deciding figure is therefore not this year's profit but the retained earnings balance after past losses have been offset. For the full procedure and documentation, see profit repatriation for FDI companies.
| Criterion | Accounting accumulated losses | Tax losses carried forward |
|---|---|---|
| Basis | Profit after tax in the financial statements | Taxable income on the annual corporate income tax (CIT/TNDN) finalization return |
| Used to | Determine distributable profit | Reduce taxable income in later years |
| Effect of non-deductible expenses | No effect | Makes the tax loss smaller than the accounting loss |
| Time limit | Accumulates until fully offset | Carried forward within the period allowed under current regulations |
2. Worked example: accumulated losses and profit repatriation over 3 years
Company X (100% foreign-owned) was established in 2023. Assumptions: the accounting loss equals the tax loss, there are no disallowed expenses, the CIT rate is 20%, and no profits have yet been distributed. The figures below are an illustrative example.
| Item | 2023 | 2024 | 2025 |
|---|---|---|---|
| Profit before tax | -1,500 | -500 | 3,000 |
| Losses carried forward and offset | 0 | 0 | 2,000 |
| Taxable income | 0 | 0 | 1,000 |
| CIT at 20% | 0 | 0 | 200 |
| Profit after tax | -1,500 | -500 | 2,800 |
| Retained earnings at year-end | -1,500 | -2,000 | 800 |
In 2025 the company made a profit before tax of VND 3 billion (≈ USD 118,000, approximate, at a reference rate of VND 25,500/USD), yet the maximum it can distribute is only about VND 800 million. The rest of the 2025 profit went to offset the VND 2 billion of accumulated losses from the first two years.
Illustrative example. The actual distribution also depends on the owner's decision to retain earnings and on the audited figures.
View as table
| 2025 profit before tax | 3,000,000,000 VND |
| 2025 CIT | 200,000,000 VND |
| 2025 profit after tax | 2,800,000,000 VND |
| Accumulated losses at start of year | 2,000,000,000 VND |
| Maximum distributable | 800,000,000 VND |
3. Three year-3 profit scenarios and the distributable amount
Keeping the first two loss-making years unchanged (VND 2 billion in total), we vary the 2025 profit before tax to see how the repatriation threshold shifts.
Illustrative example. VND 1.5 billion scenario: no tax payable yet because of losses carried forward, but accumulated losses of VND 500 million remain, so nothing can be distributed.
View as table
| Year-3 profit after tax | Maximum distributable | |
|---|---|---|
| Profit before tax VND 1.5 billion | 1,500,000,000 VND | 0 VND |
| Profit before tax VND 2.2 billion | 2,160,000,000 VND | 160,000,000 VND |
| Profit before tax VND 3 billion | 2,800,000,000 VND | 800,000,000 VND |
- Profit of VND 1.5 billion: taxable income after loss carry-forward is still negative, so no tax is payable; retained earnings at year-end are still minus VND 500 million, so nothing can be remitted.
- Profit of VND 2.2 billion: taxable income of VND 200 million, tax of VND 40 million; retained earnings are positive at VND 160 million.
- Profit of VND 3 billion: as in the main case, a maximum of about VND 800 million.
4. How to calculate accumulated losses yourself before repatriating profits
- 1Take the opening balance
Retained earnings at the start of the year per the prior year's audited financial statements.
- 2Add this year's profit after tax
Use the audited figure, including adjusting entries.
- 3Deduct amounts already distributed
Deduct profits declared for distribution during the year (if any).
- 4Deduct amounts retained
Deduct amounts the owner decides to retain or appropriate to funds under the charter.
- 5Reconcile tax obligations
Confirm there are no outstanding tax liabilities before finalizing the distribution.
5. How can you clear accumulated losses sooner?
There is no way to "get around" accumulated losses, but a company can avoid deepening them and plan distributions realistically:
- Review accruals and provisions without a proper basis in loss-making years so the financial statements are accurate.
- Track tax losses separately from accounting losses so you don't miss the right to carry losses forward.
- Prepare a 2–3 year forecast for the parent company showing the year in which retained earnings are expected to turn positive.
- Consider other financing arrangements with the parent company (for example, legitimate service fee payments), and check the related-party transaction rules carefully before applying them.
FAQ
We made a profit this year but still have accumulated losses. Can we remit part of it?
Only retained earnings that remain positive after all past losses are offset can be considered for distribution. If the balance is still negative after offsetting losses, nothing can be remitted yet.
Once tax losses are fully used, are the accounting accumulated losses also cleared?
Not necessarily. The two figures are calculated on different bases; non-deductible expenses or timing differences can make them diverge.
Can we increase capital to clear accumulated losses and then distribute profits?
A capital increase raises owner's equity but does not eliminate negative retained earnings. Any capital restructuring requires separate advice under current regulations.
Know in advance which year you can distribute profits
ACCA Consulting Vietnam prepares accumulated loss schedules and distributable profit forecasts for FDI companies. Get advice from our accounting team.
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