Circular No. 08/1998/TT-NHNN7 guiding the implementation of Decision No. 173/1998/QĐ-TTg dated September 12, 1998 of the Government Prime Minister.

CIRCULAR

Guidelines for Implementing Decision No. 173/1998/QĐ-TTg dated September 12, 1998 of the Prime Minister

On September 12, 1998, the Prime Minister issued Decision No. 173/1998/QĐ-TTg on the obligation to sell and the right to purchase foreign currency by resident organizations.

Pursuant to Article 7 of this Decision, the State Bank of Vietnam provides the following guidelines for implementation:

I. GENERAL PROVISIONS:

1. "Current account income" refers to the income of residents from non-residents from goods, services, direct investment income, income from investments in securities, interest on foreign loans, unilateral transfers, and similar transactions.

2. "Capital transaction income" refers to income from capital inflows into Vietnam in the field of direct investment, investment in securities, foreign borrowing, recovery of foreign debts, and other forms of investment as prescribed by Vietnamese law that increase the assets of residents from non-residents.

3. "Grant, humanitarian aid": In this Circular, it refers to non-repayable grants and aid provided by non-residents to residents.

4. Time of performance of the obligation to sell.

The time for performing the obligation to sell existing foreign currency balances in the accounts of resident organizations shall be implemented from the date Decision No. 173/QĐ-TTg takes effect (September 12, 1998).

II. APPLICABLE OBJECTS:

The subjects to which this Circular applies include:

1. State-owned enterprises, private enterprises, companies, cooperatives, and other economic entities of all economic sectors in Vietnam, enterprises with foreign direct investment, and foreign parties participating in joint business contracts guaranteed by the Vietnamese Government for foreign exchange balance support, branches of foreign companies, foreign contractors, and joint venture contractors with foreign parties (hereinafter referred to as Economic Entities).

2. State agencies, armed forces units, political organizations, political social organizations, social organizations, social-professional organizations, social funds, charitable funds operating in Vietnam (hereinafter referred to as Non-Profit Organizations).

3. "Authorized banks" refer to banks in Vietnam permitted by the State Bank to conduct foreign exchange operations (hereinafter collectively referred to as Banks).

III. Cases Not Subject to the Obligation to Sell Foreign Currency:

1. Cases Not Required to Sell:

a) Income from grants and humanitarian aid under agreements or arrangements with foreign countries;

b) Income of the entrusted party under export agency contracts (in this case, the entrusting party must perform the obligation to sell, and the entrusted party must sell the proceeds from agency fees);

c) Income from temporary importation and re-exportation under sales contracts with foreign countries (in this case, only the profit portion from such transactions must be sold);

d) Advance payments, deposits, and prepayments from non-residents and collections on behalf of non-residents;

e) Income from capital transactions.

2. Documentation for cases not required to sell:

a) For point 1(a): original or certified copy of the agreement or arrangement signed with a foreign country or related documents concerning grant and humanitarian aid;

b) For point 1(b): original or certified copy of the export agency contract signed between the entrusting party and the entrusted party;

c) For point 1(c): original or certified copy of the sales contract signed between the parties and a permit from the Ministry of Trade allowing temporary importation and re-exportation services;

d) For point 1(d): original or certified copy of the contracts containing provisions regarding deposits, advance payments, and prepayments;

e) For point 1(e): original or certified copy of the contract or related documents concerning income from capital transactions.

IV. OBLIGATION TO SELL FOREIGN CURRENCY OF RESIDENT ORGANIZATIONS:

A. OBLIGATION TO SELL FOREIGN CURRENCY FROM NEW CURRENT ACCOUNT INCOME ARISING ON AND AFTER SEPTEMBER 12, 1998:

1. Sale ratio as prescribed:

a) Economic entities must sell 80% of the foreign currency received from current account income to the bank within 15 (fifteen) working days from the date the foreign currency is credited to their deposit account.

b) Non-profit organizations must sell the entire amount of foreign currency received from current account income to the bank within 15 (fifteen) working days from the date the foreign currency is credited to their deposit account.

2. Procedures for selling:

a) When foreign currency from current account income of resident organizations is credited to their deposit account, the bank is responsible for immediately transferring the amount of foreign currency required to be sold according to the regulations from the income source to the "management and custody" account, and must promptly notify the customer of the amount of foreign currency required to be sold so that the organization can proceed with the sale procedures.

Resident organizations with current account income not subject to sale as specified in Point 1 of Part III of this Circular shall submit to the bank where they have opened their foreign currency account the relevant documents as stipulated in Point 2 of Part III to prove the exempted income sources. After receiving the documents verifying the exempted foreign currency income, the bank will return the foreign currency to the organization's deposit account.

b) Within 15 (fifteen) working days from the date the foreign currency is credited to the deposit account, if the organization does not sell the foreign currency to the bank as required or does not provide the necessary documentation proving the exempted income sources, the bank will issue a reminder notice to the organization to fulfill its obligation to sell foreign currency within the next 5 (five) working days.

If the organization still fails to fulfill its obligation to sell foreign currency within the above 5-day period, the bank will purchase the foreign currency held in the "management and custody" account.

c) Within 15 (fifteen) working days from the date the foreign currency is credited to the deposit account, if the organization has a need to pay foreign currency for transactions due for settlement, it may use the available balance in the deposit account for payment. If the balance in the deposit account is insufficient to cover the transaction, the bank will allow the organization to use the foreign currency in the "management and custody" account to settle the shortfall after presenting all relevant documents.

d) Organizations holding foreign currency to be sold on the "management and custody" account are permitted to sell that foreign currency to other banks after presenting the signed foreign currency purchase and sale contract.

B.OBLIGATIONS TO SELL FOREIGN CURRENCY FROM PERMANENT RECEIPTS PRIOR TO THE EFFECTIVENESS OF DECISION 173/1998/QĐ-TTg (EFFECTIVE DATE: SEPTEMBER 12, 1998) CURRENTLY REFLECTED IN THE DEPOSIT ACCOUNT BALANCE.

1.RATIO FOR SALE AS PRESCRIBED:

a)BY NO LATER THAN THE END OF OCTOBER 5, 1998, ECONOMIC ORGANIZATIONS MUST SELL TO THE BANK 80% OF THE FOREIGN CURRENCY RECEIVED FROM PERMANENT RECEIPTS PRIOR TO SEPTEMBER 12, 1998, STILL REFLECTED IN THE DEPOSIT ACCOUNT BALANCE.

b)BY NO LATER THAN THE END OF OCTOBER 5, 1998, NON-PROFIT ORGANIZATIONS MUST SELL TO THE BANK THE ENTIRE AMOUNT OF FOREIGN CURRENCY RECEIVED FROM PERMANENT RECEIPTS PRIOR TO SEPTEMBER 12, 1998, STILL REFLECTED IN THE DEPOSIT ACCOUNT BALANCE.

2. Procedures for selling:

a)BANKS ARE RESPONSIBLE FOR DETERMINING THE QUANTITY OF FOREIGN CURRENCY FROM SOURCES GENERATED BEFORE SEPTEMBER 12, 1998 (INCLUDING SOURCES NOT CONSIDERED PERMANENT RECEIPTS) CURRENTLY REFLECTED IN THE DEPOSIT ACCOUNT BALANCE OF ECONOMIC ORGANIZATIONS AND NON-PROFIT ORGANIZATIONS, AND IMMEDIATELY TRANSFERRING THE IDENTIFIED FOREIGN CURRENCY FROM THE DEPOSIT ACCOUNT TO THE "MANAGEMENT AND SAFEKEEPING" ACCOUNT AT THE RATIO OF 80% FOR ECONOMIC ORGANIZATIONS AND 100% FOR NON-PROFIT ORGANIZATIONS. AT THE SAME TIME, THE BANK MUST NOTIFY THE ORGANIZATION BY NO LATER THAN THE END OF OCTOBER 5, 1998, TO IMPLEMENT THE SALE OF FOREIGN CURRENCY.

b)BEFORE OCTOBER 5, 1998, ORGANIZATIONS WITH FOREIGN CURRENCY RECEIPTS THAT ARE NOT REQUIRED TO BE SOLD ACCORDING TO THE PROVISIONS SET OUT IN POINT 1, PART III, MUST SUBMIT RELEVANT DOCUMENTS AND COMPLETE THE PROOF FOR THESE RECEIPTS ACCORDING TO THE GUIDANCE PROVIDED IN POINT 2, PART III, TO THE BANK WHERE THE ACCOUNT IS OPENED.

THE BANK CALCULATES THE AMOUNT OF FOREIGN CURRENCY THAT THE ORGANIZATION MUST SELL, SPECIFICALLY AS FOLLOWS:

FOR ECONOMIC ORGANIZATIONS, A = (B - C) X 80%

FOR NON-PROFIT ORGANIZATIONS, A = B - C

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry

A: AMOUNT OF FOREIGN CURRENCY TO BE SOLD;

B: BALANCE FROM SOURCES GENERATED UP TO SEPTEMBER 12, 1998, CURRENTLY REFLECTED IN THE DEPOSIT ACCOUNT BALANCE AS OF SEPTEMBER 30, 1998;

C: AMOUNT OF FOREIGN CURRENCY NOT REQUIRED TO BE SOLD ACCORDING TO THE PROVISIONS.

BASED ON THE AMOUNT OF FOREIGN CURRENCY TO BE SOLD (A), THE BANK WILL RECONCILE WITH THE AMOUNT OF FOREIGN CURRENCY ON THE "MANAGEMENT AND SAFEKEEPING" ACCOUNT. IN CASE THE AMOUNT OF FOREIGN CURRENCY TO BE SOLD IS LESS THAN THE AMOUNT OF FOREIGN CURRENCY ON THE "MANAGEMENT AND SAFEKEEPING" ACCOUNT, THE BANK WILL IMPLEMENT THE PURCHASE OF THE AMOUNT OF FOREIGN CURRENCY TO BE SOLD AND TRANSFER THE DIFFERENCE BACK TO THE ORGANIZATION'S DEPOSIT ACCOUNT.

c)AFTER OCTOBER 5, 1998, IF THE ORGANIZATION DOES NOT SELL FOREIGN CURRENCY TO THE BANK, THE BANK WILL PURCHASE THE FOREIGN CURRENCY ON THE "MANAGEMENT AND SAFEKEEPING" ACCOUNT ACCORDING TO THE OBLIGATION STIPULATED IN POINT 4 OF DECISION 173/1998/QĐ-TTg DATED SEPTEMBER 12, 1998, ISSUED BY THE PRIME MINISTER.

d)BEFORE OCTOBER 5, 1998, IF THE ORGANIZATION HAS A NEED TO PAY FOREIGN CURRENCY FOR TRANSACTIONS DUE FOR SETTLEMENT, IT MAY USE THE CURRENT BALANCE IN THE DEPOSIT ACCOUNT FOR PAYMENT. IN CASE THE BALANCE IN THE DEPOSIT ACCOUNT IS INSUFFICIENT TO COVER THE TRANSACTION, THE BANK WILL ALLOW THE ORGANIZATION TO USE THE FOREIGN CURRENCY ON THE "MANAGEMENT AND SAFEKEEPING" ACCOUNT TO SETTLE THE SHORTFALL AFTER PRESENTING ALL RELEVANT DOCUMENTS.

đ)ORGANIZATIONS WITH FOREIGN CURRENCY TO BE SOLD ON THE "MANAGEMENT AND SAFEKEEPING" ACCOUNT ARE PERMITTED TO SELL THIS FOREIGN CURRENCY TO OTHER BANKS AFTER PRESENTING THE SIGNED FOREIGN CURRENCY PURCHASE AND SALE CONTRACT.

V.RIGHTS TO BUY FOREIGN CURRENCY FOR RESIDENTS WHO ARE ORGANIZATIONS

1.RESIDENTS WHO HAVE A NEED FOR FOREIGN CURRENCY TO MEET REQUIREMENTS FOR CURRENT TRANSACTIONS AND OTHER PERMITTED TRANSACTIONS AS PRESCRIBED SHALL HAVE THE RIGHT TO BUY FOREIGN CURRENCY FROM AUTHORIZED BANKS UPON PRESENTATION OF VALID DOCUMENTS AND CERTIFICATES TO THE BANK.

2.WHEN BUYING FOREIGN CURRENCY TO FULFILL THE PAYMENT OBLIGATIONS FOR CURRENT TRANSACTIONS OR OTHER PERMITTED TRANSACTIONS, RESIDENT ORGANIZATIONS MUST PRESENT THE ORIGINAL OR CERTIFIED COPIES OF THE FOLLOWING VALID DOCUMENTS AND CERTIFICATES TO THE BANKS:

a)FOR PAYMENT OF IMPORTED GOODS AND SERVICES TO FOREIGN COUNTRIES, THERE MUST BE AN IMPORT CONTRACT FOR GOODS AND SERVICES WITH FOREIGN COUNTRIES; IMPORT PERMIT ISSUED BY THE PRIME MINISTER (FOR GOODS LISTED IN THE PROHIBITED IMPORT LIST), OR QUOTA ISSUED BY THE MINISTRY OF TRADE OR SPECIALIZED MANAGEMENT MINISTRY (FOR IMPORTED GOODS LISTED IN THE CONDITIONAL IMPORT LIST), ESTABLISHMENT DECISION, BUSINESS REGISTRATION, FULL SET OF DOCUMENTS INCLUDING LETTER OF CREDIT (IF ANY), INVOICE, BILL OF LADING AND OTHER DOCUMENTS RELATED TO IMPORT OF GOODS AND SERVICES;

b)FOR PAYMENT OF COMMISSIONED EXPORT-IMPORT GOODS AND SERVICES TO THE COMMISSIONED PARTY, THERE MUST BE A COMMISSIONED EXPORT-IMPORT CONTRACT AND DOCUMENTS RELATED TO COMMISSIONED EXPORT-IMPORT;

c)FOR REPAYMENT OF DAMAGES RELATED TO EXPORT OF GOODS AND SERVICES, THERE MUST BE AN EXPORT CONTRACT FOR GOODS AND SERVICES, PAYMENT NOTICE, COMPLAINT LETTER, RECORD AND DOCUMENTS RELATED TO DISPUTE RESOLUTION AND COMPLAINT;

d)FOR PAYMENT OF DEPOSITS FOR BIDDING ABROAD, THERE MUST BE A RELATED CONTRACT, DOCUMENTS AND CERTIFICATES RELATED TO BIDDING ABROAD;

đ)FOR EXPENSES RELATED TO EXHIBITIONS, ADVERTISING PROGRAMS, TRADE PROMOTIONS, TRAINING PROGRAMS, THERE MUST BE A RELATED CONTRACT, APPROVAL DOCUMENTS FROM THE AUTHORIZED AUTHORITIES, PAYMENT NOTICE FROM ABROAD AND OTHER RELATED DOCUMENTS;

e)FOR PAYMENT OF MEMBERSHIP FEES TO INTERNATIONAL ORGANIZATIONS, FEES FOR INTERNATIONAL MEETING REGISTRATIONS, THERE MUST BE APPROVAL DOCUMENTS FROM THE AUTHORIZED AUTHORITIES AND OTHER RELATED DOCUMENTS;

g)FOR EXPENSES RELATED TO FEES AND EXPENSES FOR THE ESTABLISHMENT AND OPERATION OF OVERSEAS REPRESENTATIVE OFFICES, THERE MUST BE APPROVAL FROM THE AUTHORIZED AUTHORITIES FOR THE ESTABLISHMENT OF THE OVERSEAS REPRESENTATIVE OFFICE AND DOCUMENTS RELATED TO THE PAYMENT OF FEES AND EXPENSES OF THE REPRESENTATIVE OFFICE;

h)FOR EXPENSES RELATED TO APPLICATIONS FOR TRADEMARK REGISTRATION, COPYRIGHT REGISTRATION, APPLICATION OF PATENTS AND INVENTIONS, ADVISORY SERVICES, THERE MUST BE PRESENTATION OF A RELATED CONTRACT AND DOCUMENTS RELATED TO PAYMENT TO FOREIGN COUNTRIES;

i)FOR EXPENSES RELATED TO THE DISPATCH OF PERSONNEL TO WORK IN THE RESIDENT ORGANIZATION ABROAD FOR WORK, STUDY, SURVEY, SEMINARS..., THERE MUST BE DOCUMENTS FROM THE AUTHORIZED AUTHORITIES FOR PERMISSION TO TRAVEL ABROAD AND DOCUMENTS RELATED TO FOREIGN PAYMENTS, OTHER RELATED DOCUMENTS.

k) The transfer of statutory capital and reinvestment capital abroad by foreigninvestors investing in Vietnam must be accompanied by a liquidation record fromthe investment permit issuing authority, a financial report confirming thefulfillment of financial obligations to the Vietnamese State with confirmation fromthe competent tax authority, and other relevant documents;

l) The transfer of profits abroad by foreign investors in Vietnam must beaccompanied by a certified financial report from an auditing agency, a boardresolution on profit distribution (if it is a joint venture with foreign investment),confirmation from the competent tax authority that all financial obligations tothe Vietnamese State have been fulfilled, a business liquidation report or acontractual cooperation agreement approved by the investment permit issuingauthority (if the foreign investor transfers profits at the end or dissolution of thebusiness), and other relevant documents;

m) The repayment of foreign loans must be accompanied by an approved loanagreement and other relevant documents;

n) For other current transactions, the Bank will specify the necessary documentsfor purchasing foreign currency according to each case;

3. The implementation of foreign currency purchases by foreign-investedenterprises and foreign parties participating in contractual business cooperationthat are not guaranteed by the Vietnamese State for foreign exchange balance shallbe carried out in accordance with current regulations;

4. For resident organizations subject to Decision 37/1998/QĐ-TTg dated February14, 1998, who sold foreign currency to the Bank before the effective date ofDecision 173/1998/QĐ-TTg, they may continue to purchase back the foreigncurrency sold to the Bank under Decision 37/1998/QĐ-TTg within six months fromthe date of sale;

VI. FOREIGN CURRENCY PURCHASE AND SALE WITH THE STATE BUDGET;

The State Bank of Vietnam will coordinate with the Ministry of Finance tospecify the procedures for opening foreign currency accounts and purchasingforeign currency for the State Budget;

VII. RESPONSIBILITIES OF THE BANKS

Banks when buying and selling foreign currency with customers as prescribed inthis Circular must strictly comply with the following provisions:

1. Guide and urge resident organizations to fulfill their obligation to sell foreigncurrency to the Bank; purchase foreign currency in accordance with this Circular;

2. Meet the foreign currency needs of resident organizations as stipulated in PartV of this Circular in accordance with the actual payment value of the customerand only sell foreign currency to the customer when the payment is due. Inparticular, the sale of foreign currency for capital transactions must be carriedout in accordance with current regulations;

3. Post the buying rate and selling rate as prescribed by the State Bank, suchposting is considered a commitment to foreign currency transactions withcustomers;

4. Report accurately to the Central State Bank every day about the amount offoreign currency bought and sold on that day to maintain the foreign exchangebalance or Vietnamese currency status, carry out foreign currency transactionswith customers, other permitted banks, and the State Bank in the inter-bankforeign exchange market to meet legitimate customer needs and ensure the dailyforeign exchange position within the specified limit;

5. Detect violations by banks or resident organizations against the provisions ofthis Circular and report them to the Central State Bank for appropriate action;

VIII. RESPONSIBILITIES OF RESIDENT ORGANIZATIONS:

1. Strictly implement the sale of foreign currency as prescribed in this Circular;

2. Present complete documents as required and reasonably requested by theBank;

3. Truthfully declare as prescribed in this Circular;

4. Detect violations by banks or other organizations against the provisions ofthis Circular and report them to the Central State Bank for appropriate action;

Banks and resident organizations mentioned above, if violating the provisions ofthis Circular, will be dealt with according to administrative penalties laws, theirforeign exchange business suspended, or their operating license revoked, and incases of serious violation, criminal responsibility will be pursued;

IX. IMPLEMENTATION PROVISIONS:

1. This Circular takes effect from September 30, 1998. Previous regulationscontrary to this Circular regarding foreign exchange management shall beabolished;

2. Heads of Departments, Directorates, Office Chiefs, Inspection Chiefs of theCentral State Bank, Governors of Provincial and City State Banks, GeneralDirectors (Directors) of commercial banks, joint venture banks, shareholdingbanks, branches of foreign banks within their functional scope are responsible fororganizing, guiding, implementing, and enforcing this Circular;

3. Ministries, sectors, government agencies, People's Committees of Provincesand Cities shall cooperate in implementing this Circular according to theirfunctions and tasks./.