DIRECT INVESTMENT CAPITAL ACCOUNT (DICA), IMPORTANT ISSUES

In the context of globalization and international economic integration, Vietnam has become an attractive destination for foreign investors. To effectively manage and attract foreign direct investment, the investment capital account plays an important role, not only helping investors carry out financial transactions in a convenient and transparent way, but also a tool for the government to control and manage capital flows. However, opening and managing a direct investment capital account in Vietnam requires investors to clearly understand legal regulations and important notes.

It is necessary to distinguish between direct investment capital account and indirect investment capital account

Direct Investment Capital Account (DICA – Direct Investment Capital Account) is a type of payment account in foreign currency or Vietnam Dong, opened for the purpose of performing transactions related to foreign direct investment activities into Vietnam.

It is necessary to distinguish DICA from IICA – Indirect Investment Capital Account, a type of payment account in Vietnam Dong opened by a foreign investor at a licensed bank to carry out revenue and expenditure transactions related to foreign indirect investment activities into Vietnam.

The basic difference between DICA and IICA lies in the object of opening and purpose of using the account.

Direct investment capital account is opened by enterprises with foreign direct investment or foreign investors

Depending on the method of investment, subjects opening and using DICA can be determined as follows:

Enterprises with foreign direct investment capital will perform in the case of project investment through enterprise establishment, if:

– Enterprises established in the form of investment to establish economic organizations, including foreign investors who own capital, are required to carry out procedures for granting investment registration certificates;

– Enterprises with foreign investors owning from 51% of charter capital due to foreign investors contributing capital, purchasing shares, capital contributions or reorganizing the enterprise, which are not subject to the case of Investment Registration Certificate issuance.

– Enterprises for projects established by foreign investors to implement PPP projects (investment in the form of public-private partnership) according to the provisions of Investment laws.

Foreign investors implementing in the case of project investment without enterprises establishment including:

– Foreign investors participating in BCC contracts (business cooperation contracts);

– Foreign investors directly implementing PPP projects in the absence of establishing a project enterprises (or foreign investors directly implement PPP projects).

Investment capital contribution activities must be performed through direct investment capital account

Obligated to open direct investment capital account to carry out revenue and expenditure transactions related to foreign direct investment activities in Vietnam

The contribution of investment capital in cash by foreign investors and Vietnamese investors in prescribed cases must be performed through bank transfer according to the following principles:

– Corresponding to the foreign currency in which investment capital is contributed, only 01 (one) DICA can be opened in that foreign currency at 01 (one) bank. Opening a DICA in foreign currency is mandatory.

– In case of investment in Vietnam Dong, 01 (one) DICA in Vietnam Dong can be opened at the bank where opening the DICA in foreign currency.

– In case a foreign investor participates in different BCC contracts or directly implements many PPP projects, the foreign investor must open a separate DICA corresponding to each BCC or PPP project.

– For foreign loan transactions, if the loan currency does not correspond to the currency in which DICA has been opened, an additional account for loan and repayment of foreign loan in the loan currency at the bank where the DICA has been opened for the purpose of performing loan-related transactions.

Note: DICA must be opened at a licensed bank according to regulations.

Direct investment capital accounts are opened and used based on permits by competent state agencies

DICA can normally be opened after completing the prescribed investment legal procedures.

Contemporanously, the investor’s capital contribution must be consistent with the approved capital contribution level in the Investment Registration Certificate, Establishment and Operation License in accordance with specialized laws (for enterprises with foreign direct investment capital established and operating in accordance with specialized laws), Notice on meeting the conditions for capital contribution, share purchase, repurchase of capital contributions of foreign investors, PPP contract has been completed signing by competent state agency and other documents proving that the foreign investor’s capital contribution is in accordance with the provisions of law.

However, before approval is achieved, foreign investors can still transfer money into Vietnam to serve investment preparation activities. This investment amount is transferred from abroad or from the payment account in foreign currency or Vietnam Dong of that foreign investor opened at a licensed bank in Vietnam to pay legal expenses for the period of performing investment preparation activities in Vietnam.

Transactions of investment capital and investment projects transfer must also be carried out through direct investment capital account

Payment of the transfer value of shares and capital contributions at enterprises with foreign direct investment through DICA is mandatory in cases of transfer between a non-resident investor and a resident foreign investor. For transactions between non-resident investors or between resident investors, performance through this account is not obligated.

Payment of the transfer value of investment projects under the BCC, between investors directly implementing the PPP project, is required through DICA accounts for the following transactions:

– Between non-resident investors or between a non-resident investor and a resident investor in a BCC;

– Between non-resident investors or between non-resident investors and resident investors directly implementing the PPP project.

At the termination of investment activities, capital, profits and legal revenue transferred abroad must be performed through direct investment capital account

This regulation is required for direct investment capital upon reducing investment capital; transfer of investment projects; closing, liquidating, terminating operations of investment projects, BCC, PPP contracts. Exceptions are only applied in certain cases specifically defined by law.

However, if an enterprise with foreign direct investment capital must close its DICA due to dissolution, bankruptcy, termination of the enterprise’s existence… then investors are allowed to use payment accounts in foreign currency and Vietnam Dong to carry out procedures for transferring capital and revenue abroad. 

>> PROCEDURE FOR CAPITAL CONTRIBUTION, CAPITAL AND SHARE PURCHASE IN VIETNAM https://linconlaw.vn/procedure-for-capital-contribution-capital-and-share-purchase-in-vietnam/

>> INSUFFICIENT CONTRIBUTION OF CHARTER CAPITAL IN SINGLE-MEMBER LIMITED LIABILITY COMPANY https://linconlaw.vn/insufficient-contribution-of-charter-capital-in-single-member-limited-liability-company/