Important Notice

    Date: 27 June 2019

    Re: Update new regulation – Circular 06/2019/TT-NHNN dated 26 June 2019 guiding the Foreign Exchange Control for the Foreign Direct Investment in Vietnam

     

    Dear Valued Customer,

    United Overseas Bank (Vietnam) Limited (hereinafter called “UOB Vietnam”) would like to thank you for your continued support and it has been a pleasure serving you.

    We would like to update new regulation – Circular 06/2019/TT-NHNN dated 26 June 2019 of the State Bank of Vietnam (“SBV”) guiding the foreign exchange control for the foreign direct investment in Vietnam (hereinafter called “Circular 06”). This circular shall provide guidance on the foreign exchange control for the foreign direct investment activities in foreign currency (“FCY”) and Vietnam Dong; invested capital transfer for the pre-investment stage; overseas transfer of capital, legal profits and legal incomes; transfer of shares, contributed capital in foreign direct investment enterprise.

    Circular 06/2019/TT-NHNN shall be effective as from 06 September 2019. This circular shall replace the Circular 19/2014/TT-NHNN dated 11 August 2014 of SBV providing guidance on foreign exchange control for foreign direct investment in Vietnam (“Circular 19”), amend Circular 05/2014/TT-NHNN dated 12 March 2014 of SBV providing guidance on opening and use of indirect investment capital accounts for performing foreign indirect investment activities in Vietnam and supplement Circular 16/2014/TT-NHNN dated 01 August 2014 of SBV providing guidance for use of foreign currency accounts, VND accounts of residents, non-residents at authorized banks.

    By this notice, UOB Vietnam would like to summarize some key points of Circular 06 as follows:
     

    1. Amendment of the definition of foreign investor and foreign direct investment enterprise (“FDI enterprise”)

    • To widen the definition of “foreign investor” compared with the previous circular. Accordingly, foreign investor shall include individuals with foreign nationality instead of non-resident individual as stipulated in Circular 19.
    • To amend the definition of FDI enterprise by listing out all kinds of FDI enterprises and focus on the the shareholding ratio of foreign investor (1)
    (1) According to Article 3.2 of Circular 06, the definition of FDI is as follows:
    “Foreign direct investment enterprises” shall include:
    a) Enterprises that are established in the form of investment for establishment of economic entities whose foreign investor is a member or shareholder and who are required to follow the procedures for issuance of investment registration certificate in accordance with laws and regulations on investment;
    b) The enterprises that are not regulated in Point a hereof with 51% or more of charter capital held by a foreign investor, including:
    (i) An enterprise with a foreign investor contributing capital, buying shares where the capital contributed to the enterprise (operating in either conditional or unconditional business lines as applicable to foreign investors) leads to the foreign investor holding 51% or more of charter capital of the enterprise;
    (ii) An enterprise being established after split, merger, consolidation which leads to the foreign investor holding 51% or more of charter capital of the enterprise;
    c) A project enterprise that is established by a foreign investor for the purpose of a PPP project in accordance with laws and regulations on investment”


    As the result, from the effective date of Circular 06, only enterprises which meet the criteria of FDI enterprises as stipulated by Circular 06 are permitted to open Direct Investment Capital Account (“DICA”). In the event that the enterprises which have already opened DICA, but not satisfied with the definition of the FDI enterprises, must close DICA and foreign investor who hold shares or contributed capital in such enterprise must open Indirect Capital Investment Account (IICA”), in particular cases as follows:

    • After performing the transfer of shares, contributed capital or issuing extra shares to increase charter capital at a FDI enterprise, the percentage of shareholding or contributed capital of the foreign investor in such enterprise shall be below 51%;
    • After the FDI enterprise which is a public company has its stocks listed or registered for trading on Securities Exchange.
       

    2. Detail guiance about transfer of capital, contributed capital in a FDI enterprise

    The payment of transfer of shares, contributed capital in a FDI enterprise should be conducted as follows:
     

    Buyer Seller Via DICA Via current account Payment & quoting in VND Payment & quoting in FCY
    Non-resident Non-resident Not required Permitted Permitted Permitted
    Resident Resident Not required Permitted Permitted Not permitted
    Non-resident Resident DICA in VND Not permitted Permitted Not permitted
    Resident Non-resident DICA in VND Not permitted Permitted Not permitted

     

    3. Transforming process of capital accounts

    Within 12 months at the latest since 06/09/2019 (ie. 06/09/2020), the enterprises and foreign investors holding shares or contributed capital in such enterprises must conduct the transforming process for DICA into IICA and visa versa, as follows:
     

    #

    Applicable customer

    Required Action

    1

    Current enterprise (having no DICA) with a foreign investor having IICA for capital contribution, buying shares or contributed capital at the enterprise which leads to the foreign investor holding 51% charter capital or more.

    • The foreign investor must close its IICA
    • The enterprise must open a DICA

    2

    Current enterprise which has foreign investor owning less than 51% but is maintaining DICA (except the case FDI enterprise which is required to follow to procedures for issuance of Investment Registration Certificate (“IRC”) and already had an IRC)

    • The foreign investor must open a IICA
    • The enterprise must close its DICA

    3

    Enterprise that do not fall within the subjects that are required to follow the procedures for issuance of Investment Registration Certificate but have a demand for and have been granted with an IRC in accordance with the regulations on investment

    4

    FDI enterprise listed or registered for trading on the Stock Exchange

     

    In the event where the enterprise has been taking foreign loans and debt repayment via a DICA, it may continue to maintain this account for the purpose of foreign loans and debt repayment. During the transitional period, the enterprises and foreign investors owning shares or contributed capital in such enterprises may continue to use the existing DICA to perform the transactions of receipt and payment related to the investment activities in Vietnam.

    Please kindly review your accounts for transforming of capital accounts within the timeline in order to ensure the compliance with regulations.

    We would like to summary the above key points of Circular 06 for your reference and please find the full content of Circular 06 for sufficient information regarding FX control for direct investment activities in Vietnam. Should you like to discuss any queries or concerns in relation to any of the above, please do not hesitate to contact your Relationship Manager.

     

    Best regards,

    UNITED OVERSEAS BANK (VIETNAM) LIMITED