Circular No. 26/KH-TT guiding the implementation of Chapter VIII of Decree No. 139-HĐBT dated September 5, 1988 on detailed regulations for the implementation of the Law on Foreign Investment in Vietnam.

CIRCULAR

STATE BANK OF VIETNAM CIRCULAR NO. 26/KH-TT
MARCH 8, 1989 GUIDING THE IMPLEMENTATION OF CHAPTER VIII OF DECREE NO. 139/HĐBT DATED SEPTEMBER 5, 1998 ON
DETAILING THE IMPLEMENTATION OF THE FOREIGN INVESTMENT LAW
IN VIETNAM

On September 5, 1998, the Council of Ministers issued Decree No. 139/HĐBT detailing the implementation of the Law on Foreign Investment in Vietnam; the General Director of the State Bank of Vietnam guides the implementation of Chapter VIII on "Foreign Exchange Management" of the aforementioned Decree.

I - REGARDING THE OPENING AND USE OF ACCOUNTS

1. After being granted permission by the Board of Cooperation and Investment, foreign-invested enterprises must open special accounts (foreign currency) at:

- The Vietnam Foreign Trade Bank:

- Or other banks authorized by the State Bank of Vietnam (including specialized banks, joint venture banks between Vietnam and foreign countries, and branches of foreign banks located in Vietnam).

As for Vietnamese currency, foreign-invested enterprises have the right to choose the most convenient bank to open their account.

2. Foreign individuals participating in business cooperation contracts, foreign investors (including organizations and individuals), and foreign individuals working in foreign-invested enterprises (hereinafter referred to as foreign individuals) may open accounts at the banks mentioned in Article 1 of this Circular when necessary.

3. All foreign currency capital and income, as well as Vietnamese currency, of foreign-invested enterprises must be deposited into their accounts at one of the banks mentioned in Point 1 of this Circular, according to the regulations on opening and using accounts of the bank where the enterprise opens its account.

The balance on foreign currency deposit accounts as well as the balance on fixed-term deposit accounts in Vietnamese currency will accrue interest at the rate published by the bank where the enterprise opens its account within the framework of interest rates set by the State Bank of Vietnam.

4. Foreign-invested enterprises and foreign individuals have the right to convert the amount of foreign currency in their accounts into Vietnamese currency. In cases where the converted Vietnamese currency is not fully spent, it can be reconverted back into foreign currency according to the exchange rate stipulated in Article 17 of this Circular.

II - REGARDING PAYMENTS

5. All payments and disbursements between foreign-invested enterprises and foreign individuals with domestic and foreign customers (including organizations and individuals) must be conducted through the bank where the enterprise has opened its account and must comply with the current regulations on payment systems and foreign exchange management in Vietnam.

6. Within the balance on their foreign currency deposit accounts, foreign-invested enterprises may use the funds for the following payments and disbursements:

6.1. Purchasing machinery, equipment, spare parts, raw materials, fuel, materials, and paying for technology transfers from abroad as well as from Vietnamese organizations.

6.2. Repaying debts (including interest) that the enterprise has borrowed from abroad and domestically to serve production and business activities.

6.3. Other expenses related to the enterprise's production and business activities.

7. In cases where foreign-invested enterprises have transactions in Vietnamese currency with Vietnamese organizations and foreign organizations operating in Vietnam, they must comply with the current regulations on payment systems and cash management in Vietnam.

8. For foreign individuals who have foreign currency deposit accounts at banks, they may use their foreign currency for:

8.1. Purchasing goods at stores that accept foreign currency or paying for services in foreign currency.

8.2. Selling to the bank at the bank's buying rate at the time of selling foreign currency.

8.3. Transferring abroad according to the current regulations of the State.

9. In principle, foreign-invested enterprises must balance their own foreign currency revenues and expenditures. Foreign currency revenues must at least cover expenditures.

In cases where foreign-invested enterprises produce substitute imports or construct infrastructure projects, they must have a foreign currency plan to ensure revenue and expenditure balance. If the enterprise's products cannot be exported and must be sold domestically for Vietnamese currency, such Vietnamese currency can only be spent in Vietnam and cannot be converted into foreign currency.

III - REGARDING CREDIT

10. Foreign-invested enterprises may borrow Vietnamese currency and foreign currency from the Vietnam Foreign Trade Bank or authorized banks, according to the lending regulations of the State Bank of Vietnam.

The conditions for foreign currency loans from the Bank are:

10.1. The enterprise must have an effective project for using borrowed foreign currency capital to ensure timely repayment (principal and interest in foreign currency).

10.2. The enterprise must not have overdue foreign currency debts.

In cases where a guarantee is required for foreign borrowing, the enterprise may request the aforementioned banks to provide such guarantees according to the guarantee regime of the State Bank of Vietnam.

IV.- ON PROFIT TRANSFER

11. Foreign individuals with investment capital in Vietnam (including foreign individuals investing in joint ventures, wholly foreign-owned enterprises, and those participating in business cooperation contracts) are permitted to transfer their portion of profits abroad.

Profit transfer abroad can only be carried out from the fiscal year when the enterprise begins to generate profit and after tax payment, confirmed by the Vietnamese financial authority.

12. The transfer of profits by foreign investors in joint ventures or wholly foreign-owned enterprises shall be conducted at the end of the fiscal year.

In cases where the enterprise is dissolved (due to expiration of its operating period or any other reason), foreign investors may transfer their portion of profits after completing liquidation procedures without waiting until the end of the fiscal year.

For foreign participants in business cooperation contracts lasting less than twelve months, profit transfer shall be conducted upon contract completion. If the contract exceeds one year, profit transfer shall be conducted at the end of the fiscal year.

V.- ON CAPITAL TRANSFER

13. When an enterprise with foreign investment ceases operations or is dissolved, foreign investors may transfer the contributed capital and reinvested capital (if any) abroad after completing liquidation procedures and receiving confirmation from the financial authority.

14. In principle, capital transfer abroad should be conducted evenly over three years. However, in the following circumstances, the State Bank of Vietnam may permit short-term transfers.

14.1. The amount transferred abroad is equivalent to one million US dollars or less.

14.2. The enterprise exports at least eighty percent of the value of its products or generates at least eighty percent of foreign currency revenue compared to the unit's revenue plan.

Specifically, foreign participants in business cooperation contracts may transfer their entire capital abroad upon contract completion and must obtain confirmation from the Vietnamese financial authority.

15. Where the amount transferred abroad exceeds the contributed capital and reinvested capital, the foreign investor must apply to the State Committee on Cooperation and Investment for approval.

Apart from transferring capital and profits as stipulated in the above provisions, foreign investors may also transfer other amounts and values of assets legally owned by them provided they receive confirmation from the Vietnamese financial authority.

VI.- ON SALARY AND OTHER INCOME TRANSFERS

16. Foreign individuals working in enterprises with foreign investment may transfer their salary and other lawful income abroad after deducting income tax, living expenses in Vietnam, and obtaining confirmation from the enterprise director.

VII.- ON EXCHANGE RATES

17. The conversion of foreign currency investment capital into Vietnamese Dong and vice versa, from Vietnamese Dong to foreign currency within the investment domain, such as capital contribution, capital transfer, profit transfer, salary transfer, and other lawful income, as well as payments between enterprises with foreign investment and domestic and foreign organizations and individuals, shall all be conducted based on the exchange rate published by the State Bank of Vietnam at the time of conversion or payment.

VIII.- ON PROCEDURES

18. Enterprises with foreign investment and foreign individuals must complete all necessary procedures and present valid documents related to the transactions as prescribed by the bank where the enterprise has an account when conducting transactions with domestic and foreign organizations and individuals through the bank, as well as when transferring profits, capital, salaries, and other lawful income abroad.

This Circular takes effect from the date of issuance. The Regulation No. 68/NH-QĐ dated August 3, 1988, issued by the General Director of the State Bank of Vietnam regarding banking operations related to foreign investment, is hereby abolished.