FOREIGN DIRECT INVESTMENT INTO VIETNAM AND INVESTMENT CAPITAL TRANSFER

The State Bank has developed and issued many decrees and circulars to create a synchronous legal framework on foreign exchange management to guide foreign direct investment activities in Vietnam. So, how is the transfer of capital to carry out foreign direct investment activities from abroad into Vietnam?

1.         What is a foreign-invested enterprise (FDI)?

According to Circular No. 06/2019/TT-NHNN, foreign direct investment enterprises (FDI) include:

–           Enterprises 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 with foreign investors owning 51% or more of the charter capital of the enterprise through capital contribution, share purchase and capital contribution. Or owning 51% of charter capital after splitting, merging or consolidating, leading to new ownership or establishment by foreign investors.

–           Project enterprises established by foreign investors to implement PPP projects in accordance with the law on investment.

Therein, forms of foreign direct investment in Vietnam include:

–           Invest in the establishment of economic organizations.

–           Investment in capital contribution, purchase of shares, purchase of contributed capital.

–           Implementation of investment projects.

–           Investment in the form of BCC contract.

–           New forms of investment and types of economic organizations according to the Government’s regulations

2.         Requirements to open a direct investment capital account

Enterprises and investors subjected to regulations must open direct investment capital accounts for investment activities, complying:

–           Must open a foreign currency direct investment capital account at 01 (one) permitted bank to carry out lawful receipt and expenditure transactions in foreign currencies related to foreign direct investment activities in Vietnam;

–          Corresponding to the type of foreign currency in which investment capital is contributed, only 01 (one) direct investment capital account in that foreign currency may be opened at 01 (one) permitted bank;

–           In case of making investment in Vietnamese dong, 01 (one) direct investment capital account in Vietnamese dong may be opened at an authorized bank where a foreign currency direct investment capital account has been opened to carry out lawful receipts and expenditures in Vietnamese dong related to foreign direct investment activities in Vietnam;

–           In case a foreign investor participates in multiple BCC contracts or directly implements multiple PPP projects, the foreign investor must open a separate direct investment capital account corresponding to each BCC contract or PPP project.

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3.         Money transfer for investment preparation activities in Vietnam

In the stage of preparation for the implementation of investment projects, foreign investors are allowed to transfer money directly from abroad to pay lawful expenses in the stage of carrying out investment preparation activities in Vietnam, not required to go through foreign currency payment accounts of foreign investors opened at domestic banks.

The steps to transfer money to carry out investment activities are carried out as follows:

–           Foreign investors are allowed to transfer money from abroad or from their current accounts in foreign currencies and Vietnamese dong opened at authorized banks in Vietnam to pay lawful expenses during the period of carrying out investment preparation activities in Vietnam.

–           After that, the foreign investor is granted an Investment Registration Certificate, a Notice of satisfaction of conditions for capital contribution, share purchase, redemption of contributed capital of foreign investors, issuance of establishment licenses and operation according to specialized laws,  conclusion of PPP contracts.

–           Foreign investors use the money transferred into Vietnam to carry out investment preparation activities to be used to: foreign exchange with foreign direct investment activities

+          Partial or full conversion into contributed capital;

+          Partial or full conversion into foreign loans of enterprises with foreign direct investment; or foreign  hối với hoạt động đầu tư trực tiếp nước ngoài 

+          Return to foreign investors the money transferred into Vietnam to carry out investment preparation activities. Forex với hoạt động đầu tư trực tiếp nước ngoài 

Notes: 

In case of not being granted an Investment Registration Certificate by a competent authority, or other documents prescribed by law and operating under specialized laws, signing a PPP contract or not continuing to implement a direct investment project in Vietnam. Foreign investors may transfer abroad the remaining amount in foreign currency or purchase foreign currency for transfer abroad for the amount transferred into Vietnam and interest incurred (if any) after deducting lawful expenses.

The parties should pay attention to ensure that the above-mentioned money transfer activities are agreements between related parties and can present valid documents and documents proving the amount transferred into Vietnam and lawful expenses related to investment preparation activities in Vietnam.

4.         Lawful transfer of capital, profits and revenues abroad

Foreign investors must move abroad through a direct investment capital account. Enterprises with foreign direct investment capital must close their investment capital accounts due to dissolution, bankruptcy or termination of existence of enterprises,… may use the investor’s current account in foreign currency and Vietnamese dong to carry out procedures for transferring capital and revenue abroad.