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26 September, 2019
On 26 June 2019, the State Bank of Vietnam (the “SBV”) promulgated Circular No. 06/2019/TT- NHNN guiding foreign exchange control of foreign direct investment activities in Vietnam (“Circular 06”), which replaces Circular No. 19/2014/TT-NHNN. Circular 06 provides new provisions in relation to the direct investment capital account (the “DICA”) as follows:
1. The enterprises with foreign direct investment capital (the “FDI Enterprises”) are defined clearly and in detail under Circular 06. In particular, FDI Enterprises comprise:
(a) Enterprises established in the form of investment to establish an economic organization with foreign investors who are members or shareholders and which must conduct procedures for issuance of an investment registration certificate in accordance with the law on investment;
(b) Enterprises not within the case prescribed in sub-clause (a) above with foreign investors holding 51% or more of the charter capital of the enterprise, comprising:
(i) An enterprise having a foreign investor who contributes capital or purchases shares or a capital contribution portion in the enterprise (operating in an industry or trade whether or not investment and business is subject to conditions applicable to foreign investors) resulting in foreign investors owning 51% or more of the chapter capital of the enterprise;
(ii) An enterprise established after a demerger, division, merger or consolidation resulting in foreign investors owning 51% or more of the charter capital of the enterprise;
(iii) A newly established enterprise in accordance with specialized branch law;
(c) Project enterprises established by foreign investors to implement PPP projects in accordance with the law on investment.
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The above mentioned FDI Enterprises and the foreign investors participating in a BCC, and foreign investors directly implementing a PPP project in cases where a project enterprise is not established (hereinafter referred to as foreign investors directly implementing the PPP project) are the entities that are allowed to open and use the DICA.
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If an enterprise has a foreign investor who has opened and operated an indirect investment capital account (“INCA”) to contribute capital to or purchase shares or a capital contribution portion in such enterprise resulting in foreign investors owning 51% or more of the charter capital, then that enterprise must open a DICA in accordance with provisions of Circular 06.
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The following enterprises which have opened the DICA must proceed with closing the DICA, concurrently the foreign investor as non-resident owning shares, part of capital contribution hereunder must open the INCA under the regulation on foreign exchange:
(a) enterprise with a foreign investor owning below 51% capital charter of the enterprises, except in the case prescribed in Item 1(a) above;
(b) enterprises are not required to obtain the investment registration certificate (the “IRC”), but they have the demand of issuance of the IRC and have been issued the IRC by the provincial DPI;
(c) FDI Enterprises having the stocks which have been either listed in the stock trading floor, or registered for trade on the Stock Exchange; and
(d) One of foregoing enterprises which is currently borrowing/repaying a foreign loan via a DICA, it may continue to maintain such account for the purposes of such loan in accordance with the law on borrowing foreign loans and their repayment by enterprises.
Circular 06 took effect on 6 September 2019.
For further information, please contact:
Dang The Duc, Partner, Indochine Counsel
duc.dang@indochinecounsel.com
