Circular No. 06/2019/TT-NHNN dated June 26, 2019, of the State Bank of Vietnam on guiding the foreign exchange management of foreign direct investment in Vietnam

CIRCULAR

Guiding the foreign exchange management of foreign direct investment in Vietnam^[1]

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions and the November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the December 13, 2005 Ordinance on Foreign Exchange and the March 18, 2013 Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 70/2014/ND-CP of July 17, 2014, detailing a number of articles of the Ordinance on Foreign Exchange and the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 16/2017/ND-CP of February 17, 2017, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Foreign Exchange Management Department;

The Governor of the State Bank of Vietnam promulgates the Circular guiding the foreign exchange management of foreign direct investment in Vietnam.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

1. This Circular guides the foreign exchange management of foreign direct investment in Vietnam, including contribution of investment capital; opening and use of foreign-currency and Vietnam-dong direct investment capital accounts; transfer of money for carrying out investment preparation activities; outbound transfer of capital, profits and lawful revenues; and transfer of investment capital or investment projects.

2. The contents related to the foreign exchange management of foreign-invested enterprises being public companies and having stocks listed or registered for transaction at stock exchanges must comply with the regulations on the foreign exchange management of foreign indirect investment in Vietnam.

Article 2.Subjects of application

This Circular applies to:

1. Foreign-invested enterprises prescribed in Clause 2, Article 3 of this Circular.

2. Foreign and Vietnamese investors in foreign-invested enterprises.

3. Foreign investors to business cooperation contracts (BCCs).

4. Foreign investors to investment contracts in the form of public-private partnership (PPP).

5. Organizations and individuals involved in foreign direct investment in Vietnam.

Article 3.Interpretation of terms

In this Circular, the terms below are construed as follows:

1. “Foreign investors” include individuals holding foreign citizenship and organizations established under foreign laws that conduct foreign direct investment in Vietnam.

2. “Foreign-invested enterprises” include:

a/ Enterprises established as economic organizations whose members or shareholders are foreign investors and which are required to carry out procedures for grant of  investment registration certificates under the investment law;

b/ Enterprises other than those prescribed at Point a of this Clause with foreign investors owning 51% or more of their charter capital, including:

(i) Enterprises to which foreign investors contribute capital or in which foreign investors purchase shares or contributed capital (which are engaged in conditional or unconditional business investment sectors and trades applicable to foreign investors), which leads to foreign investors owning 51% or more of their charter capital;

(ii) Enterprises established from the division, splitting, merger or consolidation, which leads to foreign investors owning at 51% or more of their charter capital;

(iii) Newly established enterprises under specialized laws;

c/ Project enterprises established by foreign investors to implement PPP projects in accordance with the investment law.

3. “Licensed bank” means a commercial bank or foreign bank branch licensed to do foreign exchange business and provide foreign exchange services in accordance with law.

4. “Licensed credit institution” means a licensed bank or non-bank credit institution licensed to do foreign exchange business and provide foreign exchange services in accordance with law.

5. “Direct investment capital account” means a foreign-currency or Vietnam-dong payment account opened by a foreign-invested enterprise or foreign investor at a licensed bank to conduct transactions related to foreign direct investment in Vietnam under Articles 5, 6 and 7 of this Circular.

Article 4.General principles

1. Foreign and Vietnamese investors shall make foreign-currency or Vietnam-dong investment capital contributions at levels stated in investment registration certificates, establishment and operation licenses in accordance with specialized laws (for foreign-invested enterprises established and operating under specialized laws), notices of the satisfaction of conditions for capital contribution or purchase of shares or contributed capital by foreign investors, PPP contracts signed with competent state agencies, or other documents proving foreign investors’ capital contribution in accordance with law.

2.  Residents being Vietnamese investors may make investment capital contributions with their self-acquired foreign-currency sources.

3. The contribution of investment capital in cash by foreign and Vietnamese investors shall be made by transfer of money into direct investment capital accounts.

4. Contents related to short-, medium- or long-term foreign loans of foreign-invested enterprises (transactions on collection of capital withdrawals and payment of principals, interests and charges; and transactions on accounts for borrowing and repayment of foreign loans) must comply with the regulations on borrowing and repayment of foreign loans by enterprises.

5. The use of profits divided to foreign investors in Vietnam’s territory must comply with the regulations on foreign exchange management and relevant laws.

Chapter II

SPECIFIC PROVISIONS

Article 5.Opening and use of direct investment capital accounts

1. Subjects entitled to open and use direct investment capital accounts include:

a/ Foreign-invested enterprises prescribed in Clause 2, Article 3 of this Circular;

b/ Foreign investors to BCCs, and foreign investors directly implementing PPP projects without establishing project enterprises (below referred to as foreign investors directly implementing PPP projects).

2. The subjects prescribed in Clause 1 of this Article shall open direct investment capital accounts as follows:

a/ To open a foreign-currency direct investment capital account at 1 (one) licensed bank to conduct lawful collection and payment transactions in foreign currencies related to foreign direct investment in Vietnam;

b/ To open only 1 (one) direct investment capital account in the foreign currency they have used for making investment capital contribution at 1 (one) licensed bank;

c/ In case of making investment in Vietnam dong, to open 1 (one) Vietnam-dong direct investment capital account at the licensed bank where they have opened the foreign-currency direct investment capital account to conduct lawful collection and payment transactions in Vietnam dong related to foreign direct investment in Vietnam;

d/ In case a foreign investor participates in different BCCs or directly implements different PPP projects, he/she/it shall open a separate direct investment capital account for each BCC or PPP project.

3. In case a foreign-invested enterprise borrows a foreign loan in a foreign currency other than that of its direct investment capital account, it may open an account for borrowing and repayment of foreign loans in the loan’s currency at the licensed bank where it has opened the direct investment capital account to conduct lawful collection and payment transactions related to the foreign loan in accordance with the regulations on borrowing and repayment of foreign loans by enterprises.

4. In case of changing the licensed bank where a direct investment capital account is opened, the subjects prescribed in Clause 1 of this Article shall:

a/ Open a direct investment capital account at another licensed bank;

b/ Transfer the whole balance on the previous direct investment capital account to the new one, then close the previous account;

c/ Use the direct investment capital account at another licensed bank to conduct the collection and payment transactions prescribed in Articles 6 and 7 of this Circular only after having completed the steps prescribed at Points a and b this of Clause.

5. The procedures for opening and closing direct investment capital accounts must comply with regulations of the State Bank of Vietnam (below referred to as the State Bank) on the opening and use of payment accounts at payment service-providing organizations.

6. The enterprises prescribed at Points b and c, Clause 2, Article 3 of this Circular shall close their direct investment capital accounts; non-resident foreign investors owning shares or contributed capital in such enterprises shall open indirect investment capital accounts to conduct collection and payment transactions under the regulations on the foreign exchange management of foreign indirect investment in Vietnam in the following cases:

a/ After transferring shares or contributed capital or issuing additional shares to increase the charter capital of a foreign-invested enterprise, the percentage of shares or contributed capital owned by foreign investors in such enterprise is below 51%;

b/ After a foreign-invested enterprise being a public company has its stocks listed or registered for transaction on stock exchanges.

Article 6.Collection and payment transactions on foreign-currency direct investment capital accounts

1. Collection transactions:

a/ Transfer of foreign-currency direct investment capital contributions of foreign and Vietnamese investors in foreign-invested enterprises, foreign investors to BCCs, and foreign investors directly implementing PPP projects;

b/ Transfer of payments for the transfer value of investment capital or investment projects under Article 10 of this Circular;

c/ Transfer of foreign currency amounts purchased from licensed credit institutions to transfer capital, profits and lawful revenues abroad in accordance with this Circular;

d/ Transfer of amounts from foreign-currency payment accounts opened at licensed banks of foreign-invested enterprises, foreign investors to BCCs, or foreign investors directly implementing PPP projects to transfer capital, profits and lawful revenues abroad to foreign investors;

dd/ Conversion of foreign currencies used for making investment capital contribution in case the currency used in capital contribution is other than that of the direct investment capital account;

e/ Transfer of capital surplus from the issuance of additional shares to increase the charter capital of foreign-invested enterprises;

g/ Transfer of foreign currency amounts earned from the domestic sale of petroleum products (after fulfilling financial obligations and paying expenses in Vietnam dong) in accordance with the petroleum law and the guarantee agreement and commitment of the Government (if any);

h/ Transfer of amounts related to foreign loans of foreign-invested enterprises under the regulations on borrowing and repayment of foreign loans by enterprises, except the case specified in Clause 3, Article 5 of this Circular;

i/ Other lawful foreign-currency revenues from foreign direct investment in Vietnam.

2. Payment transactions:

a/ Transfer of amounts into foreign-currency payment accounts opened at licensed banks by foreign-invested enterprises, foreign investors to BCCs, foreign investors directly implementing PPP projects or executive officers of petroleum projects in accordance with the petroleum law to conduct foreign direct investment in Vietnam;

b/ Sale of foreign-currency amounts to licensed credit institutions for transfer into Vietnam-dong payment accounts of foreign-invested enterprises, foreign investors to BCCs, or foreign investors directly implementing PPP projects;

c/ Transfer of payments for the transfer value of investment capital or investment projects to a foreign-based transferor or sale of foreign currency amounts to pay the transfer value of investment capital or investment projects to a Vietnam-based transferor in Vietnam dong under Article 10 of this Circular;

d/ Outbound transfer of foreign-currency profits and other lawful revenues of foreign investors from foreign direct investment in Vietnam;

dd/ Outbound transfer of foreign-currency direct investment capital of foreign investors in case of reduction of investment capital or completion, liquidation or operation termination of investment projects , BCCs or PPP contracts in accordance with the investment law;

e/ Conversion of foreign currencies for outbound transfer of capital, profits and lawful revenues from direct investment activities in case the currency used in such transfer is other than that of the direct investment capital account;

g/ Transfer of amounts related to foreign-currency foreign loans of foreign-invested enterprises in accordance with the regulations on borrowing and repayment of foreign loans by enterprises, except the case prescribed in Clause 3, Article 5 of this Circular;

h/ Other lawful foreign-currency payments related to foreign direct investment in Vietnam.

Article 7.Collection and payment transactions on Vietnam-dong direct investment capital accounts

1. Collection transactions:

a/ Transfer of Vietnam-dong direct investment capital contributions of foreign and Vietnamese investors in foreign-invested enterprises, foreign investors to BCCs, and foreign investors directly implementing PPP projects;

b/ Transfer of payments for the transfer value of investment capital and investment projects under Article 10 of this Circular;

c/ Transfer of Vietnam-dong profits divided to foreign and Vietnamese investors in foreign-invested enterprises, foreign investors to BCCs, and foreign investors directly implementing PPP projects to increase capital and expand investment in Vietnam;

d/ Transfer of amounts from Vietnam-dong payment accounts of foreign-invested enterprises, foreign investors to BCCs, and foreign investors directly implementing PPP projects to transfer capital, profits and lawful revenues abroad to foreign investors;

dd/ Transfer of capital surplus from the issuance of additional shares to increase the charter capital of foreign-invested enterprises;

e/ Transfer of amounts related to Vietnam-dong foreign loans of foreign-invested enterprises licensed to borrow Vietnam-dong foreign loans under the regulations on borrowing and repayment of foreign loans by enterprises;

g/ Other lawful Vietnam-dong revenues from foreign direct investment in Vietnam.

2. Payment transactions:

a/ Transfer of amounts into Vietnam-dong payment accounts opened at licensed banks by foreign-invested enterprises, foreign investors to BCCs, foreign investors directly implementing PPP projects and executive officers of petroleum projects in accordance with the petroleum law to conduct foreign direct investment in Vietnam;

b/ Payment of the transfer value of investment capital or investment projects for a Vietnam-based transferor or payment for buying foreign currencies to pay the transfer value of investment capital or investment projects for a foreign-based transferor under Article 10 of this Circular;

c/ Purchase of foreign currency amounts for outbound transfer of Vietnam-dong profits and other lawful revenues to foreign investors;

d/ Transfer of Vietnam-dong direct investment capital to Vietnamese investors or purchase of foreign currency amounts for outbound transfer of direct investment capital to foreign investors in case of reduction of investment capital or completion, liquidation or operation termination of investment projects, BCCs or PPP contracts in accordance with the investment law;

dd/ Transfer of amounts related to Vietnam-dong foreign loans of foreign-invested enterprises licensed to borrow Vietnam-dong foreign loans under the regulations on borrowing and repayment of foreign loans;

e/ Other lawful Vietnam-dong payments related to foreign direct investment in Vietnam.

Article 8.Transfer of money to conduct investment preparation activities

1. Before obtaining investment registration certificates, notices of the satisfaction of conditions for capital contribution or purchase of shares or capital contributed by foreign investors, or establishment and operation licenses under specialized laws, or signing PPP contracts, foreign investors may transfer money from abroad or their foreign-currency or Vietnam-dong payment accounts opened at licensed banks in Vietnam to pay lawful expenses in the stage of investment preparation in Vietnam.

2. After obtaining investment registration certificates, notices of the satisfaction of conditions for capital contribution or purchase of shares or capital contributed by foreign investors, or establishment and operation licenses under specialized laws, or signing PPP contracts, the money amount transferred by foreign investors into Vietnam to conduct investment preparation activities may be:

a/ Partly or wholly converted into capital contributions;

b/ Partly or wholly converted into foreign loans of foreign-invested enterprises. In this case, foreign-invested enterprises shall comply with the regulations on borrowing and repayment of foreign loans by enterprises. The term of a foreign loan shall be counted from the date the project is granted an investment registration certificate or establishment and operation license under a specialized law, or the PPP contract or foreign loan agreement is signed (whichever comes later) until the final date for debt repayment;

c/ Refunded to foreign investors in foreign currency or Vietnam dong after paying lawful expenses related to investment preparation activities in Vietnam.

3. If not obtaining investment registration certificates, notices of the satisfaction of conditions for capital contribution or purchase of shares or capital contributed by foreign investors, or establishment and operation licenses under specialized laws, not signing PPP contracts, or stopping direct investment projects in Vietnam, foreign investors may transfer abroad the remaining foreign-currency amounts or purchase foreign-currency amounts for transfer abroad with the money amounts they have transferred into Vietnam and interests thereon (if any) after paying lawful expenses related to investment preparation activities in Vietnam.

4. The transactions prescribed in Clauses 1, 2 and 3 of this Article shall be conducted on the basis of agreement between related parties, with the production of valid documents proving the money amounts transferred into Vietnam and lawful expenses related to preparation investment activities in Vietnam, while ensuring compliance with the regulations on foreign exchange management, the investment and accounting laws, and relevant laws.

Article 9.Outbound transfer of capital, profits and lawful revenues

1. Foreign investors shall transfer abroad via their direct investment capital accounts:

a/ Direct investment capital upon reduction of investment capital; transfer of investment projects (except the case prescribed at Point a, Clause 1, Article 10 of this Circular); or upon completion, liquidation or operation termination of investment projects, BCCs or PPP contracts in accordance with the investment law;

b/ Principals, interests and expenses of foreign loans (except the case prescribed in Clause 3, Article 5 of this Circular), profits and lawful revenues from direct investment in Vietnam.

2. In case foreign-invested enterprises have to close their direct investment capital accounts due to their dissolution, bankruptcy or existence termination or transfer of investment projects which leads to change of their registered initial legal entities, foreign investors may use their foreign-currency and Vietnam-dong payment accounts opened at licensed banks to purchase foreign currencies and transfer abroad direct investment capital and lawful revenues.

Article 10.Transfer of investment capital or investment projects

1. The payment for the transfer value of shares or contributed capital in foreign-invested enterprises prescribed in Clause 2, Article 3 of this Circular shall be made:

a/ Not via direct investment capital accounts among non-resident investors or among resident investors;

b/ Via direct investment capital accounts between non-resident investors and resident investors.

2. The payment for the transfer value of investment project among investors to BCCs or among investors directly implementing PPP projects shall be made:

a/ Via direct investment capital accounts among non-resident investors or between non-resident investors and resident investors to BCCs;

b/ Via direct investment capital accounts among non-resident investors or between non-resident investors and resident investors directly implementing PPP projects.

3. Currencies for pricing and payment of the transfer value of investment capital or investment projects in foreign direct investment in Vietnam:

a/ The pricing and payment for the transfer value of investment capital or investment projects between two non-resident investors may be conducted in foreign currencies;

b/ The pricing and payment for the transfer value of investment capital or investment projects between resident investors and non-resident investors, or among resident investors shall be conducted in Vietnam dong.

Chapter III

RESPONSIBILITIES OF RELATED PARTIES

Article 11.Responsibilities of licensed credit institutions

1. To guide foreign-invested enterprises and foreign investors in producing valid documents and papers in accordance with the current law on foreign exchange management.

2. To open and close direct investment capital accounts at the request of foreign-invested enterprises and foreign investors in accordance with this Circular.

3. To review, check and keep relevant documents and papers proving actual transactions to ensure the proper and lawful provision of foreign exchange services to foreign-invested enterprises and foreign investors.

4. To require foreign-invested enterprises and foreign investors to provide documents related to foreign direct investment in Vietnam.

5. To sell foreign currencies to foreign investors and foreign-invested enterprises for transferring them abroad to foreign investors on the basis of self-balancing foreign currency sources of licensed credit institutions in accordance with law.

6. To give written certifications, at the request of account holders, of the account balance, information about transactions on payment accounts or direct investment capital accounts of foreign-invested enterprises or foreign investors.

Article 12.Responsibilities of foreign-invested enterprises and foreign investors

1. To comply with the provisions on foreign direct investment in Vietnam in this Circular and relevant laws.

2. To truthfully and fully declare contents of transactions related to foreign direct investment in Vietnam; to provide documents and papers related to foreign direct investment in Vietnam as requested and guided by licensed credit institutions; to take responsibility before law for the authenticity of the documents and papers provided to licensed credit institutions.

3. To purchase foreign currencies at licensed credit institutions for outbound transfer of capital, profits and lawful revenues to foreign investors in accordance with this Circular.

4. To transfer payments for the transfer value of investment capital or investment projects to foreign and Vietnamese investors in the case of paying the transfer value of investment capital or investment projects prescribed at Point b, Clause 1, Article 10 of this Circular.

5. To report related contents at the request of the State Bank.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 13.Transitional provisions

1. Within 12 months from the effective date of this Circular, enterprises and non-resident foreign investors owning shares or contributed capital in such enterprises shall conduct the conversion of accounts under Clauses 2 and 3 of this Article.

2. In case a foreign investor in an enterprise has opened and used an indirect investment capital account to contribute capital or purchase shares or contributed capital in such enterprise which leads to the foreign investor owning 51% or more of its charter capital, the foreign investor shall open a direct investment capital account in accordance with this Circular.

3. The enterprises below that have opened direct investment capital accounts shall close such accounts, while non-resident foreign investors owning shares or contributed capital in such enterprises shall open indirect investment capital accounts in accordance with the regulations on foreign exchange management:

a/ An enterprise with foreign investors owning below 51% of its charter capital, except the case prescribed at Point a, Clause 2, Article 3 of this Circular;

b/ An enterprise not required to carry out procedures for grant of an investment registration certificate but wishing to obtain and having obtained an investment registration certificate in accordance with the investment law;

c/ A foreign-invested enterprise having stocks listed or registered for transaction on stock exchanges;

d/ An enterprise prescribed at Point a, b or c of this Clause conducting transactions on borrowing and repayment of foreign loans via a direct investment account may maintain such account for the purpose of borrowing and repayment of foreign loans in accordance with the regulations on borrowing and repayment of foreign loan by enterprises.

4. During the account conversion, enterprises and non-resident foreign investors owning shares or contributed capital in such enterprises may continue to use their current capital accounts to conduct collection and payment transactions related to investment activities in Vietnam.

Article 14.Effect

1. This Circular takes effect on September 6, 2019. This Circular replaces the Governor of the State Bank’s Circular No. 19/2014/TT-NHNN of August 11, 2014, guiding the foreign exchange management of foreign direct investment in Vietnam.

2. This Circular amends Clauses 1, 2 and 6, Article 5 of the Governor of the State Bank’s Circular No. 05/2014/TT-NHNN of March 12, 2014, guiding the opening and use of indirect investment capital accounts for foreign indirect investment in Vietnam, as follows:

“1. Contribution of capital to, purchase and sale of shares or capital contributed by foreign investors in, enterprises other than those prescribed in Clause 2, Article 3 of the Governor of the State Bank’s Circular No. 06/2019/TT-NHNN of June 26, 2019, guiding the foreign exchange management of foreign direct investment in Vietnam, and amending and supplementing documents (if any), whose stocks are not yet listed or registered for transaction on stock exchanges.”

“2. Contribution of capital to, purchase and sale of shares or capital contributed by foreign investors in, enterprises whose stocks are listed or registered for transaction on stock exchanges.”

“6. Contribution of capital and transfer of capital contributed by foreign investors to securities investment funds and fund management companies in accordance with the securities law.”

3. This Circular adds the following fourth dash to Point d, Clause 1, Article 3 of the Governor of the State Bank’s Circular No.16/2014/TT-NHNN of August 1, 2014, guiding the use of residents’ and non-residents’ foreign-currency and Vietnam-dong accounts opened at licensed banks (which was amended and supplemented under the Governor of the State Bank’s Circular No. 49/2018/TT-NHNN of December 31, 2018, prescribing term deposits):

“- Transfer of foreign currency amounts from direct investment capital accounts of foreign investors under petroleum projects.”

Article 15.Organization of implementation

The Chief of the Office, the Director of the Foreign Exchange Management Department, and heads of units of the State Bank, directors of the State Bank’s provincial-level branches, chairpersons of the Boards of Directors or Members’ Councils, and directors general (directors) of credit institutions and foreign bank branches shall organize the implementation of this Circular.-

For the State Bank Governor
Deputy Governor
NGUYEN THI HONG