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.
In particular, the
regulations on investment capital account of foreign investor are set forth in
Circular No. 05/2014/TT-NHNN dated on March 12th, 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 11th, 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.
