COMPANY PAYS SALARY IN FOREIGN CURRENCY, PERMITTED OR NOT?

Using foreign currency is a powerful tool to help business take advantage of opportunities in global markets and manage financial risks. However, in order to use foreign currency effectively, companies need to master the regulations and strictly comply. The laws places a number of restrictions on the use of foreign currency by companies in Vietnam for the purpose of ensuring financial security, including regulations on paying employees salary in foreign currency. Together with Lincon review some common questions related to this issue.

1.         Are companies allowed to agree in the labor contract on paying salary in foreign currency to employees?

According to the provisions of the Ordinance on Foreign Exchange, in principle, transactions, payments, etc. in the territory of Vietnam are not allowed to use foreign exchange. However, for some specific cases, companies are allowed to make transactions and payments in foreign currency.

Regulations in Clause 2, Article 95 of the 2019 Labor Code:

“The salary stated in the labor contract and the salary paid to the employee are in Vietnam Dong. In case the employee is a foreigner in Vietnam, it can be in foreign currency.”

Pusuant to the above regulations:

–           If the employee is Vietnamese and works in Vietnam, the salary on the labor contract is required to use Vietnam Dong, foreign currency is not permitted.

–           However, if the employee is a foreigner working in Vietnam, the company and the foreign worker are allowed to agree on the use of foreign currency.

2.         How can company pay salaries and bonuses in foreign currency to foreign employees?

Regulations in Clause 14, Article 4 of Circular 32/2013/TT-NHNN: “Residents and non-residents are organizations that can negotiate and pay salaries, bonuses and allowances in labor contracts in foreign currency by transfer or cash to non-residents and foreign residents working for the same organization”.

Pusuant to the above regulations, the company with foreign currency accounts at credit institutions that are allowed to pay salaries and bonuses to foreign employees in foreign currency in the form of bank transfer or cash. The specific form of payment is agreed upon by both parties and must be recorded in the Labor Contract.

Note: foreign employees must open foreign currency accounts at credit institutions and request to be paid wages in foreign currencies through such accounts.

3.         After returning to their countríe, are foreign employees allowed to transfer savings from their wages abroad?

Regulations in Clause 4, Article 8 of the 2005 Foreign Exchange Ordinance:

“Non-residents and residents are foreigners who have foreign currency on their accounts to be transferred abroad; If having a legal source of income in Vietnamese Dong, they can buy foreign currency to transfer abroad.”

Pursuant to the regulations above:

–           If the savings are in VietnamDong, the foreign worker can buy foreign currency to transfer abroad.

–           If that amount is foreign currency, they will be certainly transferred abroad through the use of accounts at commercial banks and foreign bank branches authorized to do business and provide foreign exchange services. This is a form of one-way money transfer from Vietnam to abroad by foreigners without any legal restrictions.

–           Accordingly, when saving money into bank account, foreign employees completely have right to transfer money abroad.

4.         In addition to paying salaries to foreign employees, is the company allowed to use foreign currency accounts to perform other transactions?

Regulations in Article 3 of Circular 16/2014/TT-NHNN, residents who are organizations are allowed to use foreign currency accounts at licensed banks to carry out revenue and expenditure transactions according to regulations. Specifically, in addition to pay salaries to foreign employees, companies in Vietnam can also use foreign currency accounts at banks to make a number of transactions, such as to:

–           Cash withdrawal for individuals working for the organization when they are sent abroad for work;

–           Money transfer, payment for transactions permitted for domestic payment in foreign currencies;

–           Transfer money, pay for current transactions, capital transactions according to the provisions of laws; etc.

Note, transactions must strictly comply with the provisions of the law on foreign exchange management.

>> PERSONAL INCOME TAX FROM RECEIVING DIVIDENDS, FOR FOREIGN INVESTORS AS NON-RESIDENT, HOW TO PAY? https://linconlaw.vn/personal-income-tax-from-receiving-dividends-for-foreign-investors-as-non-resident-how-to-pay/

>> PROCEDURES FOR ISSUANCE OF ELIGIBILITY CERTIFICATE  FOR CONSTRUCTION EXECUTION CLASS II https://linconlaw.vn/procedures-for-issuance-of-eligibility-certificate-for-construction-execution-class-ii/

5.         May companies withdraw foreign currency in cash in Vietnam?

Pursuant to Clause, Article 3, Circular 16/2014/TT-NHNN (supplemented by Point c, Clause 4, Article 18 of Circular 20/2022/TT-NHNN effective from February 15, 2023), residents are Organizations are allowed to use foreign currency accounts at authorized banks to carry out permitted spending transactions. In which, some cases are allowed to withdraw foreign currency cash for spending purposes, including:

“…

dd) Cash withdrawals for individuals working for the organization when they are sent abroad for work;

e) Payment of bank transfer or withdrawal of foreign currency in cash to pay salaries, bonuses, and allowances to non-residents and residents who are foreign individuals;

i) Withdrawal of foreign currency cash to bring abroad for sponsorship and aid purposes according to the provisions of law on foreign exchange management.”

6.         Cases of buying and selling foreign currency; How will violations of illegally transferring and carrying foreign currency abroad be handled?

Depending on the violation, the nature and severity of the violation, the level of administrative penalty can be from 10 million to 250 million VND for violations, pusuant to Article 23 of Decree 88 /2019/ND-CP.