Foreign investors must comply with the Decree on Foreign Exchange Management. And carry out specific procedures at the commercial bank where they establish a payment account when purchasing shares or contributing capital to a company in Vietnam. The following are some points to note:

Utilization of Investment Capital Accounts for Payments

Foreign Investors and Enterprises must determine which Investment Capital Accounts to use for the payment or receipt of transfer prices of shares or contribution capital amounts according to the specific circumstances of each case.

1.1. Direct investment capital account (DICA)

A bank authorized to conduct business and provide foreign exchange services in Vietnam can use the account of a Foreign-Invested Enterprise to carry out transactions related to foreign direct investment in Vietnam. The authorized bank allows each Foreign-Invested Enterprise to open only one (01) Direct investment capital account in foreign currency (DICA-FC) and one (01) Direct investment capital account in Vietnamese Dong (DICA-VN).

Considering the acquisition or creation of shares or contribution capital amounts of a Foreign Direct Investment Enterprise in Vietnam constitutes foreign direct investment in Vietnam. Foreign Direct Investment Enterprises consist of:

(a) These are economic entities that have Foreign Investors as shareholders or members and have issued investment registration certificates in compliance with investment laws.

(b) Enterprises other than those mentioned in Point (a) above, with Foreign Investors owning a minimum of 51% of the enterprises’ charter capital, including:

(i) Businesses, whether in sectors with or without Foreign Investors’ conditions applied, where Foreign Investors contribute capital or acquire shares or contribution capital amounts, resulting in Foreign Investors owning at minimum 51% of the enterprise’s charter capital;

(ii) Enterprises established through separation, consolidation, or acquisition, resulting in Foreign Investors owning at minimum 51% of the enterprise’s charter capital;

(c) Project-oriented businesses established by Foreign Investors to execute PPP projects according to investment legislation.

1.2 Indirect Investment Capital Account (IICA)

A payments account opened by a Foreign Investor in Vietnamese Dong at an eligible bank that performs business and foreign exchange services in Vietnam. Its primary purpose is to carry out authorized revenue and expenditure transactions linked to Foreign Investors’ indirect investment activities in Vietnam.
Various forms of indirect investment, such as capital contribution, or buying and selling shares of enterprises that are not covered under Clause 2, Article 3 of Circular 06/2019/TT-NHNN dated June 26, 2019, and not listed or registered for trading on the Stock Exchanges are allowed. IICAs can be used for the mentioned cases in section 1.1. Indirect investment can also involve buying and selling shares or invested capital amounts of Foreign Investors in enterprises with shares listed or registered for trading on the Stock Exchanges, buying and selling bonds and other types of securities on the Vietnamese securities market, and buying and selling other valuable papers issued in Vietnamese Dong by residents who are licensed organizations within the Vietnamese territory.

Fund management companies, securities companies, and organizations allowed to perform investment entrustment operations according to the existing securities law, as well as credit institutions and foreign bank branches licensed to conduct investment entrustment operations under the regulations of the State Bank can be entrusted with these investment activities. Furthermore, indirect investment activities also comprise capital contribution and transfer of contributed capital of Foreign Investors in securities investment funds and fund management companies in compliance with the provisions on securities law.

Payment methods for each Investment Capital Account type are outlined as follows

2.1. Direct Investment Capital Account (DICA)

Payment through DICA must follow Circular 06/2019/TT-NHNN issued on June 26, 2019, guiding foreign exchange management for foreign direct investment in Vietnam. Accordingly, DICA plays a role as an intermediary account that receives payments of the Transfer price from the Buyer and then transfers that amount to the Seller. The following points should be noted:

(a) Foreign Direct Investment Enterprises must make transfer price payments for shares or contributed capital amounts as follows:

(i) Among Non-Resident Investors or among Resident Investors not using Direct Investment Capital Accounts;

(ii) Among Non-Resident Investors and Resident Investors using Direct Investment Capital Accounts.

(b) Pricing and payment of transfer value for investment capital or investment projects of foreign direct investment activities in Vietnam are to follow:

(i) Two non-resident investors must conduct the pricing and payment for the transfer value of investment capital or investment projects in foreign currencies.

(ii) Non-resident investors or resident investors who transfer investment capital or investment projects must conduct pricing and payment in Vietnamese dong.

2.2. Indirect Investment Capital Account (IICA)

Circular 05/2014/TT-NHNN, issued on March 12, 2014 regulates the payment through an Indirect Investment Capital Account (IICA). It provides guidance on opening and utilizing IICAs for carrying out foreign indirect investment operations in Vietnam. As stipulated by the circular, the utilization of IICA accounts is mandatory for Foreign Investors when collecting transfer price payments from the buyer or when transferring the payment to the seller. Therefore, to comply with the existing regulations, it is imperative that investors adhere to the IICA regulations as they conduct their business operations in Vietnam.

Consultation with a bank

Bank consultation is an essential step before making payment of the Transfer price. Therefore, the concerned parties must consult the Commercial Bank where they have established their DICA or IICA account. Even if the Commercial Bank and the concerned parties hold different opinions on the payment method, they must not stop the payment of the Transfer price. The concerned parties should discuss the following concerns with the Commercial Bank:

(a) When conducting M&A transactions, the concerned parties can use DICA-FC, DICA-VN, IICA accounts, and other accounts that do not involve using Investment Capital Accounts for payment.

(b) The payment currency can be in Vietnam Dong or other foreign currencies, and it’s important to consider this factor.

(c) The Commercial Bank requires specific documents to be provided for each payment made, and it’s crucial to be aware of these requirements.

(d) If defining payment terms is necessary, identify and document the payment details and regulations meticulously.

Based on our practical observation, non-compliance with the above regulations can result in challenges for enterprises in making payments outside Vietnam (e.g. loan repayment, profit repatriation). Given the non-compliance risks that may arise, it is prudent for enterprises to stay vigilant and remain up-to-date with the latest regulations.

HMLF is a law firm that provides professional legal services to enterprises, especially FDI companies looking to invest in Vietnam. With a team of experts and enthusiastic staff, we always strive to offer optimal solutions that bring customer satisfaction when experiencing our legal services.

Harley Miller Law Firm “HMLF”
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