Legal basic

• Consolidation document 07/VBHN-VPQH in 2013 consolidating the Ordinance on Foreign Exchange issued by the Office of the National Assembly
• Decree No.70/2014/ND-CP dated July 17, 2014, detailing the implementation of several provisions of the Ordinance and the amended Ordinance on the foreign exchange
• Circular No. 06/2019/TT-NHNN dated July 26 2019 guiding the foreign exchange management for the foreign direct investment in Vietnam
• Circular No. 05/2014/TT-NHNN dated March 12, 2014, guiding the opening and use of indirectly- invested capital accounts for implementation of foreign indirect investment activities in Vietnam
• Circular No. 13/2016/TT-NHNN dated June 30, 2016, on amendments to certain articles of the Circular No. 45/2011/TT-NHNN on the management of foreign exchange with regard to credit institutions granting of foreign loans and collection of debts thereof

Regulation

According to Article 4.4 of Consolidation document 07/VBHN-VPQH: 

“Capital transaction means a transaction for the purpose of transferring capital between a resident and a non-resident in the following sectors: 

(i) Direct investment; 

(ii) Indirect investment; 

(iii) Borrowing a foreign loan and repayment of a foreign loan; 

(iv) other forms of investment in accordance with the law of Vietnam”. 

The concept of the above forms of capital transaction also stipulated in the consolidation document in Clause 12, 13, 14, 15, 16 Article 4 as follow: 

• 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
• Foreign indirect investment in Vietnam means the investment into Vietnam by foreign investors through purchase and sales 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.
• Borrowing of a foreign loan and repayment of a foreign loan means the borrowing by a resident of a loan in any form from, and the repayment of the foreign loan to a non-resident in accordance with law. 
• Provision of a foreign loan and recovery of a foreign loan means that a resident provides a loan to, and recovers payment from a non-resident in a form stipulated by law. 
• Offshore investment from Vietnam means a transfer of capital overseas by a resident for investment in a form stipulated by law

As for the activity of direct investment 

• Enterprises possessing foreign direct investment capital, foreign investors joining contracts of business cooperation must open accounts of direct investment capital at authorized credit institutions.   The contribution of investment capital, remittance of principal investment capital and profits and other lawful revenue must be effected via these accounts.
• Lawful revenue of foreign investors from activities of foreign direct investment in Vietnam may be used for reinvestment or remittance abroad. 
• In case where the stated-above revenue is amount in Vietnam dong, they may be used to buy foreign currency for remittance abroad at authorized credit institutions.

As for the activity of indirect investment 

• Foreign investors being non-residents must open indirect investment accounts in Vietnam dong for implementation of indirect investment in Vietnam. Indirect investment capital in foreign currency must be converted into Vietnam dong for implementation of the investment through these accounts.
• Lawful revenue of foreign investors being non-residents from activities of foreign indirect investment in Vietnamese may be used for reinvestment or buying foreign currency at authorized credit institutions for remittance abroad.

As for the activity of offshore investment form Vietnam   

• Residents who are entitled to conduct offshore direct investment shall be permitted to use the following foreign exchange capital sources for their investment:

• Foreign currency on accounts at authorized credit institutions;
• Foreign currency bought at authorized credit institutions;
• Foreign exchange from other lawful capital sources in accordance with law.

• Resident permitted to conduct offshore direct investment must open a foreign currency account at an authorized credit institution and register remittance of foreign currency abroad for investment through such account in accordance with regulations of the State Bank of Vietnam.
• Offshore indirect investment 

• Credit institutions are entitled to conduct offshore indirect investment.
• Residents not being credit institutions permitted to conduct offshore indirect investment conduct the opening and use of account, remittance of investment capital abroad, remittance of capital, profit and other lawful revenue from activities of offshore indirect investment back into Vietnam in accordance with regulations of the State Bank of Vietnam.

As for the activity of borrowing and repayment of foreign loans

• Residents being enterprises, cooperatives, cooperatives unions, credit institutions and foreign banks’ branches shall be permitted to borrow and repay foreign loans on the principle of self-borrowing and self-repayment in accordance with law.
• Residents being individuals shall be permitted to borrow and repay foreign loans on the principle of self-borrowing and self-repayment in accordance with regulations of the Government.
• The State Bank of Vietnam shall certify the registration of loans within the total commercial loan limit annually approved by the Prime Minister of the Government.
• When borrowing and repaying foreign loans, residents must comply with the conditions on: 

• borrowing and repayment of foreign loans, 
• shall register the loans, 
• shall open and use accounts, 
• shall withdraw capital and transfer money for loan repayment and 
• shall report the use status of loans in accordance with regulations of the State Bank of Vietnam.  

As for the activity of provision and recovery of foreign loans

• Credit institutions shall be permitted to provide and recover foreign loans, grant guarantee for non-residents in accordance with regulations of the State Bank of Vietnam.
• Economic institutions shall be permitted to provide foreign loans, except for export of goods and services of deferred payment; to grant guarantee for non-residents when being permitted by the Prime Minister.
• The State bank of Vietnam shall guide implementation of the opening and use of accounts, the remittance of capital and recovery of foreign loans, registration of provision of loans, recovery of foreign debts and other transactions of capital transfer relating to activities of provision of loans, recovery of foreign debts by economic institutions.

Above is our consultancy about this issue. If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com

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