Penalties for not applying for a foreign loan

Penalties for not applying for a foreign loan

According to the regulations of the State Bank of Vietnam, all enterprises, cooperatives, cooperative unions and credit institutions when borrowing capital from abroad must carry out procedures for registration of foreign loans.

Responsibilities of enterprises include: loan registration, opening and using loan accounts, repaying foreign debts, withdrawing capital and transferring debt repayment, as well as reporting on the implementation of foreign loans in accordance with regulations. The procedure for applying for a loan from abroad is mandatory for the above economic organizations.

Legal documents regulating foreign loans

The main legal documents regulating foreign exchange management in foreign borrowing and repayment activities of enterprises include:

• Foreign Exchange Ordinance No. 28/2005/PL-UBTVQH11 and Ordinance Amending and Supplementing No. 06/2013/PL-UBTVQH13 of the Standing Committee of the National Assembly;
• Decree 219/2013/ND-CP of the Government on management of foreign loans and debt repayment of enterprises;
• Decree 88/2019/ND-CP stipulates penalties for administrative violations in the field of currency and banking;
• Circular 12/2022/TT-NHNN of the State Bank guiding foreign exchange management for foreign borrowing and debt repayment activities of enterprises.

Initial obligation to apply for a foreign loan

According to the provisions of Article 14 of Circular 12/2022/TT-NHNN, borrowers subject to foreign loan registration are obliged to register loans with the State Bank. Specifically, borrowing organizations including enterprises, cooperatives, cooperative unions and credit institutions in Vietnam, when borrowing capital from abroad, must carry out initial loan registration procedures with the management agency, the State Bank.

Obligation to apply for change of foreign loan

When there are any changes related to the contents of the loan originally confirmed by the State Bank, the borrower should register the changes with this authority. Some specific cases that need to be notified to the State Bank include:

• Change information about the lender;
• Change the transaction name of the bank providing the service;
• Change the amount of capital withdrawal, actual debt repayment is lower than planned;
• Adjust the time for capital withdrawal and debt repayment to the extent allowed;
• Change the head office address of the borrower in the same locality;
• Small changes in the amount of capital withdrawal, debt repayment, interest, fees within the prescribed range;
• Adjust the plan to pay interest and fees but do not change the calculation.

In case the withdrawal amount changes and the actual repayment is lower than the plan, before withdrawing the remaining amount, the borrower needs to apply for a plan adjustment for the unrealized amount.

Foreign loans subject to registration

Foreign loans that need to carry out registration procedures with the State Bank include:

• Medium and long-term loans;
• Payday loans are entitled to an extension of the principal repayment period, if the total loan term exceeds 1 year;
• The short-term loan is not renewed but still has the principal balance (including interest entered into the principal) after 1 year from the date of first disbursement. Unless the enterprise pays off the principal balance within 30 days after 1 year of initial disbursement.

Enterprises having the above loans are responsible for registering with the State Bank.

Penalties for not applying for a foreign loan

Penalties for not registering a foreign loan with the state bank

Enterprises will be fined if they fail to comply with regulations on foreign loan registration with the State Bank. According to Decree 88/2019/ND-CP, specific penalties for failure to register or register changes to foreign loans as prescribed are:

• For individuals: from 20.000.000 VND – 30.000.000 VND;
• For organizations: from 40,000,000 VND – 60,000,000 VND (double the fine for individuals).

In addition, if the enterprise withdraws capital or repays foreign loans in contravention of regulations, it will also be penalized:

• For individuals: from 30.000.000 VND – 50.000.000 VND;
• For organizations: from 60,000,000 VND – 100,000,000 VND (double the fine for individuals).

For specific advice, please contact Siglaw Law Firm for the fastest and most detailed answer:

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