Investment Capital Account of Foreign Investors in Vietnam

According to Vietnam laws, any transaction relating to direct or indirect investment operation of foreigner must be implemented by an investment capital account opened in a licensed bank which is commercial bank or branch of foreign bank permitted to trade and supply foreign exchange service according to legal provisions. It is imperative that, the foreign exchange control in Vietnam is strictly regulated, it is suggested the investors whom invest in Vietnam to consult with banking lawyers in Vietnam to receive legal advice on transaction in the activities of investment through direct investment or M&A transactions.

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In particular, the regulations on investment capital account of foreign investor are set forth in Circular No. 05/2014/TT-NHNN dated on March 12^th, 2014 of the State Bank of Vietnam guiding the opening and use of indirectly- invested capital accounts for implementation of foreign indirect investment activities in Vietnam and Circular No. 19/2014/TT-NHNN dated on August 11^th, 2014 of the State Bank of Vietnam guiding the foreign exchange management for the foreign direct investment in Vietnam.

What is Foreign Direct Investment?

Foreign direct investment in Vietnam means the transfer of capital for investment and participation in the management of investment activities in Vietnam by foreign investors.

The subject matters governed by Circular No. 19/2014/TT-NHNN include residents which are enterprises receiving the direct foreign investment; non-residents involved in the business cooperation agreement in Vietnam; non-residents who are foreign investors of FDI enterprises; organizations, individuals regarding the foreign direct investment in Vietnam.

The invested capital contribution of foreign and Vietnamese investors into an FDI enterprise must be performed in the form of money transfer into the direct investment accounts. In order to perform the foreign direct investment activities in Vietnam, FDI enterprise and foreigner participating in business cooperation contract are entitled to open their foreign currency and Vietnamese dong account of direct investment at a licensed bank.

What is Foreign Indirect Investment?

Foreign indirect investment in Vietnam means the investment into Vietnam by foreign investors through purchase and sale of securities, other valuable papers, contribution of capital and purchase of shares, and through securities investment funds, other intermediary financial institutions in accordance with the law of Vietnam but without direct participation in management of investment activities.

The subject matters governed by Circular 05/2014/TT-NHNN include foreign investors who are nonresidents conducting indirect investment activities in Vietnam; and organizations and individuals who are related to indirect investment activities in Vietnam. It means that this Circular does not govern foreign investors being residents who are foreign organizations and individuals. These subject mattes conduct indirect investment activities in Vietnam according to prevailing legal provisions on securities and other relevant normative legal documents.

All indirect investment activities of foreign investors in Vietnam must be conducted in Vietnam Dong. Transactions relating to foreign indirect investment activities must be conducted through an indirectly-invested capital account opened at a licensed bank.

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The Cases of Transferring Money from Vietnam Abroad

In the context of international economic integration, more and more foreign investors are coming and investing in Vietnam. Besides, many Vietnamese individuals and organizations have also implemented many investment activities, living, traveling… abroad. Therefore, there are needs to transfer money fromVietnam abroad. According to the provisions of Vietnamese laws on foreign exchange management, domestic individuals and organizations are allowed to transfer money  abroad in the following cases:

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For individuals being Vietnamese citizens, they are entitled to buy, transfer or bring foreign currencies overseas according to the State Bank’s regulations for the following purposes: to study and receive medical treatment abroad; traveling; business trip; visiting abroad; to pay charges and fees to foreign countries; allowances for relatives members living abroad; transfer of inheritance money to overseas heirs; transfer money in case of permanent residence abroad; One-way money transfer for other legitimate needs.

For enterprises, they are allowed to transfer money abroad when performing the following cases: Carrying out payment and transferring money related to the import or export of goods and/or services; payment of payments and remittances related to commercial credits and short-term bank loans; make payments and transfers related to direct and indirect investment income; transfer money when being allowed to reduce direct investment capital; payment of debts and interest of foreign loans; make one-way money transfers; payment and other remittance according to regulations of the State Bank of Vietnam.

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