CHANGES ON INDIRECT INVESTMENT ACCOUNTS FROM JUNE 16, 2025

Effective from June 16, 2025, Circular No. 03/2025/TT-NHNN will supersede Circular No. 05/2014/TT-NHNN, introducing significant amendments governing the opening and use of indirect investment accounts in Vietnam. These revised provisions are designed to streamline investment procedures for both institutional and individual investors, while concurrently enhancing regulatory oversight of foreign indirect capital inflows. In this context, what critical issues must investors and related entities be promptly aware of to ensure full legal compliance and operational readiness?

Obligated to convert to direct investment accounts if foreign investors hold “exceeding 50% and below 51%” of charter capital

Pursuant to Circular No. 03/2025/TT-NHNN, effective from June 16, 2025, a foreign investor will be classified as engaging in foreign direct investment if holding “exceeding 50%” of the charter capital of an enterprise, as opposed to the previous threshold of “51% or more” under earlier regulations.

Accordingly, enterprises in which foreign investors currently hold a stake exceeding 50% but below 51% of charter capital must open a direct investment capital account. This account shall be used for all transactions related to the investment capital, such as capital contributions and remittance of investment profits.

It is important to note that the deadline for completing the account conversion is June 16, 2026.

4 transactions mandated to use indirect investment accounts

Pursuant to Article 4 of Circular No. 03/2025/TT-NHNN, foreign indirect investment transactions in Vietnam must be conducted through indirect investment accounts in the following cases:

– Purchase and sale of securities on the Vietnamese stock market, and purchase and sale of other valuable papers;

– Capital contribution, share acquisition, or acquisition of equity interests in unlisted enterprises not falling under the regime of direct investment capital accounts;

– Entrusted investment in Vietnamese dong through fund management companies and other licensed entities permitted to carry out entrusted investment activities;

– Purchase and sale of other types of securities in accordance with the law on securities.

In conjunction with these, the Circular provides additional guidance on specific payment purposes from indirect investment accounts, including:

– Payments of losses and other costs incurred from securities transactions placed without pre-funding by foreign institutional investors, as permitted under current securities regulations;

– Payments of fees, charges, taxes, administrative fines, and other expenses related to foreign indirect investment transactions in Vietnam;

– Transfers of deposits or margin amounts related to foreign indirect investment transactions in Vietnam, including deposits/margins for transactions; transfers to the Vietnamese dong payment account of the foreign investor; or purchase of foreign currency for remittance abroad in cases where such deposits/margins are refunded in accordance with applicable laws and agreements between the parties.

Translation may be not required for indirect investment accounts documentation for investment in securities

Under the new provisions of Circular No. 03/2025/TT-NHNN, banks are permitted to apply internal regulations tailored to their specific operational procedures regarding the dossier, process, and agreements for opening indirect investment accounts. At the same time, the Circular reinforces banks’ responsibility for managing such accounts in compliance with applicable laws.

Notable points concerning the documentation requirements for opening indirect investment accounts for securities investment purposes include:

– Authentication of documents: Foreign-language documents and those issued by competent foreign authorities must be notarized or certified in accordance with either Vietnamese law or applicable foreign law, and must be issued or certified within 12 months prior to the date the licensed bank receives the dossier;

– Language of the dossier: Translation into Vietnamese is optional, subject to the agreement between the bank and the investors.

However, banks must retain the right to verify, examine, and take full responsibility for ensuring that all foreign-language documents, data, and information adequately meet the required disclosure standards.

In addition, such documents must be translated into Vietnamese upon request by competent authorities. The translation must either be certified by a person authorized by the bank or be notarized/authenticated in accordance with applicable legal requirements.

Key considerations in the use of indirect investment accounts

Indirect investment accounts serve as intermediaries to ensure transparency of foreign capital flows and to support the implementation of foreign exchange control in accordance with Vietnamese law.

These accounts may only be used for revenue and expenditure transactions directly related to foreign indirect investment activities in Vietnam. Balances in foreign investors’ indirect investment accounts are not permitted to be converted into term deposits or savings deposits.

To ensure clear identification of the legal and financial responsibilities of each investor, foreign investors are not allowed to open joint indirect investment accounts (i.e., accounts held jointly by two or more entities) for the purpose of carrying out indirect investment activities in Vietnam.

Additionally, in order to establish a legal basis for banks to verify, reconcile, retain records, and comply with regulatory requirements, all fund transfer instructions related to foreign indirect investment activities must clearly state the purpose of the transaction.

>> DIRECT INVESTMENT CAPITAL ACCOUNT (DICA), IMPORTANT ISSUES https://linconlaw.vn/direct-investment-capital-account-dica-important-issues/

>> OPEN DICA OR ICCA WHEN FOREIGN CAPITAL CONTRIBUTION IS BELOW 51%? https://linconlaw.vn/open-dica-or-icca-when-foreign-capital-contribution-is-below-51/