Circular No. 06/2019/TT-NHNN guiding foreign exchange management for foreign direct investment activities in Vietnam

CIRCULAR

Guidelines on foreign exchange management for foreign direct investment in Vietnam

Guidelines on foreign exchange management for foreign direct investment in Vietnam

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Foreign Exchange Decree dated December 13, 2005 and the Decree Amending and Supplementing Certain Articles of the Foreign Exchange Decree dated March 18, 2013;

Pursuant to Decree No. 70/2014/NĐ-CP dated July 17, 2014 of the Government detailing the implementation of certain provisions of the Foreign Exchange Ordinance and the Ordinance Amending and Supplementing Certain Provisions of the Foreign Exchange Ordinance;

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

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

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

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular guides foreign exchange management for foreign direct investment in Vietnam including: Capital contribution for investment; opening and using foreign currency and Vietnamese dong investment capital accounts; transferring funds to implement preparatory activities for investment; transferring capital, profits, and lawful revenues abroad; transferring investment capital, transferring investment projects.

2. Matters related to foreign exchange management for foreign-invested enterprises that are public companies with shares listed or traded on the Stock Exchange shall be implemented according to regulations on foreign exchange management for indirect foreign investment in Vietnam.

Article 2. Applicability

This Circular applies to the following subjects:

1. Foreign-invested enterprises as provided for in Clause 2, Article 3 of this Circular.

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

3. Foreign investors participating in joint venture contracts (hereinafter referred to as BCC contracts).

4. Foreign investors participating in public-private partnership contracts (hereinafter referred to as PPP contracts).

5. Organizations and individuals related to foreign direct investment in Vietnam.

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. "Foreign investor" includes: foreigners with foreign nationality, organizations established under foreign laws conducting foreign direct investment in Vietnam.

2. "Foreign-invested enterprise" includes:

a) Enterprises established through foreign investment in economic organizations, where foreign investors are members or shareholders and must complete the procedures for obtaining an Investment Registration Certificate in accordance with the law on investment;

(i) Enterprises where foreign investors contribute capital, purchase shares, or equity stakes leading to foreign investors owning 51% or more of the charter capital of the enterprise (in industries or businesses subject to conditions for foreign investment or not);

(ii) Enterprises established after division, merger, or consolidation leading to foreign investors owning 51% or more of the charter capital of the enterprise;

(iii) New enterprises established in accordance with specialized laws;

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

3. "Authorized banks" include commercial banks and branches of foreign banks operating foreign exchange transactions and services in accordance with the law.

4. "Authorized credit institutions" include authorized banks and non-bank credit institutions operating foreign exchange transactions and services in accordance with the law.

5. "Direct investment capital account" is a foreign currency or Vietnamese dong settlement account opened by foreign-invested enterprises or foreign investors at authorized banks to conduct transactions related to foreign direct investment in Vietnam as stipulated in Articles 5, 6, and 7 of this Circular.

Article 4. General Principles

1. Foreign investors and Vietnamese investors may contribute capital for investment in foreign currency or Vietnamese dong according to the amount of capital contribution of the investor as stated in the Investment Registration Certificate, Business License (for foreign-invested enterprises established and operated under specialized laws), Notification of Compliance with Conditions for Capital Contribution, Share Purchase, or Repurchase of Foreign Investors' Equity, signed PPP Contracts with competent state agencies, other documents proving the compliance of foreign investors' capital contributions with the law.

2. Resident Vietnamese investors may contribute capital for investment from their own foreign currency.

3. Foreign investors and Vietnamese investors must contribute capital for investment through transfer to the direct investment capital account.

4. Matters related to short-, medium-, and long-term foreign loans of foreign-invested enterprises (transactions involving receipt of loan repayments, principal, interest, fees; loan accounts, foreign debt repayment accounts) shall be carried out in accordance with the law on foreign borrowing and repayment by enterprises.

5. The use of distributed profits by foreign investors within Vietnam must comply with foreign exchange management regulations and relevant laws.

Chapter II
SPECIFIC PROVISIONS

Article 5. Opening and using foreign direct investment capital accounts

1. The subjects opening and using foreign direct investment capital accounts include:

a) Foreign-invested enterprises as stipulated in Clause 2, Article 3 of this Circular;

b) Foreign investors participating in BOT contracts, foreign investors directly implementing PPP projects in cases where project companies are not established (hereinafter referred to as foreign investors directly implementing PPP projects).

2. The subjects specified in Clause 1 of this Article shall open foreign direct investment capital accounts according to the following regulations:

a) Must open a foreign direct investment capital account denominated in foreign currency at one permitted bank to conduct lawful transactions in foreign currency related to foreign direct investment in Vietnam;

b) Corresponding to each type of foreign currency used for capital contribution, only one foreign direct investment capital account denominated in that foreign currency may be opened at one permitted bank;

c) In cases of investment in Vietnamese dong, one foreign direct investment capital account denominated in Vietnamese dong may be opened at a permitted bank where a foreign direct investment capital account denominated in foreign currency has been opened to conduct lawful transactions in Vietnamese dong related to foreign direct investment in Vietnam;

d) In cases where foreign investors participate in multiple BOT contracts or directly implement multiple PPP projects, foreign investors must open separate foreign direct investment capital accounts corresponding to each BOT contract or PPP project.

3. In cases where foreign loans are taken out in currencies that do not correspond to the currency used by foreign-invested enterprises to open foreign direct investment capital accounts, such enterprises may open additional loan and repayment accounts denominated in the loan currency at the permitted bank where the foreign direct investment capital account is opened to conduct lawful transactions related to foreign loans in accordance with laws on foreign borrowing and repayment by enterprises.

4. In cases where the permitted bank where the foreign direct investment capital account is opened changes, the subjects specified in Clause 1 of this Article shall carry out the following steps:

a) Open a foreign direct investment capital account at another permitted bank;

b) Transfer the entire balance from the previously opened foreign direct investment capital account to the newly opened account, then close the previously opened account;

c) The foreign direct investment capital account at the other permitted bank may only be used to conduct transactions stipulated in Articles 6 and 7 of this Circular after completing the steps mentioned in points a and b of this clause.

5. Procedures for opening and closing foreign direct investment capital accounts shall be carried out in accordance with the State Bank of Vietnam's (hereinafter referred to as the State Bank) regulations on opening and using settlement accounts at service providers.

6. Enterprises specified in points b and c, Clause 2, Article 3 of this Circular must close their foreign direct investment capital accounts that have been opened; non-resident foreign investors who hold shares or equity contributions in these enterprises must open indirect foreign investment capital accounts to conduct transactions in accordance with foreign exchange management regulations for indirect foreign investment in Vietnam in the following cases:

b) After the foreign-invested enterprise, which is a public company, lists its shares on or registers for trading on the stock exchange.

Article 6. Transactions for receipts and payments on foreign currency direct investment capital accounts

1. Receipt transactions:

a) Receipts from transfers of foreign currency direct investment capital contributions made by foreign investors, Vietnamese investors in foreign-invested enterprises, foreign investors participating in BOT contracts, and foreign investors directly implementing PPP projects;

b) Receipts from transfers of foreign currency for the value of transferred investment capital and projects as stipulated in Article 10 of this Circular;

c) Receipts of foreign currency purchased from authorized credit institutions to transfer capital, profits, and legitimate income abroad as stipulated in this Circular;

d) Receipts from foreign currency settlement accounts opened at authorized banks of foreign-invested enterprises, foreign investors participating in BOT contracts, and foreign investors directly implementing PPP projects to transfer capital, profits, and legitimate income abroad for foreign investors;

đ) Receipts from converting foreign currency to make direct investment capital contributions when the contribution currency differs from the currency of the already opened direct investment capital account;

e) Receipts from transfers of surplus equity capital from issuing additional shares to increase the registered capital in foreign-invested enterprises;

g) Receipts of foreign currency from domestic oil and gas product sales revenue (after fully fulfilling financial obligations and deducting costs in Vietnamese dong) according to laws on oil and gas and Guarantee and Commitment Agreements with the Government (if applicable);

h) Transfer receipt transactions related to foreign loans of foreign-invested enterprises as stipulated by laws on borrowing and repaying foreign debts of enterprises, except as provided in Clause 3, Article 5 of this Circular;

i) Other lawful foreign currency receipts related to foreign direct investment in Vietnam;

2. Payment transactions:

a) Transfers to foreign currency settlement accounts opened at authorized banks of foreign-invested enterprises, foreign investors participating in BOT contracts, foreign investors directly implementing PPP projects, and project managers according to laws on oil and gas to carry out foreign direct investment activities in Vietnam;

b) Sales of foreign currency to authorized credit institutions to transfer into Vietnamese dong settlement accounts of foreign-invested enterprises, foreign investors participating in BOT contracts, and foreign investors directly implementing PPP projects;

c) Transfers of foreign currency for the value of transferred investment capital and projects to the transferring party abroad or sales of foreign currency to pay the value of transferred investment capital and projects to the transferring party in Vietnam in Vietnamese dong as stipulated in Article 10 of this Circular;

d) Transfers of foreign currency profits and other lawful income from foreign direct investment activities in Vietnam by foreign investors abroad;

đ) Transfers of foreign currency direct investment capital of foreign investors abroad in cases of reducing investment capital, ending, liquidating, or terminating investment projects, BOT contracts, and PPP contracts as stipulated by laws on investment;

e) Transfers of foreign currency for transferring capital, profits, and other lawful income from foreign direct investment activities abroad when the transfer currency differs from the currency of the already opened direct investment capital account;

g) Transfer payment transactions related to foreign loans in foreign currency of foreign-invested enterprises as stipulated by laws on borrowing and repaying foreign debts of enterprises, except as provided in Clause 3, Article 5 of this Circular;

h) Other lawful foreign currency payment transactions related to foreign direct investment activities in Vietnam.

Article 7. Transactions for receiving and disbursing funds on accounts for direct foreign investment in Vietnamese dong

1. Receipt transactions:

a) Receiving transfers of capital contributions in Vietnamese dong from foreign investors, Vietnamese investors in foreign-invested enterprises, foreign investors participating in BCC contracts, and foreign investors directly implementing PPP projects;

b) Receipts from transfers of foreign currency for the value of transferred investment capital and projects as stipulated in Article 10 of this Circular;

c) Receiving transfers of profits distributed in Vietnamese dong from foreign investors, Vietnamese investors in foreign-invested enterprises, foreign investors participating in BCC contracts, and foreign investors directly implementing PPP projects to increase capital and expand investment activities in Vietnam;

d) Receiving transfers from settlement accounts in Vietnamese dong of foreign-invested enterprises, foreign investors participating in BCC contracts, and foreign investors directly implementing PPP projects to transfer capital, profits, and lawful revenues abroad to foreign investors;

đ) Receiving transfers of surplus share capital from issuing additional shares to increase the registered capital of foreign-invested enterprises;

e) Transfers received through bank transfers related to foreign loans in Vietnamese dong of foreign-invested enterprises permitted to borrow foreign loans in Vietnamese dong according to the laws on borrowing and repaying foreign debts;

g) Other lawful transfers in Vietnamese dong related to direct foreign investment in Vietnam.

2. Payment transactions:

a) Disbursing transfers to settlement accounts in Vietnamese dong opened at authorized banks of foreign-invested enterprises, foreign investors participating in BCC contracts, foreign investors directly implementing PPP projects, and project managers according to oil and gas laws to carry out direct foreign investment in Vietnam;

b) Disbursing transfers to pay the value of transferred investment capital and projects to the transferring party in Vietnam or purchasing foreign currency to pay the value of transferred investment capital and projects to the transferring party abroad according to Article 10 of this Circular;

c) Purchasing foreign currency through transfers to transfer profits and lawful revenues in Vietnamese dong to foreign investors abroad;

d) Transferring direct investment capital in Vietnamese dong to Vietnamese investors or purchasing foreign currency to transfer direct investment capital to foreign investors abroad in cases of reducing investment capital, terminating, liquidating, or ceasing operations of investment projects, BCC contracts, and PPP contracts according to the laws on investment;

đ) Transfers disbursed through bank transfers related to foreign loans in Vietnamese dong of foreign-invested enterprises permitted to borrow foreign loans in Vietnamese dong according to the laws on borrowing and repaying foreign debts;

e) Other lawful disbursements in Vietnamese dong related to direct foreign investment in Vietnam.

Article 8. Transfer of funds to implement preparatory investment activities

1. Before being granted Investment Registration Certificates, Notifications on Meeting Conditions for Capital Contributions, Share Purchases, and Repurchases of Foreign Investors' Shares, Licenses for Establishment and Operation under Specialized Laws, or signing PPP contracts by competent authorities, foreign investors are permitted to transfer funds from abroad or from their foreign currency or Vietnamese dong settlement accounts opened at authorized banks in Vietnam to pay lawful expenses during the preparatory investment phase in Vietnam.

2. After being granted Investment Registration Certificates, Notifications on Meeting Conditions for Capital Contributions, Share Purchases, and Repurchases of Foreign Investors' Shares, Licenses for Establishment and Operation under Specialized Laws, or signing PPP contracts, the funds transferred by foreign investors into Vietnam for preparatory investment activities can be used for:

a) Converting part or all into capital contributions;

b) Converting part or all into foreign loans of foreign-invested enterprises. In the case of converting into foreign loans, foreign-invested enterprises must comply with the laws on borrowing and repaying foreign debts. The term of the foreign loan is calculated from the date the project receives the Investment Registration Certificate, License for Establishment and Operation under Specialized Laws, or signing of the PPP contract, or the date of the agreement on foreign borrowing (whichever is later), to the final repayment date;

c) Returning to foreign investors in foreign currency or Vietnamese dong the amount transferred into Vietnam for preparatory investment activities after deducting lawful expenses related to preparatory investment activities in Vietnam.

3. If foreign investors are not granted Investment Registration Certificates, Notifications on Meeting Conditions for Capital Contributions, Share Purchases, and Repurchases of Foreign Investors' Shares, Licenses for Establishment and Operation under Specialized Laws, or signing PPP contracts, or if they do not continue with direct investment projects in Vietnam, foreign investors may transfer the remaining amount abroad in foreign currency or purchase foreign currency to transfer the amount transferred into Vietnam and accrued interest (if any) after deducting lawful expenses related to preparatory investment activities in Vietnam.

4. Transactions stipulated in Clause 1, Clause 2, and Clause 3 of this Article shall be carried out based on agreements between the parties involved, presenting valid documents and evidence proving the amount transferred into Vietnam and lawful expenses related to preparatory investment activities in Vietnam, ensuring compliance with foreign exchange management regulations, investment laws, accounting laws, and other relevant laws.

Article 9. Transfer of Capital, Profits, and Legal Income Abroad

1. Foreign investors must transfer through their direct investment capital accounts:

a) Direct investment capital when reducing investment capital; transferring investment projects (except for cases stipulated in point a, Clause 1, Article 10 of this Circular); ending, liquidating, terminating operations of investment projects, BOT contracts, PPP contracts according to laws on investment;

b) Principal, interest, and foreign borrowing costs (except for cases stipulated in Clause 3, Article 5 of this Circular), profits, and other legal income related to direct investment in Vietnam.

2. In cases where foreign-invested enterprises must close their direct investment capital accounts due to dissolution, bankruptcy, cessation of existence of the enterprise, or transfer of investment projects resulting in changes to the initial registered legal entity of foreign-invested enterprises, foreign investors may use the foreign currency settlement account or Vietnamese dong settlement account opened at permitted banks to conduct transactions to purchase foreign currency, transfer direct investment capital and legal income abroad.

Article 10. Transfer of Investment Capital and Investment Projects

1. The payment of the value of transferred shares or equity contributions in foreign-invested enterprises as stipulated in Clause 2, Article 3 of this Circular shall be carried out as follows:

a) Between non-resident investors or between resident investors, it shall not be conducted through direct investment capital accounts;

b) Between a non-resident investor and a resident investor, it must be conducted through direct investment capital accounts.

2. The payment of the value of transferred investment projects between investors in BOT contracts, and between direct investors implementing PPP projects shall be carried out as follows:

a) Between non-resident investors or between a non-resident investor and a resident investor in BOT contracts, it must be conducted through direct investment capital accounts;

b) Between non-resident investors or between a non-resident investor and a resident investor directly implementing PPP projects, it must be conducted through direct investment capital accounts.

3. Currency for valuation and payment of the value of transferred investment capital and investment projects in direct foreign investment in Vietnam:

a) Valuation and payment of the value of transferred investment capital and investment projects between two non-residents may be conducted in foreign currency;

b) Valuation and payment of the value of transferred investment capital and investment projects between residents and non-residents, and between residents, must be conducted in Vietnamese dong.

Chapter III
RESPONSIBILITIES OF THE PARTIES INVOLVED

Article 11. Responsibilities of Permitted Credit Institutions

1. Guide foreign-invested enterprises and foreign investors to present valid documents and certificates in accordance with current laws on foreign exchange management.

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

3. Examine, inspect, and retain relevant documents and certificates corresponding to actual transactions to ensure that foreign exchange services provided to foreign-invested enterprises and foreign investors are carried out for the intended purpose and in compliance with the law.

4. Require foreign-invested enterprises and foreign investors to provide relevant documents and certificates concerning direct foreign investment in Vietnam.

5. Sell foreign currency to foreign investors and foreign-invested enterprises to transfer abroad for foreign investors based on the self-balancing of foreign currency sources of permitted credit institutions and in compliance with the law.

6. Confirm in writing upon the account holder's request regarding the balance of the account, transaction information on settlement accounts and direct investment capital accounts of foreign-invested enterprises and foreign investors.

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

1. Comply with regulations on direct foreign investment in Vietnam as stipulated in this Circular and related laws.

2. Truthfully and fully declare the contents of transactions related to direct foreign investment in Vietnam; provide relevant documents and certificates for direct foreign investment activities in Vietnam upon request and guidance from authorized credit institutions; bear full responsibility under the law for the authenticity of the provided documents and certificates to authorized credit institutions.

3. Purchase foreign currency from authorized credit institutions to transfer capital, profits, and legitimate income out of Vietnam for foreign investors according to the provisions of this Circular.

4. Transfer payments for the value of transferred investment capital and projects to foreign investors and Vietnamese investors as stipulated in point b, Clause 1, Article 10 of this Circular.

5. Implement reports on related matters as required by the State Bank of Vietnam.

Chapter IV
IMPLEMENTING PROVISIONS

Article 13. Transitional Provisions

1. Within the latest period of 12 months from the date this Circular takes effect, foreign enterprises and non-resident foreign investors holding shares or contributions in such enterprises must implement account conversion as prescribed in Clauses 2 and 3 of this Article.

2. In cases where foreign-invested enterprises have already opened and used indirect investment capital accounts to contribute capital, purchase shares, or contributions, leading to foreign investors owning more than 51% of the charter capital, they must open direct investment capital accounts as prescribed in this Circular.

3. In cases where the following enterprises have already opened direct investment capital accounts, they must close these accounts, while non-resident foreign investors holding shares or contributions in such enterprises must open indirect investment capital accounts according to foreign exchange management regulations:

a) Enterprises where foreign investors own less than 51% of the charter capital, except as provided in point a, Clause 2, Article 3 of this Circular;

b) Enterprises not required to complete investment registration procedures but have obtained investment registration certificates from competent authorities as prescribed by investment laws;

c) Foreign-invested enterprises whose shares are listed on stock exchanges or registered for trading on securities exchanges;

d) In cases where enterprises specified in points a, b, and c of this clause are currently conducting overseas borrowing and repayment through direct investment capital accounts, they may continue to maintain these accounts for overseas borrowing and repayment purposes as prescribed by laws on overseas borrowing and repayment by enterprises.

4. During the transition period, foreign enterprises and non-resident foreign investors holding shares or contributions in such enterprises may continue to use existing capital accounts to conduct transactions related to investment activities in Vietnam.

Article 14. Effective Date

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

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

"1. Contributing capital, buying, or selling shares or contributions of foreign investors in enterprises not falling within the scope prescribed in Clause 2, Article 3 of Circular No. 06/2019/TT-NHNN dated June 26, 2019, issued by the Governor of the State Bank of Vietnam guiding foreign exchange management for direct foreign investment in Vietnam and any subsequent amendments (if any), which have not been listed or registered for trading on the securities exchange."

"2. Contributing capital, buying, or selling shares or contributions of foreign investors in enterprises whose shares are listed or registered for trading on the securities exchange."

"6. Contributing capital, transferring contributions of foreign investors in securities investment funds and fund management companies as prescribed by securities laws."

3. This Circular supplements the fourth bullet point in point d, Clause 1, Article 3 of Circular No. 16/2014/TT-NHNN dated August 1, 2014, issued by the Governor of the State Bank of Vietnam guiding the use of foreign currency accounts and Vietnamese dong accounts of residents and non-residents at authorized banks (amended and supplemented by Circular No. 49/2018/TT-NHNN dated December 31, 2018, issued by the Governor of the State Bank of Vietnam on term deposits) as follows:

"- Receiving foreign currency transfers from direct investment capital accounts of foreign investors in oil and gas projects."

Article 15. Implementation Organization

The Chief of the Office, Heads of the Department of Foreign Exchange Management, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally-administered cities, Chairmen of the Board of Directors, Chairmen of the Board of Members, General Directors (Directors) of credit organizations, and foreign bank branches are responsible for organizing the implementation of this Circular.