Circular No. 04/2001/TT-NHNN guiding foreign exchange management for enterprises with foreign investment capital and foreign parties participating in joint venture contracts

CIRCULAR

Guidelines on Foreign Exchange Management for Foreign-Invested Enterprises and Foreign Parties Participating in Business Cooperation Contracts

and the foreign party participating in the joint business contract

Pursuant to Article 125 of Decree No. 24/2000/NĐ-CP dated July 31, 2000 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam, the State Bank of Vietnam hereby provides specific guidelines on foreign exchange management for foreign-invested enterprises and foreign parties participating in business cooperation contracts as follows:

I. SUBJECTS AND SCOPE OF REGULATION

1. These Circulars apply to organizations permitted to engage in production and business activities in Vietnam under the provisions of the Law on Foreign Investment in Vietnam, including:

1.1. Wholly foreign-owned enterprises, joint ventures with foreign partners (hereinafter referred to as foreign-invested enterprises);

1.2. Foreign parties participating in business cooperation contracts (hereinafter referred to as foreign cooperative parties).

Foreign individuals working at foreign-invested enterprises, projects under business cooperation contracts involving foreign exchange and foreign exchange activities must comply with the provisions set forth in Section II Chapter I and Chapter III Part Two of Circular No. 01/1999/TT-NHNN7 dated April 16, 1999 of the State Bank guiding the implementation of Decree No. 63/1998/NĐ-CP dated August 17, 1998 of the Government on Foreign Exchange Management.

2. When foreign-invested enterprises and foreign cooperative parties conduct transactions related to foreign exchange, including opening and using accounts at domestic and foreign banks; converting foreign currency; transferring capital into and out of Vietnam; transferring profits abroad; exchange rates; information reporting, they must strictly adhere to the provisions of this Circular and other current regulations on foreign exchange management in Vietnam.

The foreign exchange activities of credit institutions, investment funds with foreign investment and indirect investment forms not covered by this Circular.

II. OPENING AND USING ACCOUNTS AT BANKS OPERATING IN VIETNAM

3. Opening and using dedicated foreign currency deposit accounts:

3.1. Foreign-invested enterprises and foreign cooperative parties must open dedicated foreign currency deposit accounts at a bank authorized to conduct foreign exchange operations (hereinafter referred to as authorized bank) to carry out transactions involving foreign investors' capital transfers, including:

a) Statutory capital or contractual performance capital of foreign investors transferred into and out of Vietnam;

b) Principal of medium and long-term foreign loans transferred into and out of Vietnam;

c) Interest and fees of medium and long-term foreign loans transferred out of Vietnam to repay foreign debts;

d) Profits and lawful income of foreign investors transferred out of Vietnam;

e) Capital withdrawals to be transferred into foreign currency deposit accounts of foreign-invested enterprises or foreign cooperative parties;

f) Capital deposits from foreign currency deposit accounts of foreign-invested enterprises or foreign cooperative parties.

3.2. In special cases, upon request of foreign lenders, foreign-invested enterprises and foreign cooperative parties may be allowed to open additional accounts to receive loan funds and repay foreign loans (in addition to the dedicated foreign currency deposit account specified in Point 3.1 above) at authorized banks.

4. Opening and using foreign currency deposit accounts:

Foreign-invested enterprises and foreign cooperative parties are permitted to open and use foreign currency deposit accounts at authorized banks to serve their operations. The procedures for opening and using foreign currency deposit accounts shall be carried out in accordance with the provisions of Section I Chapter I Part Two of Circular No. 01/1999/TT-NHNN7 dated April 16, 1999 of the State Bank guiding the implementation of Decree No. 63/1998/NĐ-CP dated August 17, 1998 of the Government on Foreign Exchange Management.

All foreign currency receipts and payments of foreign-invested enterprises and foreign cooperative parties must be conducted through their own accounts opened at authorized banks, complying with the provisions of this Circular and other current foreign exchange management regulations.

5. Opening and using Vietnamese dong deposit accounts:

Foreign-invested enterprises and foreign cooperative parties operating in Vietnam are permitted to open Vietnamese dong deposit accounts at banks. The procedures for opening and using Vietnamese dong deposit accounts shall be carried out in accordance with the regulations of the State Bank and the guidance of the bank where the foreign-invested enterprise or foreign cooperative party opens its account.

III. OPENING AND USING FOREIGN CURRENCY ACCOUNTS ABROAD

6. Foreign-invested enterprises are permitted to open accounts at foreign banks to implement medium and long-term foreign loans in accordance with Point 2 of Section I Chapter V Part Two of Circular No. 01/1999/TT-NHNN7 dated April 16, 1999 of the State Bank guiding the implementation of Decree No. 63/1998/NĐ-CP dated August 17, 1998 of the Government on Foreign Exchange Management.

7. In addition to the accounts opened in accordance with Point 6 of this Circular, in special cases, foreign-invested enterprises may be permitted by the State Bank to open accounts abroad for other purposes based on the following conditions:

7.1. Enterprises that are part of the government's important investment program;

7.2. Enterprises investing under the BOT, BTO, BT models need to open accounts abroad to fulfill their commitments;

7.3. Enterprises investing in aviation, maritime, postal services, insurance, tourism industries with international business activities need to open accounts abroad to facilitate international settlement practices;

7.4. Enterprises permitted to establish branches or representative offices abroad need to open accounts to support the operations of their branches or representative offices abroad;

8. For cases outside the scope of Point 7 of this Circular, based on the needs and necessity to open accounts abroad, the Governor of the State Bank will consider and decide accordingly.

9. The Governor of the State Bank shall specify the purpose, duration of use, and balance of foreign currency accounts in the Decision allowing the opening and use of foreign currency accounts abroad for each case (Form No. 8).

10. Documents for applying to open an account abroad: Entities specified in Points 7 and 8 of this Circular wishing to open an account abroad must submit the application dossier to the State Bank (Department of Foreign Exchange Management). The dossier includes:

10.1. Application form for permission to open and use an account abroad (Form No. 1);

10.2. Explanation of the necessity to open an account abroad;

11.3. Notarized copy of the Investment License;

10.4. Monthly plan for foreign currency receipts and payments of the account opened abroad.

Within fifteen working days from the date of receiving complete and valid documents, the State Bank shall be responsible for reviewing and deciding whether to permit or not permit the enterprise to open an account abroad. In cases where permission is denied, the reasons must be clearly stated.

11. Projects under the Petroleum Law are allowed to open foreign currency accounts according to the provisions of the Petroleum Law and must register the account with the State Bank - Department of Foreign Exchange Management (Form No. 2) within fifteen days from the date of opening the foreign currency account.

IV. FOREIGN CURRENCY CONVERSION

12. Enterprises with foreign investment capital and foreign joint venture parties may purchase foreign currency from authorized banks to meet the following transactions:

12.1. Current transactions as stipulated in Appendix 3 of Circular No. 01/1999/TT-NHNN7 dated April 16, 1999 guiding the implementation of Decree No. 63/1998/NĐ-CP dated August 17, 1998 of the Government on Foreign Exchange Management;

12.2. Other permitted transactions, including:

a) Repayment of principal, interest, and fees for short-term foreign loans (if loan conditions comply with the Governor of the State Bank's regulations on foreign borrowing and repayment by enterprises);

b) Repayment of principal, interest, and fees for medium and long-term foreign loans registered with the State Bank;

c) Repayment of principal, interest, and fees for foreign currency loans at authorized banks operating in Vietnam;

d) Transfer of statutory capital, reinvestment capital, or contract performance capital out of the country when ceasing operations due to expiration of the term or premature dissolution (including the case of transferring capital).

13. For enterprises with foreign investment capital and foreign joint venture parties belonging to special important projects invested according to the government program, based on the Prime Minister's decision and the provisions of the Investment License regarding the guarantee of foreign exchange balance for each project, authorized banks shall provide foreign exchange balance for enterprises with foreign investment capital and foreign joint venture parties. In cases where there is insufficient foreign currency to meet the conversion needs, the authorized bank must report to the State Bank (Department of Foreign Exchange Management) so that the State Bank can provide foreign currency according to the Prime Minister's decision.

14. For enterprises with foreign investment capital and foreign joint venture parties belonging to construction projects of infrastructure and some other important projects,

in cases where authorized banks have difficulties and cannot fully meet the foreign currency conversion needs, the authorized bank must report to the State Bank (Department of Foreign Exchange Management) so that the State Bank can consider and report to the Government for a decision on providing foreign currency support.

V. CAPITAL TRANSFER IN AND OUT OF VIETNAM

15. Enterprises with foreign investment capital and foreign joint venture parties must contribute capital in accordance with the progress recorded in the Joint Venture Contract, the Company Charter, or the Business Cooperation Contract approved by the competent authority.

16. Enterprises with foreign investment capital and foreign joint venture parties must transfer foreign currency revenues from overseas current transactions back into their foreign currency deposit accounts opened at authorized banks. The obligation to sell foreign currency by enterprises with foreign investment capital and foreign joint venture parties is carried out according to the Prime Minister's regulations during each period.

17. Foreign investors are allowed to transfer profits earned from business activities, dividends received, income from service provision and technology transfer, and other lawful assets to their ownership abroad after fulfilling all financial obligations to the Vietnamese State.

When ceasing operations or dissolving an enterprise, foreign investors are allowed to transfer statutory capital, reinvestment capital, contract performance capital, and lawful assets abroad. If the amount transferred abroad exceeds the initial capital and reinvestment capital, such amount can only be transferred abroad after being approved by the investment license issuing authority.

Enterprises with foreign investment capital and foreign joint venture parties are allowed to transfer foreign currency abroad to repay foreign debts, including principal, interest, and fees, according to the Government's and the State Bank's regulations on foreign borrowing and repayment.

18. Depending on the purpose of using foreign currency, when purchasing or transferring foreign currency abroad, enterprises with foreign investment capital and foreign joint venture parties must present to the authorized bank the Investment License and documents proving the purpose of using foreign currency as follows:

18.1. Foreign currency for importing raw materials, spare parts: Import Permit (if applicable), Commercial Contract; Documents proving delivery or execution of the Commercial Contract;

18.2. Foreign currency for paying foreign service fees: Foreign Service Contract and documents proving the execution of the Service Contract;

18.3. Foreign currency for transferring profits and lawful income abroad: Minutes of the Board of Directors (or Project Management Board for Business Cooperation Contracts) on profit distribution (or revenue sharing for Business Cooperation Contracts); Confirmation document from the competent tax authority confirming completion of financial obligations to the Vietnamese State;

In cases where the competent tax authority approves in writing, enterprises with foreign investment capital and foreign joint venture parties are allowed to transfer profits or revenue shares abroad in multiple installments within the year.

18.4. Foreign currency for transferring salaries and lawful income of foreign individuals working in foreign-invested enterprises and joint venture contracts abroad: A confirmation document from the foreign-invested enterprise or the foreign joint venture party regarding the amount to be transferred abroad (total lawful income minus the amount for financial obligations and expenses incurred in Vietnam); A document from the competent tax authority confirming the completion of financial obligations to the Vietnamese State.

18.5. Foreign currency for repaying principal, interest, and fees on loans: The foreign currency loan contract (or promissory note), repayment schedule; For medium- and long-term foreign loans, in addition to the above documents, there must be a confirmation document from the State Bank regarding the registration of the loan.

18.6. Foreign currency for transferring statutory capital, reinvestment capital, or contract performance capital abroad upon termination of operations or premature dissolution: Decision on dissolution of the foreign-invested enterprise; Decision terminating the effect of the joint venture contract accompanied by a report on the liquidation results of the enterprise or the joint venture contract; A document from the competent tax authority confirming the completion of financial obligations to the Vietnamese State.

In cases where the foreign party transfers capital to another partner, when purchasing and transferring foreign currency abroad, the following must be presented: The registered capital transfer contract with confirmation from the competent authority; A document from the competent tax authority confirming the completion of financial obligations to the Vietnamese State (if the capital transfer generates profit).

18.7. For the purchase and use of foreign currency to serve other current transactions, based on specific circumstances, the bank may require foreign-invested enterprises and foreign joint venture parties to present necessary documents to prove the legality of such current transactions.

19. The documents referred to in Article 18 above shall be originals or certified copies bearing the signature and stamp of the General Director (Director) of the foreign-invested enterprise, the representative of the foreign joint venture party, or a duly authorized person. If necessary, the bank has the right to check the original documents to ensure the accuracy of the presented documents.

20. Banks are only permitted to sell foreign currency to foreign-invested enterprises and foreign joint venture parties for direct payment to foreign entities and permitted domestic payments (foreign currency cannot be sold for retention on the accounts of foreign-invested enterprises and foreign joint venture parties). However, in the case of selling foreign currency for the purposes listed below, it must be transferred to a dedicated foreign currency deposit account (or an additional account opened for receiving and repaying foreign loans):

20.1. To transfer foreign investors' capital and reinvestment capital abroad.

20.2. To transfer profits and lawful income of foreign investors abroad.

20.3. To repay principal, interest, and fees on medium- and long-term foreign loans abroad.

The period from when foreign-invested enterprises and foreign joint venture parties purchase foreign currency and transfer it into a dedicated foreign currency deposit account to when it is transferred out for payment abroad shall not exceed five working days.

VI. EXCHANGE RATES

21. The conversion of US dollars and Vietnamese dong for statutory capital contribution and contract performance capital shall be based on the average inter-bank foreign exchange market rate between the Vietnamese dong and US dollar published by the State Bank at the time of capital contribution.

22. The purchase and sale of various foreign currencies related to the business activities of foreign-invested enterprises and foreign joint venture parties shall be conducted according to the buying and selling rates of the authorized banks at the time of transaction.

VII. INFORMATION REPORTING AND VIOLATION HANDLING.

23. Annually, no later than January 15 (for annual reports) and July 15 (for mid-year reports), foreign-invested enterprises and foreign joint venture parties must report to the State Bank of Vietnam (Department of Foreign Exchange Management) and the Branches of the State Bank in provinces and cities within their jurisdiction on the implementation of investment capital (Form No. 3).

24. Annually, no later than January 30 (for annual reports) and July 30 (for mid-year reports), branches of the State Bank in provinces and cities must report to the State Bank (Department of Foreign Exchange Management) on the implementation of investment capital by foreign-invested enterprises and foreign joint venture parties within their jurisdiction (Form No. 4).

25. Annually, no later than January 15 (for annual reports) and July 15 (for mid-year reports), foreign-invested enterprises permitted to open foreign accounts under Section III of this Circular must report to the State Bank (Department of Foreign Exchange Management) on the use of permitted foreign accounts (Form No. 5).

26. Quarterly, no later than the tenth day of the first month of each quarter, authorized banks (head offices) must report to the State Bank (Department of Foreign Exchange Management): The situation of selling foreign currency to foreign-invested enterprises and foreign joint venture parties (Form No. 6); The operation status of dedicated foreign currency deposit accounts and accounts for receiving and repaying foreign loans (if any) of foreign-invested enterprises and foreign joint venture parties (Form No. 7).

27. If foreign-invested enterprises, foreign joint venture parties, and authorized banks violate the provisions of this Circular, they may be subject to administrative penalties as stipulated in Decree No. 20/2000/NĐ-CP dated June 15, 2000 of the Government on administrative penalties in the field of currency and banking activities or be dealt with according to other current legal regulations.

VIII. IMPLEMENTATION PROVISIONS

28. This Circular shall take effect fifteen days from the date of signature and shall replace Circular No. 02/TT-NH7 dated June 28, 1997 of the State Bank of Vietnam guiding foreign exchange management for enterprises with foreign investment capital and foreign parties participating in joint venture contracts, and Decision No. 468/2000/QĐ-NHNN7 dated November 8, 2000 of the Governor of the State Bank of Vietnam on selling foreign currency to enterprises with foreign investment capital and foreign parties participating in joint venture contracts.

29. Heads of units under the State Bank of Vietnam, Directors of State Bank of Vietnam Branches in provinces and centrally governed cities, Chairmen of Management Boards, General Managers (Directors) of banks operating in Vietnam, General Managers (Directors) of enterprises with foreign investment capital, and representatives of parties participating in joint venture contracts within their respective duties and authorities shall be responsible for organizing guidance and implementation of this Circular./.