29/08/2019
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Lawyer Nguyen Cong explains:
NEW REGULATION ON MANAGEMENT OF FOREIGN EXCHANGE REGARDING FOREIGN DIRECT INVESTMENT IN VIETNAM
Recently, State Bank of Vietnam (“SBV”) promulgated Circular No. 06/2019/TT-NHNH (“Circular 06”) detailing on management of foreign exchange with reference to foreign direct investment in Vietnam. This Circular 06 will take effect as from 06 September 2019. In this update, we will list out most notable points in Circular 06 for your reference:
1. Direct Investment Capital Account (“DICA”)’s required-owners include:
(a) Enterprises invested by foreign direct investment (Doanh nghiệp có vốn đầu tư trực tiếp nước ngoài). Circular 06 states evidently the definition of Enterprises invested by foreign direct investment. Specifically, they are:
• Enterprises set up under the form of establishing economic organizations, with at least one of the members or shareholders is foreign, and granted an Investment Registration Certificate;
• Enterprises whose foreign capital accounts for 51% and above of their charter capital; and
• Project enterprises established by foreign investors to implement PPP (Public-Private Partnership) projects.
(b) Foreign party in a BCC contract, foreign investor who directly implements PPP project instead of setting up a project enterprise.
2. Meanwhile, the SBV has a tight grip on the contributed capital amount of the investor, Circular 06 dictates that the contribution capital amount of the investor can also be determined by looking at the capital amount in:
• Establishment and operation license (for enterprises established and operating under specialized laws);
• Notice of satisfaction of conditions for capital contribution, share purchase, share acquisition capital contributed by foreign investors;
• PPP contracts signed with competent state agencies; and
• Other documents proving the legal capital contribution of foreign investors.
3. Apropos of opening a DICA, there are some regulations as follows:
The investor shall only open 01 account per foreign currency in an authorized bank to perform lawful collection and payment transactions in such foreign currency related to foreign direct investment in Vietnam;
In case of Vietnam D**g, the investor shall open only 1 Vietnam D**g account in the bank where it has opened its DICA in foreign currency for lawful collection and payment transactions in Vietnam d**g related to foreign direct investment activities in Vietnam;
In case a foreign investor is involved in more than 01 BCC contracts or implement more than 1 PPP projects, that foreign investor must open separate DICAs corresponding to each BCC contract or PPP project.
4. The following enterprises must close their DICA, concurrently their foreign investors who are non Vietnam-based-in owning shares or contributed capital in such enterprises must open an indirect investment capital account (IICA):
(a) Enterprises whose foreign investors own less than 51% of their charter capital, except for enterprises established under Investment Registration Certificate required by law;
(b) Enterprises whose procedures for issuance of Investment Registration Certificate not required but they have undergone such procedure and been granted an Investment Registration Certificate;
(c) Enterprises invested by foreign direct investment have stocks listed on the stock exchange or registered for trading on the Stock Exchange; and
(d) If an enterprise specified in points a, b and c above is borrowing and repaying foreign loans through its direct investment capital account, it may continue to maintain this account for borrowing purposes, repayment of foreign debts in accordance with the law on foreign loans and debt repayment of enterprises.
5. All of following activities are confined to a DICA:
(a) Transfer abroad:
• Direct investment capital when reducing investment capital; transfer investment projects; ending, liquidating, terminating the operation of investment projects, BCC contracts, PPP contracts
• Principal, interest and expenses for foreign loans (except in case enterprises invested by foreign direct investment are allowed to open a loan account when the loan’s currency does not correspond to the currency of the opened DICA); profits and lawful revenue sources related to direct investment in Vietnam;
(b) The payment of transfer’s value of shares or contributed capital between Vietnam-based-in investors (nhà đầu tư cư trú) and non Vietnam-based-in investors (nhà đầu tư không cư trú) at enterprises invested by foreign direct investment; and
(c) The payment of transfer’s value of investment projects:
• Between non Vietnam-based-in investors or between non Vietnam-based-in investors and Vietnam-based-in investors in BCC contracts;
• Between non Vietnam-based-in investors or between non Vietnam-based-in investors and Vietnam-based-in investors directly implementing PPP projects
6. Transitional term:
(a) The conversion between the DICA and IICA must be made within 01 year as from the effective date of this Circular 06 (i.e. no later than 6 September 2020);
(b) Enterprises whose foreign investors own more than 51% of their charter capital but only opened IICA, they need to close IICA and open DICA.
We do hope that the above is useful for your reference. Should you have any question or need our support, please reach us, via my email: [email protected]. Thank you.
