Foreign currency refers to the currency of another country or territory, including the Euro and other common currencies used in international and regional payment systems. In the context of deep economic integration and the increasing development of cross-border investment activities, the demand for purchasing foreign currency by FDI enterprises in Vietnam is rising in order to serve investment and business activities as well as overseas remittances.
In this article, Siglaw will analyze the cases in which FDI enterprises are permitted to purchase foreign currency in accordance with current legal regulations.
Under what circumstances are FDI enterprises allowed to purchase foreign currency for transferring money abroad?
Purchasing foreign currency is understood as the act of resident organizations and individuals using Vietnamese money to buy foreign currency at authorized credit institutions for the purpose of transferring or taking it abroad in cases permitted by law. According to Article 12 of Circular 06/2019/TT-NHNN, foreign direct investment (FDI) enterprises and foreign investors are responsible for purchasing foreign currency at authorized credit institutions to transfer investment capital, profits, and other legitimate income abroad in accordance with regulations.
Therefore, FDI companies are permitted to purchase foreign currency to transfer capital, profits, and other legitimate income abroad for foreign investors.
Specifically, funds transferred abroad through direct investment capital accounts include:
- Direct investment capital in cases of capital reduction; transfer of investment projects; termination or liquidation of investment projects; termination of BCC or PPP contracts as stipulated by investment laws;
- Principal, interest, and related expenses of foreign loans;
- Profits and other legitimate income arising from direct investment activities in Vietnam.
In addition, in cases where an FDI enterprise has to close its direct investment capital account due to dissolution, bankruptcy, cessation of operations, or transfer of an investment project resulting in a change of the initially registered legal entity, the foreign investor may use a foreign currency or Vietnamese Dong payment account opened at an authorized bank to conduct foreign currency purchases and legally transfer funds abroad.
Circumstances FDI enterprises are permitted to purchase foreign currency for one-way remittances abroad.
According to Clause 1, Article 7 of Decree 70/2014/ND-CP, resident organizations are permitted to make one-way remittances abroad for the purpose of financing, aid, or other purposes as stipulated by the State Bank of Vietnam. This content is further guided by Circular 20/2022/TT-NHNN.
Current legal regulations do not differentiate between domestic and FDI enterprises. Therefore, FDI enterprises also have the right to purchase foreign currency to make one-way remittances abroad in legal cases.
Cases involving the purchase of foreign currency for financing or aid.
According to Clause 1, Article 4 of Circular 20/2022/TT-NHNN, organizations are permitted to purchase and transfer foreign currency abroad in the following cases:
- Sponsorship and aid under commitments or agreements between the State, Government, and local authorities of Vietnam with foreign partners. The source of funds may be from the budget or from the sponsoring organization itself;
- Support for disaster relief, epidemics, and war recovery through voluntary contributions or funds from the sponsoring organization;
- Sponsorship for programs, funds, or projects in the fields of culture, education, and health to support and promote community development.
Note that if an organization purchases foreign currency in cash to take abroad exceeding the permitted amount, it must declare it to customs, and the authorized bank will issue a certificate confirming the foreign currency in cash in accordance with current regulations.
Cases where foreign currency is purchased for purposes other than those specified.
According to Clause 2, Article 4 of Circular 20/2022/TT-NHNN, organizations are allowed to purchase foreign currency to transfer money unilaterally abroad in cases such as:
- Paying prizes to non-resident organizations and individuals participating in programs and competitions organized in Vietnam;
- Allocating funding to overseas members participating in scientific research projects;
- Repaying funding as committed to foreign partners.
The funds used may come from the resident organization or from funding received from foreign organizations and individuals.
Permitted foreign currency purchase amount
The amount of foreign currency that can be purchased, transferred, or taken out of the country is determined based on valid documents and papers related to the transaction.
However, in the case of transferring foreign currency to finance programs, funds, or projects supporting development in the fields of culture, education, and health, the maximum amount transferred shall not exceed USD 50,000 or its equivalent value per transfer.
Notes on foreign currency in the transfer of investment capital and investment projects of FDI enterprises.
According to Article 10 of Circular 06/2019/TT-NHNN, the payment of the transfer value of shares or capital contributions in FDI enterprises is regulated as follows:
- Transactions between two non-resident investors or between two resident investors are not required to be conducted through a direct investment capital account;
- Transactions between a resident investor and a non-resident investor must be conducted through a direct investment capital account.
Regarding the currency used in payment:
- In the case of a transfer between two non-resident parties: the use of foreign currency for valuation and payment is permitted;
- In the case of a transfer between a resident and a non-resident or between resident parties: the transaction must be conducted in Vietnamese Dong.
Can FDI companies make payments in foreign currency to export processing enterprises?
According to point a, clause 12, Article 4 of Circular 32/2014/TT-NHNN, domestic enterprises are permitted to quote, price, and receive payment in foreign currency via bank transfer when selling goods to export processing enterprises.
Therefore, in the case of FDI enterprises selling goods to export processing enterprises, the parties are permitted to make payments in foreign currency via bank transfer. Except for this case, other transactions between FDI enterprises and export processing enterprises are not permitted to use foreign currency for payment in violation of regulations.
If you have any questions regarding the remittance of foreign currency abroad by FDI enterprises, please contact Siglaw Firm for comprehensive free consultation at the following address:
Head Office in Hanoi: No. 44/A32 – NV13, Area A Geleximco, Le Trong Tan Street, Tay Mo Ward, Hanoi, Vietnam.
Southern Branch: No. 103 – 105, Nguyen Dinh Chieu Street, Xuan Hoa Ward, Ho Chi Minh City.
Central Branch: VIFC DN – ICT Building, Software Park No. 2, Nhu Nguyet Street, Hai Chau Ward, Da Nang.
Email: vp@siglaw.com.vn
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