Circular No. 06/2019/TT-NHNN (Circular 6) came into effect on 6 September 2019 and replaces Circular No. 19/2014/TT-NHNN (Circular 19).
It provides guidelines on foreign exchange control related to foreign direct investment in Vietnam.
Below we set out the most important points of interest.
Circular 6 clarifies that a foreign direct investment enterprise (FDI enterprise) must open a direct investment capital account (DICA). It also provides an amended definition of what an FDI enterprise would be, namely an enterprise that is incorporated by:
- foreign investors (amongst others) and for which an investment registration certificate (IRC) is issued; or
- Vietnamese investors first, but then acquired by foreign investors who own 51% or more of the charter capital of such an enterprise.
Previously, under Circular 19, only the first type of enterprise was required to open a DICA.
Currently, both foreign and domestic investors in an FDI enterprise can only contribute investment capital via a DICA up to the level of the investment capital as stipulated in the IRC. Under Circular 6, foreign investors are permitted to contribute investment capital in an FDI enterprise via a DICA in either foreign currency or Vietnamese Dong up to the level of the investment capital stipulated in:
- the IRC;
- establishment and operation licence prescribed in specific laws;
- notice approving the registration of an M&A transaction by a foreign investor;
- PPP contract signed with the competent authorities; and
- other documents evidencing capital contribution by foreign investors.
Circular 6 specifies the revenue (payments into) and disbursement (payments out of) transactions on a DICA that are allowed in foreign currency and in Vietnamese Dong:
- Receive direct investment capital contributions;
- Receive money in payment of the value of a transfer of investment capital and of an investment project;
- Remit overseas the direct investment capital in case of reduction of investment capital, dissolution or termination of operation of the FDI enterprise;
- Remit money in payment of the value of a transfer of investment capital and of an investment project;
- Transfer profits abroad; and
- Other lawful revenue and disbursements related to the FDI activities in Vietnam.
Circular 6 clarifies that transfer of capital between 2 non‑residents, or between 2 residents does not need to be made via a DICA. Accordingly, it means that a transfer of capital between a resident and a non-resident needs to be made via a DICA.
Furthermore, the valuation, which is payment of the value of a transfer of investment capital or an investment project, between 2 residents or between a resident and a non-resident must be made in Vietnamese Dong. In case of 2 non-residents, both the valuation and payment are permitted to be made in a foreign currency.
Circular 6 requires an FDI enterprise currently using an indirect investment capital account (IICA) to contribute capital, purchase shares or capital contribution in an enterprise, to open a DICA if it would lead to ownership of 51% or more of the capital. In addition, if an enterprise no longer satisfies the conditions of opening a DICA, such enterprise must close its current DICA, and open an IICA.
The conversion of the account must be conducted within 12 months from the effective date of Circular 6.
Mark Oakley / Managing Partner
Thu Nguyen / Associate
This legal update is not an advice and should not be treated as such.