Circular No. 12/TT-NH7 guiding the implementation of Decision No. 396-TTg dated August 4, 1994 of the Prime Minister on supplementing and amending certain points regarding foreign currency management in the new situation.

CIRCULAR

GUIDELINES FOR IMPLEMENTING DECISION NO. 396/TTG OF THE GOVERNMENT PRIME MINISTER ON AUGUST 4, 1994 REGARDING THE COMPLETION AND AMENDMENT OF CERTAIN POINTS ON FOREIGN EXCHANGE MANAGEMENT IN NEW SITUATIONS, DECREE NO. 12/TT-NH7, SEPTEMBER 5, 1994 

To implement Decision No. 396/TTg dated August 4, 1994 of the Government Prime Minister on completing and amending certain points on foreign exchange management in new situations, the State Bank of Vietnam hereby provides specific guidelines as follows:

1. The organizations and units referred to in Decision No. 396/TTg dated August 4, 1994 are enterprises (including foreign-invested enterprises in Vietnam), organizations, associations established and operating under current Vietnamese laws.

Organizations and units must deposit all foreign currency they obtain from within and outside the country into their foreign currency accounts opened at commercial banks permitted to operate foreign exchange transactions in Vietnam (state-owned commercial banks, investment and development banks, joint-stock commercial banks, joint venture banks with foreign partners, and branches of foreign banks, hereinafter referred to as Banks) in accordance with the following regulations:

Organizations and units permitted to engage in import-export trade and services with foreign countries must deposit all foreign currency obtained into their foreign currency accounts opened at Banks within the time limit stipulated in contracts.

Organizations and units granted permission by the State Bank of Vietnam to collect foreign currency through sales activities, service provision, and other sources of income such as aid, gifts, advertising, exhibitions, etc., or foreign currency obtained from abroad must immediately deposit the collected foreign currency into their foreign currency accounts opened at Banks.

1.1. Banking institutions and financial companies that have not been authorized by the State Bank of Vietnam to open foreign currency accounts overseas, if they now have the need to open foreign currency accounts overseas, must meet the required conditions and submit application files to the State Bank of Vietnam (Department of Foreign Exchange Management) for permission to open foreign currency accounts overseas according to the provisions below:

1.1.1. Conditions:

a) Possess a foreign exchange business license issued by the Governor of the State Bank of Vietnam;

b) Have a minimum charter capital of 50 billion Vietnamese dong;

c) Have at least two years of operation and be operating effectively;

d) Have agency relationships with foreign banks;

e) Have staff with sufficient qualifications and the ability to perform international payment operations.

1.1.2. Application Files:

a) Application form for opening a foreign currency account overseas (attached as Appendix 1);

b) Establishment decision and business permit of the bank;

c) Business registration certificate;

d) Annual operational report of the bank most recently submitted along with a written opinion by the Director of the State Bank of Vietnam branch in the province or city regarding the bank's capability to conduct foreign business operations.

Within fifteen days from the date of receipt of complete application files, the State Bank of Vietnam shall be responsible for reviewing and issuing permission to open a foreign currency account or providing a written response explaining the reasons for not granting permission to the bank or financial company.

The State Bank of Vietnam authorizes banks and financial companies already granted permission to operate foreign exchange businesses and open foreign currency accounts overseas to independently manage the closure of foreign currency accounts overseas in accordance with business conditions.

1.2. For units in the Aviation, Maritime, Postal Services, and Insurance sectors.

When there is a need to open a foreign currency account overseas, submit the following application files to the State Bank of Vietnam (Department of Foreign Exchange Management):

a) Application form for opening a foreign currency account overseas (attached);

b) Establishment decision;

c) Business registration certificate;

d) Written approval from the competent authority of the foreign country allowing direct sale of transportation tickets in the host country (for the Aviation and Maritime sectors);

e) Contract signed with foreign parties regarding settlement and offsetting (for the Postal Services and Insurance sectors).

1.3. For enterprises established and operating under the Law on Foreign Investment in Vietnam.

Implement the provisions set forth in Circular No. 06/TT-NH7 dated September 18, 1993 of the Governor of the State Bank of Vietnam guiding the implementation of Chapter X of Decree No. 18-CP dated April 16, 1993 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam.

1.4. Economic units of Vietnam permitted by the Government Prime Minister to establish offices abroad to conduct production and business activities must, in addition to the types of documents specified in points a, b, and c of Section 1.2 above, also submit the Government's decision and written approval from the foreign country allowing establishment of offices abroad for production and business activities.

Application files for permission to open foreign currency accounts overseas for organizations and units mentioned in points 1.2, 1.3, and 1.4 only apply for the first time when requesting to open a foreign currency account overseas (subsequent requests to open additional foreign currency accounts overseas will only require submission of an application form for opening a foreign currency account overseas).

The State Bank of Vietnam has the right to request organizations and units to supplement application files if it deems necessary due to changes in content and purpose of activities.

Permits to open foreign currency accounts overseas previously issued by the Governor of the State Bank of Vietnam to banks, financial companies, and organizations remain valid for implementation.

Within thirty days from the date of receipt of complete application files, the State Bank of Vietnam shall be responsible for reviewing and issuing permission to open foreign currency accounts overseas for organizations and units or providing a written response explaining the reasons for not granting permission.

The use of foreign currency deposited overseas by organizations and units mentioned in points 1.2, 1.3, and 1.4 of this circular shall be specifically regulated by the Governor of the State Bank of Vietnam in the permit to open a foreign currency account overseas.

Banks, financial companies, and organizations permitted by the State Bank of Vietnam to open foreign currency accounts overseas must strictly comply with the foreign currency income and expenditure system as stipulated in the permit and are responsible for reporting monthly, quarterly, and annually on the situation of foreign currency income and expenditure on overseas foreign currency accounts to the State Bank of Vietnam (Department of Foreign Exchange Management) and the State Bank of Vietnam branch in the locality for management and monitoring.

1.5. Organizations and units holding foreign currency deposits at banks may use such funds for the following purposes:

1.5.1. Paying for imported goods and services to foreign countries;

1.5.2. Repaying bank loans or foreign debts;

1.5.3. Contributing capital to implement projects under the forms of investment stipulated in the Law on Foreign Investment in Vietnam;

1.5.4. Selling foreign currency to banks or finance companies authorized to deal in foreign exchange;

1.5.5. Purchasing bank bills with foreign currency;

1.5.6. Transferring foreign currency for overseas investment;

1.5.7. Transferring foreign currency abroad according to the provisions set forth in Article 83, Chapter 10 of Decree No. 18-CP dated April 16, 1993, guiding the implementation of the Investment Law (Appendix 3 attached);

1.5.8. Paying to Vietnamese organizations in certain cases specified in Point 3 of this Circular;

1.5.9. Withdrawing foreign currency (in cash or by transfer) for staff members of the organization or unit when they are dispatched abroad for work, study, survey, seminars, or to pay salaries, bonuses, and other allowances to foreigners or Vietnamese working in foreign agencies, organizations, or foreign-invested enterprises under labor contracts;

When implementing foreign currency payment orders, banks must check relevant documents in accordance with Circular No. 203/NH-TT dated October 31, 1991, issued by the State Bank of Vietnam guiding the implementation of Decision No. 337/HĐBT dated October 25, 1991, of the Chairman of the Council of Ministers (now Prime Minister) regarding certain measures to manage foreign currency during the interim period; Circular No. 06/TT-NH7 dated September 18, 1993, issued by the Governor of the State Bank of Vietnam guiding the implementation of Chapter X of Decree No. 18-CP dated April 16, 1993, of the Government detailing the implementation of the Law on Foreign Investment in Vietnam, and related documents concerning payments specified in Point 7 of this Circular;

2. The Director of the Branch of the State Bank of Vietnam in provinces and cities, together with the Directors of branches of banks within their jurisdiction (including the Directors of head offices of commercial banks), shall calculate and determine the amount of foreign currency that organizations and units need to retain for use in the quarter and the temporarily unused foreign currency in the quarter (excluding foreign-invested enterprises established and operating under the Law on Foreign Investment in Vietnam) and notify banks and finance companies within their jurisdiction to purchase the aforementioned foreign currency;

2.1. The calculation and determination of the amount of foreign currency that units need to retain for use in the quarter and the temporarily unused foreign currency in the quarter are based on the quarterly foreign currency income and expenditure plan (taking into account the actual foreign currency income and expenditure plan implemented in the previous quarter);

If the amount of foreign currency received exceeds the planned foreign currency expenditure of the organization or unit in a quarter, the Branch of the State Bank of Vietnam will require the organization or unit to sell the excess foreign currency to the bank (temporarily applicable to organizations and units with a surplus of one million US dollars or more or equivalent foreign currency);

Other organizations and units with a balance of foreign currency equivalent to less than one million US dollars who wish to buy or sell foreign currency with banks and finance companies shall continue to operate under the current foreign currency trading mechanism;

2.2. Each quarter, before the fifth day of the first month of the next quarter, banks have the responsibility to report the end-of-quarter foreign currency balances of organizations and units holding foreign currency accounts at their banks to the Branch of the State Bank of Vietnam in provinces and cities. In cases where a unit holds foreign currency accounts at multiple banks, the end-of-quarter foreign currency balance is the total of those balances;

After compiling the temporarily unused foreign currency in the quarter that organizations and units must sell to the bank, the Director of the Branch of the State Bank of Vietnam in provinces and cities, together with the Directors of banks within their jurisdiction, shall immediately proceed to purchase this foreign currency for the state's foreign currency reserve fund or for banks;

3. Organizations and units (except banks and finance companies) are not allowed to buy, sell, settle, transfer, or lend each other in foreign currency under any form;

The following cases are allowed to settle with each other through banks in foreign currency:

3.1. Payment for goods and services entrusted for import and export between two entrusting and entrusted units;

3.2. Transfer of foreign currency within a legal entity unit with its affiliated accounting units and vice versa;

3.3. Purchase of various types of insurance for import and export goods, air and sea freight, oil and gas, foreign investment projects, and insurance for foreign individuals and organizations;

3.4. Payment for international ticket and freight charges for organizations and units acting as agents for selling tickets for foreign airlines and shipping companies;

3.5. Payment for international postal charges for organizations and units permitted to provide international postal services;

4. From October 1, 1994 onwards, organizations and units operating retail stores and service businesses collecting foreign currency within the country according to the licenses previously issued by the State Bank of Vietnam must switch to collecting in Vietnamese dong (all goods and service fees must be priced in Vietnamese dong and collected in Vietnamese dong);

For organizations and units permitted to organize duty-free sales and service outlets serving foreigners at airports, ports, and places approved by the Prime Minister, they may continue to directly collect foreign currency from customers and must apply for new licenses or change existing licenses according to the regulations below:

4.1. Organizations and units without a license for selling goods and collecting foreign currency must submit application documents to the State Bank of Vietnam (Department of Foreign Exchange Management) for a license. The documents include:

a) An application for selling goods and providing services to collect foreign currency (attached as Appendix 2) with the opinion of the Director of the Branch of the State Bank of Vietnam in provinces and cities;

b) A decision establishing duty-free shops and service outlets for foreigners at border gates, airports, and ports.

4.2. Organizations and units that have previously been granted licenses for selling goods and services and collecting foreign currency must exchange their old licenses for new ones. The application for exchanging the license shall include the types of documents specified at points a and b of Article 4.1 above, along with the original of the previously issued license. The application must be submitted to the State Bank no later than thirty days from the date this Circular takes effect.

While waiting for the new license, organizations and units operating duty-free shops and service shops serving foreigners at airports and seaports may continue to directly collect foreign currency from customers until they obtain a new license issued by the State Bank.

Within fifteen days from the date of receiving all the aforementioned applications, the State Bank will issue and exchange the licenses for selling goods and services and collecting foreign currency for organizations and units.

4.3. Banks and financial companies must quickly establish networks of foreign currency exchange counters at necessary locations at border gates (airports, seaports, land borders), tourist centers, commercial centers, and hotels hosting foreign guests.

Foreign currency exchange counters located outside the main offices of banks may only use Vietnamese dong to exchange for foreign currency from customers and may not use foreign currency to exchange for Vietnamese dong. Exchange counters placed at airport and seaport border gates may permit the exchange of foreign currency back to foreigners who had exchanged foreign currency for Vietnamese dong for spending during their stay in Vietnam but did not spend it all.

The sale of foreign currency to individuals permitted to travel abroad under current regulations may only be conducted at bank headquarters.

Foreign currency exchange transactions must ensure convenience, safety, and speed for customers. At foreign currency exchange counters, the exchange rates and the license for foreign currency exchange operations must be publicly displayed.

4.4. Banks may entrust certain enterprises with sufficient credibility and meeting the required conditions to act as agents for foreign currency exchange. The agency agreement for foreign currency exchange between banks and enterprises acting as agents shall be carried out according to a unified model of the State Bank (Annex 4). Banks are responsible for submitting signed agency agreements for foreign currency exchange with enterprises to the Branch of the State Bank of the province or city where the enterprise operates for management and monitoring.

The foreign currency exchange counters of organizations and units must follow the business guidance of the entrusting bank and be subject to inspection and supervision over activities related to foreign currency as stipulated in this Circular by the Director of the Branch of the State Bank of the province or city where the counter is located.

The commission rate for foreign currency exchange agency services is determined based on the agreement between the organization, unit, and the bank or financial company.

4.5. Entrusting banks must specify the operation of foreign currency exchange counters in accordance with the actual situation in their area and strictly comply with current foreign currency management regulations.

5. The Director of the Branch of the State Bank of the province or city is responsible for supervising and inspecting banks, financial companies, and organizations and units within their jurisdiction to ensure compliance with the provisions of this Circular.

5.1. Banks, financial companies, and organizations and units permitted by the State Bank to conduct business related to foreign currency as stipulated in this Circular are responsible for reporting to the Branch of the State Bank of the province or city about their foreign currency-related activities in accordance with the following regulations:

Quarterly reports must be submitted no later than the fifth day of the first month of each quarter.

Annual reports must be submitted no later than January 20 of the following year.

The Director of the Branch of the State Bank of the province or city must compile these reports and submit them to the Central State Bank (Department of Foreign Exchange Management) according to the following schedule:

Quarterly reports must be submitted no later than the twentieth day of the first month of each quarter.

Annual reports must be submitted no later than the thirtieth day of the first month of the following year.

5.2. Banks and financial companies of organizations and units that fail to comply with the provisions of this Circular or do not adhere to the reporting deadlines may be subject to administrative penalties under the Administrative Offense Law or criminal responsibility under the Criminal Code depending on the severity of the violation.

This Circular takes effect from October 1, 1994. The contents of this Circular supplement and amend Point 5 of Circular 33/NH-TT dated March 15, 1989; Points 1, 2, and 5 of Circular 222/NH-TT dated October 20, 1990; Points 1, 2, 3, and 5 of Circular 203/NH-TT dated October 31, 1991 of the State Bank guiding the implementation of the Regulation on Foreign Exchange Management pursuant to Decree 161/HĐBT dated October 18, 1988; Directive 330/CT dated September 13, 1990 and Decision 337/HĐBT dated October 25, 1991 of the Chairman of the Council of Ministers; other provisions in the above documents that do not conflict with this Circular shall continue to be implemented.

6. Ministries, sectors, government agencies, provincial and municipal People's Committees shall cooperate in implementing this Circular in accordance with their respective functions and responsibilities./.