Recently, the State Bank of Vietnam (“SBV”) published Circular No. 06/2019/TT-NHNH (“Circular 06”) for detailing the policies in the management of foreign exchange with reference to foreign direct investment in Vietnam. This Circular 06 will take effect as from 06 September 20…

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This article provides general information and does not replace legal advice for a specific case.

The State Bank of Vietnam ("SBV") has issued Circular No. 06/2019/TT-NHNN ("Circular 06"), which details foreign exchange management for foreign direct investment in Vietnam. Circular 06 takes effect on 6 September 2019. The most notable points of Circular 06 are listed below for your reference.

1. Who must open a direct investment capital account ("DICA")
(a) Foreign direct investment enterprises. Circular 06 defines these enterprises clearly. They are:
  • enterprises established as economic organisations that have at least one foreign member or shareholder and hold an Investment Registration Certificate;
  • enterprises in which foreign investors hold 51% or more of the charter capital; and
  • project enterprises that foreign investors establish to carry out PPP (public-private partnership) projects.

(b) The foreign party to a business cooperation contract (BCC), and a foreign investor that carries out a PPP project directly instead of through a project enterprise.

2. The SBV tightens control over investors' contributed capital
Under Circular 06, an investor's contributed capital can also be determined from the capital stated in:
  • the establishment and operation licence (for enterprises established and operating under specialised laws);
  • the notice that the foreign investor has satisfied the conditions for capital contribution or for the purchase of shares or contributed capital;
  • PPP contracts signed with competent state agencies; and
  • other documents proving the foreign investor's lawful capital contribution.
3. Rules on opening a DICA
The investor may open only one account per foreign currency, at an authorised bank, to make lawful receipts and payments in that currency for its foreign direct investment in Vietnam;
For Vietnamese dong, the investor may open only one VND account, at the bank where it holds its foreign-currency DICA, to make lawful receipts and payments in VND for its foreign direct investment in Vietnam;

If a foreign investor is party to more than one BCC or carries out more than one PPP project, the investor must open a separate DICA for each BCC or PPP project.

4. Enterprises that must close their DICA (their non-resident foreign investors must then open an indirect investment capital account, IICA)
  • enterprises in which foreign investors own less than 51% of the charter capital, except enterprises that the law requires to hold an Investment Registration Certificate;
  • enterprises that are not required to obtain an Investment Registration Certificate but have nevertheless obtained one;
  • foreign direct investment enterprises whose shares are listed or registered for trading on a stock exchange; and
  • if an enterprise in points a, b or c above borrows and repays foreign loans through its DICA, it may keep this account for borrowing and repaying foreign debts in accordance with the law on foreign borrowing and debt repayment by enterprises.
5. The following transactions must go through a DICA
(a) Transfers abroad of:
  • direct investment capital when the investor reduces its investment capital, transfers an investment project, or ends, liquidates or terminates an investment project, BCC or PPP contract;
  • principal, interest and charges on foreign loans (except where the foreign direct investment enterprise may open a separate loan account because the loan currency differs from the currency of its DICA), and profits and other lawful income from direct investment in Vietnam;
(b) Payments for transfers of shares or contributed capital in foreign direct investment enterprises between resident and non-resident investors; and
(c) Payments for transfers of investment projects:
  • between non-resident investors, or between non-resident and resident investors, under a BCC;
  • between non-resident investors, or between non-resident and resident investors, that carry out PPP projects directly.
6. Transitional provisions
  • Enterprises must convert between DICA and IICA within one year from the effective date of Circular 06, that is, by 6 September 2020 at the latest;
  • Enterprises in which foreign investors own more than 51% of the charter capital but which have opened only an IICA must close the IICA and open a DICA.
Original content sourcehttps://tinpartners.vn/foreign-exchange-management-related-to-foreign-direct-investment/