Direct investment capital accounts of foreign-invested enterprises

According to the provisions of Circular 06/2019/TT-NHNN of the State Bank dated June 26, 2019, guiding foreign exchange management for foreign direct investment activities in Vietnam, after issuance of Investment Registration Certificate and Enterprise Registration Certificate, foreign-invested enterprises need to open a direct investment capital account to make investment capital contributions, transfer investment capital, transfer profits and legal sources of revenue abroad, etc. Viet An Law Firm sends foreign investors a summary of regulations on direct investment capital accounts of foreign-invested enterprises in Vietnam as follows:

“Direct investment capital account” is a payment account in foreign currency or Vietnamese Dong opened by enterprises with foreign direct investment capital or foreign investors at licensed banks to carry out transactions. Transactions related to foreign direct investment activities in Vietnam.

Subjects opening and using direct investment capital accounts

Enterprises with foreign direct investment, including:

• Enterprises are established in the form of investment to establish economic organizations, in which foreign investors are members or shareholders and must carry out procedures for issuance of Investment Registration Certificates in accordance with the provisions of investment law;
• Enterprises that do not fall into the above cases have foreign investors owning 51% or more of the enterprise’s charter capital.
• Project enterprises are established by foreign investors to implement PPP projects in accordance with investment laws.

– Foreign investors participating in BCC contracts, foreign investors directly implementing PPP projects in the case of not establishing a project enterprise (hereinafter referred to as foreign investors directly implementing projects PPP).

Subjects of application of regulations on direct investment capital accounts

• Enterprises with foreign direct investment.
• Foreign investors, Vietnamese investors in enterprises with foreign direct investment.
• Foreign investors participate in business cooperation contracts (hereinafter referred to as BCC contracts).
• Foreign investors participate in investment contracts in the form of public-private partnerships (hereinafter referred to as PPP).
• Organizations and individuals related to foreign direct investment activities in Vietnam.

Regulations on investment capital contribution through direct investment capital account

• Enterprises with foreign investment capital must open a direct investment capital account in foreign currency at 01 (one) licensed bank to carry out legal revenue and expenditure transactions in foreign currency related to investment into Vietnam;
• Foreign investors and Vietnamese investors are allowed to contribute investment capital in foreign currency and Vietnamese Dong according to the investor’s capital contribution level in the Investment Registration Certificate and Notice of Satisfaction of contribute capital, purchase shares, and capital contributions from foreign investors.
• Contributing investment capital in cash from foreign investors and Vietnamese investors must be done through transfer to a direct investment capital account.

Close direct investment capital account

– Enterprises with foreign investment (in the case of: Enterprises with foreign investors contributing capital, purchasing shares, stakes to the enterprise leading to foreign investors owning 51% or more of charter capital or more of the enterprise; Enterprises established after a split, merger, or consolidation resulting in foreign investors owning 51% or more of the enterprise’s charter capital) must close their investment capital account. Opened direct investment: Foreign investors who are non-residents own shares or capital contributions in this enterprise shall open an indirect investment capital account to carry out revenue and expenditure transactions according to regulations. Regulations on foreign exchange management for foreign indirect investment activities in Vietnam in the following cases:

• After carrying out the transaction of transferring shares, contributed capital or issuing additional shares to increase charter capital at an enterprise with foreign direct investment, the investor’s share ownership ratio and capital contribution foreign investment in this enterprise fell below 51%;
• After an enterprise with foreign direct investment is a public company with shares listed or registered for trading on the Stock Exchange.

– According to usage needs, enterprises close direct investment capital accounts when they no longer use direct investment capital accounts.

– Procedures for closing direct investment capital accounts comply with the regulations of the State Bank of Vietnam (hereinafter referred to as the State Bank) on opening and using payment accounts at payment service providers.

Income and expenditure transactions on direct investment capital account

Revenue and expenditure transactions on direct investment capital accounts in foreign currencies and accounts in Vietnam Dong are regulated in detail in Circular 06/2019/TT-NHNN.

All transactions are via bank transfer.

Transfer investment capital and investment projects through direct investment capital account

Payment of the transfer value of shares and capital contributions at enterprises with foreign direct investment is carried out as follows:

• Between non-resident investors or between non-resident investors acting through direct investment capital accounts ;
• Between the non-resident investor and the resident investor must be done through a direct investment capital account.

– Currency for valuation and payment of transfer value of investment capital and investment projects in foreign direct investment activities in Vietnam:

• The valuation and payment of the transfer value of investment capital and investment projects between two non-residents is allowed to be done in foreign currency;
• The valuation and payment of the transfer value of investment capital and investment projects between residents and non-residents, and between residents must be done in Vietnamese Dong.

Note:

• Direct investment capital accounts can only be opened at 01 (one) licensed bank;
• Corresponding to the foreign currency in which investment capital is contributed, only 01 (one) direct investment capital account in that foreign currency can be opened at 01 (one) licensed bank;
• In case of investment in Vietnamese Dong, 01 (one) direct investment capital account in Vietnamese Dong can be opened at a licensed bank where the direct investment capital account in foreign currency has been opened;

– In case of changing the authorized bank where the direct investment capital account is opened, the foreign investor must take the following steps:

• Open a direct investment capital account at another licensed bank;
• Transfer the entire balance on the previously opened direct investment capital account to the new direct investment capital account, then close the previously opened direct investment capital account.

Vietnamese investors in enterprises with foreign direct investment must also make capital contributions by transfer through a direct investment capital account.

This article is about direct investment capital accounts of foreign-invested enterprises. If Clients have any inquiries related to this topic, please contact us for the most effective support.