Circular No. 19/2014/TT-NHNN guiding foreign exchange management for foreign direct investment in Vietnam

CIRCULAR

HGuidelines on foreign exchange management for foreign direct investment activities

in Vietnam Vstrict N |||am

______________

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

No. 06/2013/UBTVQH13 dated March 18, 2013;

Pursuant to Decree No. 28/2005/PL-UBTVQH11 dated December 13, 2005 on foreign exchange; and Decree No. 06/2013/PL-UBTVQH13 dated March 18, 2013 amending and supplementing certain articles of Decree No. 28/2005/PL-UBTVQH11 dated December 13, 2005;

Pursuant to Decree No. 70/2014/NĐ-CP dated July 17, 2014 of the Government detailing implementation of certain provisions of the Foreign Exchange Law and the Law amending and supplementing certain provisions of the Foreign Exchange Law;

Pursuant to Decree No. 156/2013/NĐ-CP dated November 11, 2013 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam (hereinafter referred to as the State Bank);

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

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

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

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

Article 2. Applicability

This Circular applies to the following subjects:

1. Resident is a foreign-invested enterprise;

2. Non-resident participating in business cooperation contracts in Vietnam;

3. Non-resident foreign investor in a foreign-invested enterprise;

4. Organizations and individuals related to foreign direct investment activities in Vietnam.

Article 3. Explanation of Terms

In this Circular, the following terms shall be understood as follows:

1. "Foreign investor" includes: Non-residents who are organizations or individuals conducting foreign direct investment activities in Vietnam under the forms of direct investment as prescribed by current laws on investment.

2. "Foreign-invested enterprise" is an enterprise established, managed, and operated by foreign investors to conduct investment activities in Vietnam.

3. "Authorized bank" includes commercial banks and branches of foreign banks operating and providing foreign exchange services in accordance with the law,

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

5. "Foreign direct investment capital account" is a foreign currency or Vietnamese dong settlement account opened by a foreign-invested enterprise or a foreign investor participating in a business cooperation contract at an authorized bank to carry out transactions related to foreign direct investment activities in Vietnam as stipulated in Articles 6, 7, and 8 of this Circular.

Article 4. General Principles

1. Foreign-invested enterprises and foreign investors must comply with the provisions of the law on investment, current regulations on foreign exchange management, and this Circular.

2. Foreign investors' and Vietnamese investors' capital contributions in foreign-invested enterprises must be made through transfer to a foreign direct investment capital account.

3. The use of foreign investors' distributed profits within the territory of Vietnam must ensure compliance with current foreign exchange management regulations and other relevant laws of Vietnam.

4. The transfer of investment capital in foreign-invested enterprises and foreign investors' projects must ensure compliance with the Investment Law, Enterprise Law, Individual Income Tax Law, Corporate Income Tax Law, guiding documents of these Laws, current foreign exchange management regulations, and other relevant laws.

5. The transfer of payment amounts for the value of transferred investment capital and projects must ensure compliance with current foreign exchange management regulations and other relevant laws.

6. Foreign investors may use lawful revenues in Vietnamese dong or foreign currency from foreign direct investment activities in Vietnam to reinvest in Vietnam.

Chapter II

SPECIFIC PROVISIONS

Article 5. Capital Contribution for Investment

1. Foreign investors and Vietnamese investors in foreign-invested enterprises may contribute capital for investment in foreign currency or in Vietnamese dong according to the investment capital specified in the Certificate of Investment.

2. Resident Vietnamese investors in foreign-invested enterprises may contribute capital for investment using their own lawful foreign currency resources.

Article 6. Opening Accounts for Direct Foreign Investment in Foreign Currency and Vietnamese Dong

1. To carry out direct foreign investment activities in Vietnam, foreign-invested enterprises and foreign investors participating in joint venture contracts may open accounts for direct foreign investment in foreign currency or in Vietnamese dong at one permitted bank to conduct transactions as stipulated in Articles 7 and 8 of this Circular.

2. Foreign-invested enterprises and foreign investors participating in joint venture contracts may open accounts for direct foreign investment in the selected foreign currency to make capital contributions.

Corresponding to the selected foreign currency for making capital contributions, foreign-invested enterprises and foreign investors participating in joint venture contracts may only open one account for direct foreign investment in that foreign currency to make capital contributions.

3. In cases where foreign loans are taken out in a currency not corresponding to the currency used by the foreign-invested enterprise to open its direct foreign investment account, the foreign-invested enterprise may open an additional direct foreign investment account in the loan currency at the permitted bank where the direct foreign investment account was opened to conduct lawful transactions related to the foreign loan and transactions as stipulated in Article 7 of this Circular.

4. If there is a need to open a direct foreign investment account at another permitted bank, foreign-invested enterprises and foreign investors participating in joint venture contracts must close the previously opened direct foreign investment account, transfer the entire balance from this account to the new account. Procedures for opening and closing direct foreign investment accounts shall be carried out in accordance with the regulations of the permitted bank.

Foreign-invested enterprises and foreign investors participating in joint venture contracts may only conduct transactions on newly opened direct foreign investment accounts after closing and settling the previously opened direct foreign investment accounts.

Article 7. Using Accounts for Direct Foreign Investment in Foreign Currency

Accounts for direct foreign investment in foreign currency may be used to conduct the following transactions related to direct investment activities:

1. Receipt transactions:

a) Receiving foreign currency capital contributions from foreign investors and Vietnamese investors in foreign-invested enterprises;

b) Receiving foreign currency from the repayment of short-term, medium-term, and long-term domestic and foreign loans of foreign-invested enterprises;

c) Receiving foreign currency from the sale of investment value transfers and projects;

d) Receiving foreign currency from foreign currency settlement accounts opened at permitted banks of foreign-invested enterprises and foreign investors;

đ) Other lawful foreign currency receipts related to direct foreign investment activities in Vietnam.

2. Payment transactions:

a) Paying principal, interest, and fees of short-term, medium-term, and long-term domestic and foreign loans in foreign currency of foreign-invested enterprises;

b) Transferring foreign currency to foreign currency settlement accounts opened at permitted banks of foreign-invested enterprises and foreign investors;

c) Selling foreign currency to authorized credit institutions to transfer into Vietnamese dong settlement accounts of foreign-invested enterprises and foreign investors;

d) Transferring funds for the payment of investment value transfer and project values received;

đ) Transferring profits and other lawful foreign currency revenues from direct foreign investment activities in Vietnam by foreign investors out of Vietnam;

e) Transferring direct foreign investment capital in foreign currency of foreign investors out of Vietnam in cases of dissolution, cessation of operations of foreign-invested enterprises, investment value and project transfers, reduction of investment capital, or termination, liquidation, and cessation of project operations according to laws on investment;

g) Other lawful foreign currency expenditures related to direct foreign investment activities in Vietnam.

Article 8. Use of Direct Foreign Investment Capital Account in Vietnamese Dong

The Direct Foreign Investment Capital Account in Vietnamese Dong shall be used to conduct transactions related to the following direct investment activities:

1. Receipt transactions:

a) Receiving direct foreign investment capital contributions in Vietnamese Dong from foreign investors and Vietnamese investors in foreign-invested enterprises;

b) Receiving post-tax profits in Vietnamese Dong for reinvestment in Vietnam by foreign investors and Vietnamese investors in foreign-invested enterprises;

c) Receiving proceeds from short-, medium-, and long-term domestic loans in Vietnamese Dong of foreign-invested enterprises to carry out investment activities in Vietnam;

d) Receiving proceeds from foreign loans in Vietnamese Dong of foreign-invested enterprises permitted to borrow foreign currency-denominated loans according to current laws on foreign borrowing and repayment by enterprises not guaranteed by the Government;

đ) Receiving payment for the transfer value of investment capital and projects;

e) Receiving transfers from the Vietnamese Dong settlement accounts of foreign-invested enterprises and foreign investors opened at authorized banks;

2. Payment transactions:

a) Transferring funds to the Vietnamese Dong settlement accounts of foreign-invested enterprises and foreign investors opened at authorized banks;

b) Paying dividends in Vietnamese Dong to foreign investors and Vietnamese investors in foreign-invested enterprises;

c) Repaying principal, interest, and fees of short-, medium-, and long-term domestic loans in Vietnamese Dong for investment projects of foreign-invested enterprises;

d) Repaying principal, interest, and fees of foreign loans in Vietnamese Dong of foreign-invested enterprises permitted to borrow foreign currency-denominated loans according to current laws on foreign borrowing and repayment by enterprises not guaranteed by the Government;

đ) Transferring payment for the received transfer value of investment capital and projects;

e) Transferring direct investment capital in Vietnamese Dong to foreign investors and Vietnamese investors in foreign-invested enterprises in cases of dissolution, cessation of operations of foreign-invested enterprises, transfer of investment capital and projects, reduction of investment capital, or termination of investment project operations according to laws on investment;

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

1. Foreign investors may transfer direct investment capital abroad when foreign-invested enterprises are dissolved, cease operations, reduce investment capital, or terminate, liquidate, and cease operations of investment projects and joint venture contracts according to laws on investment, principal, interest, and loan costs, profits, and other legal income related to direct investment activities in Vietnam through the direct investment capital account, except for certain cases specified in Clause 2 of this Article and Clause 2, Clause 3 of Article 10 of this Circular;

2. In cases where foreign-invested enterprises must close their direct investment capital accounts due to dissolution, cessation of operations, or implementation of investment capital transfers that change the original legal entity of the foreign-invested enterprise, foreign investors may use their foreign currency settlement accounts and Vietnamese Dong settlement accounts opened at authorized banks to conduct foreign currency purchase transactions, transfer direct investment capital, and legal income abroad;

3. Foreign investors may use legal income in Vietnamese Dong from direct investment activities in Vietnam to purchase foreign currency at authorized credit institutions and transfer it abroad within thirty working days from the date of foreign currency purchase.

Article 10. Transfer of capital for the investment preparation phase

1. Transfer of investment capital to Vietnam before obtaining the Investment Certificate:

a) Prior to obtaining the Investment Certificate, foreign investors are permitted to transfer investment capital to Vietnam to cover legitimate expenses for the investment preparation phase in Vietnam as agreed in writing by the relevant parties and through their foreign currency settlement account opened at a permitted bank;

b) Foreign investors may utilize the transferred investment capital as specified in point a of this clause to cover legitimate expenses for the investment preparation phase in Vietnam based on compliance with current laws regarding foreign exchange usage within Vietnam and other relevant provisions of Vietnamese law.

2. Transfer of investment capital out of Vietnam after obtaining the Investment Certificate:

a) After being granted the Investment Certificate by the competent authority, foreign investors, Vietnamese investors in foreign direct investment enterprises, and foreign investors participating in business cooperation contracts must settle the portion of investment capital transferred to Vietnam prior to obtaining the Investment Certificate;

b) The transfer of the foreign investor's transferred capital to cover preparatory investment costs in Vietnam into contributed capital or foreign loans shall be carried out based on agreements between the relevant parties, ensuring compliance with current laws on investment, accounting records, and other relevant provisions of Vietnamese law;

In cases where the foreign investor's transferred capital used to cover preparatory investment costs is converted into medium- or long-term foreign loans of foreign direct investment enterprises, such enterprises shall complete procedures for registering medium- or long-term foreign loans according to the current regulations of the State Bank;

If the foreign investor does not fully utilize the transferred investment capital to cover preparatory investment costs, the foreign investor may transfer the remaining capital out of Vietnam in foreign currency or purchase foreign currency to transfer out of Vietnam the amount of capital that was converted to Vietnamese dong but not fully spent in Vietnam, based on presenting valid documentation proving the transferred capital and related project investment costs in Vietnam. The transfer of capital out of Vietnam shall be completed within thirty working days from the date of purchasing foreign currency.

3. Transfer of investment capital out of Vietnam due to non-granting of the Investment Certificate or discontinuation of direct investment projects in Vietnam:

a) Where a foreign investor has transferred investment capital to Vietnam to cover legitimate expenses for the investment preparation phase in Vietnam but has not obtained the Investment Certificate from the competent authority or continues direct investment projects in Vietnam, the foreign investor may transfer out of Vietnam the transferred investment capital and any accrued interest (if any), after deducting related preparatory investment activity costs in Vietnam, based on presenting valid documentation proving the transferred capital and legitimate related preparatory investment project costs in Vietnam;

b) The foreign investor may purchase foreign currency and transfer out of Vietnam the amount of capital that was converted to Vietnamese dong but not fully spent in Vietnam, based on presenting valid documentation proving the transferred capital and related project investment costs in Vietnam; the transfer of capital out of Vietnam shall be completed within thirty working days from the date of purchasing foreign currency.

4. The transfer of the remaining investment capital out of Vietnam as stipulated in clauses 2 and 3 of this Article shall be conducted through the foreign currency settlement account opened at a permitted bank by the foreign investor who utilized the capital transfer to Vietnam as specified in point a of clause 1 of this Article.

Article 11. Implementation of direct investment in the form of capital contribution or share purchase

Foreign investors conducting direct investment in Vietnam through the purchase of shares or capital contribution to participate in the management of investment activities in Vietnam shall comply with the regulations on account opening as follows:

1. In cases where a Vietnamese enterprise is granted an Investment Certificate by the competent authority in accordance with the current laws on investment, such enterprise must open a direct investment capital account and comply with the provisions of this Circular.

2. For cases other than those specified in point a of this clause, they shall be implemented in accordance with Circular No. 05/2014/TT-NHNN dated March 12, 2014, issued by the State Bank of Vietnam guiding the opening and use of indirect investment capital accounts for the implementation of foreign indirect investment activities in Vietnam and any subsequent amendments and supplements thereto.

Chapter III

RIGHTS AND OBLIGATIONS OF LICENSED CREDIT ORGANIZATIONS, ENTERPRISES WITH FOREIGN DIRECT INVESTMENT, AND FOREIGN INVESTORS

FOREIGN DIRECTLY INVESTED ENTERPRISE

AND FOREIGN INVESTOR

Article 12. Rights and obligations of licensed credit organizations

1. When opening a direct investment capital account and conducting transactions related to direct foreign investment in Vietnam for enterprises with foreign direct investment and foreign investors, licensed credit organizations have the right to request these enterprises and investors to present relevant documents and certificates related to their direct investment activities in Vietnam.

2. When conducting transactions related to direct foreign investment activities in Vietnam for enterprises with foreign direct investment and foreign investors, licensed credit organizations have the responsibility to:

a) Guide enterprises with foreign direct investment and foreign investors on procedures related to the opening and closing of direct investment capital accounts;

b) Specify, check, and retain appropriate documents corresponding to transactions on the foreign investor's direct investment capital account to ensure that all transactions comply with the provisions of this Circular and relevant Vietnamese laws;

c) Sell foreign currency to foreign investors for transfer abroad based on the licensed credit organization’s own balance of foreign currency and in compliance with applicable laws.

Article 13. Rights and obligations of enterprises with foreign direct investment and foreign investors

1. Enterprises with foreign direct investment and foreign investors are permitted to conduct direct investment activities in Vietnam in accordance with the provisions of this Circular and other relevant Vietnamese laws.

2. When conducting transactions related to direct foreign investment activities in Vietnam, enterprises with foreign direct investment and foreign investors have the responsibility to:

a) Declare the content of transactions related to direct foreign investment in Vietnam according to the requirements and guidance of licensed credit organizations;

b) Present and supplement documents, materials, and certificates as required by licensed credit organizations.

Chapter IV

REPORTING SYSTEM

Article 14. Reporting System for Licensed Credit Institutions

Licensed credit institutions shall report to the State Bank on the foreign direct investment activities of foreign investors in Vietnam in accordance with the current reporting regulations of the State Bank regarding statistical reporting systems.

Article 15. Special Reporting Requirements

In cases of urgency or necessity, foreign-invested enterprises and licensed credit institutions shall report relevant contents as required by the State Bank.

Chapter V

SUPERVISION, INSPECTION, AND VIOLATION HANDLING

Article 16. Supervision, Inspection, and Monitoring

1. The State Bank and its provincial branches shall conduct inspections, examinations, and oversight of compliance with foreign exchange management regulations related to foreign direct investment activities of foreign-invested enterprises, foreign investors, and licensed credit institutions as stipulated in this Circular and other relevant laws.

Related organizations and individuals shall be responsible for providing all necessary documents and materials to ensure timely and effective inspections, examinations, and oversight.

Article 17. Handling Violations

In case of violation of the provisions of this Circular, depending on the severity of the violation, foreign-invested enterprises, foreign investors, and licensed credit institutions will be subject to legal handling.

Chapter VI

IMPLEMENTATION

Article 18. Effective Date

1. This Circular takes effect from September 25, 2014.

2. Repeal Article 9 of Circular No. 05/2014/TT-NHNN dated March 12, 2014, guiding the opening and use of indirect investment capital accounts for conducting indirect foreign investment activities in Vietnam.

Article 19. Transitional Provisions

1. From the date this Circular takes effect, foreign-invested enterprises and foreign investors participating in joint venture contracts shall be responsible for converting their dedicated foreign currency deposit accounts into foreign currency direct investment capital accounts.

The conversion of foreign currency direct investment capital accounts for foreign-invested enterprises and foreign investors participating in joint venture contracts must be completed within six months from the date this Circular takes effect.

2. Licensed credit institutions shall be responsible for implementing the conversion of foreign currency direct investment capital accounts as specified in Clause 1 of this Article for foreign-invested enterprises and foreign investors participating in joint venture contracts.

3. Six months after the date this Circular takes effect, foreign-invested enterprises and foreign investors participating in joint venture contracts shall not be allowed to use dedicated foreign currency deposit accounts to conduct direct investment activities in Vietnam.

Article 20. Implementation

The Director of the Office, Heads of the Foreign Exchange Management Department, Heads of relevant units under the State Bank, Governors of the State Bank's provincial branches, Chairmen of the Board of Directors, Chairmen of the Board of Members, and General Managers (Directors) of credit institutions and foreign bank branches shall be responsible for implementing this Circular.