What is a direct investment capital account? What are the subjects, regulations on procedures for opening a foreign direct investment capital account and how to use it according to Circular 06/2019/TT-NHNN? Refer to the details in the article below of fdiinvietnam.com.
Foreign direct investment has become a popular form of investment in our country. The investment capital contribution of foreign investors in Vietnam must be made through a direct investment capital account. However, many investors do not yet fully understand this regulation. The following article of fdiinvietnam.com will share information on the opening and use of a foreign direct investment capital account for foreign-invested companies.
What is a direct investment capital account?
A direct investment capital account (or foreign direct investment capital account) is a payment account in Vietnamese Dong or foreign currency opened by a company with foreign direct investment or a foreign investor.
Foreign investment capital accounts are opened at banks (permitted by the state) to carry out transactions related to foreign direct investment activities in Vietnam.
Subjects of application of regulations on opening and using direct investment capital accounts
There are 2 groups of subjects that must open and use foreign direct investment capital accounts in Vietnam, including:
➧ Group 1: Enterprises with foreign direct investment.
Forms of enterprises with foreign direct investment according to Circular 06/2019/TT-NHNN include:
- Enterprises established in the form of investment to establish economic organizations, in which foreign investors (NĐT) participate as members or shareholders, must at the same time carry out procedures to apply for an investment registration certificate according to the law;
- Enterprises not falling into the above cases and having foreign investors owning 51% or more of charter capital;
- Project enterprises are established by foreign investors to implement PPP projects (public-private partnership investment projects) in accordance with investment laws.
➧ Group 2: Foreign investors participating in BCC contracts, foreign investors implementing PPP projects in case of not establishing a project enterprise.
>> Learn more: Investment forms under the Investment Law 2020.
Regulations on opening direct investment capital accounts
- Must open a foreign currency account of direct investment capital at a bank permitted to open according to regulations to conduct legal foreign currency transactions related to direct investment activities;
- Only 1 direct investment capital account may be opened in the foreign currency corresponding to the foreign currency used for investment capital at 1 authorized bank;
- Open a direct investment capital account in Vietnamese Dong in case of making investment in Vietnamese Dong at the bank where the direct investment capital account in foreign currency is opened to carry out legal transactions in Vietnamese Dong related to direct investment activities in Vietnam;
- In case a foreign investor enters into multiple BCC contracts or implements multiple PPP projects, this investor must open a separate direct investment capital account corresponding to each BCC contract or PPP project;
- In case an enterprise makes foreign loans and the loan amount does not correspond to the amount the enterprise uses to open a direct investment capital account, the enterprise is allowed to open an additional loan account and repay the debt in the borrowed currency at the bank where the direct investment capital account was opened to carry out legal transactions related to foreign loans according to the law;
- In case of changing banks to open direct investment capital accounts, FDI enterprises or investors may only use the newly opened direct investment capital accounts to conduct transactions according to regulations after the enterprise has completed the following 2 steps:
- Step 1: Open a new direct investment capital account at another authorized bank;
- Step 2: Transfer all balance in previously opened account to new account, then close old account.
Regulations on transactions on direct investment capital accounts
All receipts and payments on direct investment capital accounts must be made via bank transfer and are specified in detail in Circular 06/2019/TT-NHNN. Specifically as follows:
1. For receipt and payment transactions on direct investment capital accounts in foreign currency
➧ For collection transactions:
- Collecting remittances of direct investment capital contributions in foreign currency from foreign investors, Vietnamese investors in FDI enterprises, foreign investors directly implementing PPP projects, foreign investors participating in BCC contracts;
- Collect money transfer payment for capital transfer value, investment project transfer (according to regulations in Article 10 of Circular 06/2019/TT-NHNN);
- Receipt of foreign currency transfers purchased from authorized credit institutions to transfer capital, profits, and legal income abroad;
- Collecting transfers from foreign currency payment accounts opened at licensed banks of foreign direct investment companies, foreign investors directly implementing PPP projects, foreign investors participating in BCC contracts to transfer capital, profits, and legal sources of income abroad for foreign investors;
- Foreign currency conversion to make investment capital contribution (in case the capital contribution currency is completely different from the currency of the opened direct investment capital account);
- Transfer of capital surplus from issuing new shares to increase charter capital at foreign direct investment companies;
- Foreign currency transfer revenue from domestic petroleum product sales (after the enterprise has fulfilled all financial obligations and deducted expenses in Vietnamese Dong) according to state regulations on petroleum and the Government’s Guarantee and Commitment Agreement (if any);
- Transfer revenues related to foreign loans of foreign direct investment companies in accordance with the provisions of law on foreign loans and debt repayment of enterprises (excluding the cases specified in Clause 3, Article 5 of Circular 06/2019/TT-NHNN);
- Other legal revenues in foreign currency related to foreign direct investment activities in Vietnam.
➧ Payment transactions:
- Transferring money to a foreign currency payment account opened at a licensed bank of a foreign direct investment company, a foreign investor directly implementing a PPP project, a foreign investor participating in a BCC contract, or an oil and gas project operator (in accordance with the provisions of the law on oil and gas) to conduct foreign direct investment activities in Vietnam;
- Selling foreign currency to licensed credit institutions to transfer to Vietnamese Dong payment accounts of foreign direct investment companies, foreign investors directly implementing PPP projects, and foreign investors participating in BCC contracts;
- Expenses for transferring money to pay for the transfer value of investment projects and investment capital to the transferor abroad or expenses for selling foreign currency to pay for the transfer value of investment projects and investment capital to the transferor in Vietnam in Vietnamese Dong (according to regulations in Article 10 of Circular 06/2019/TT-NHNN);
- Transferring profits and legal income in foreign currency from foreign direct investment activities in Vietnam of foreign investors abroad;
- Expenses for transferring foreign investors’ direct investment capital in foreign currency abroad (in case of reducing investment capital, ending, liquidating, terminating the operation of investment projects, PPP contracts, BCC contracts according to the provisions of law on investment);
- Expenses for converting foreign currency to transfer profits, capital, and legal income from direct investment activities abroad (in case the currency used to transfer profits, capital, and legal income abroad is different from the currency of the opened direct investment capital account);
- Transfer expenses related to foreign loans in foreign currency of foreign direct investment companies (according to legal regulations on foreign loans and debt repayment of companies, except for the case specified in Clause 3, Article 5 of Circular 06/2019/TT-NHNN);
- Other legal expenses in foreign currency related to foreign direct investment activities in Vietnam.
2. For receipt and payment transactions on direct investment capital accounts in Vietnamese Dong
➧ Collection transactions:
- Collecting direct investment capital contributions in Vietnamese Dong from foreign investors, Vietnamese investors in companies with foreign direct investment, foreign investors directly implementing PPP projects, foreign investors participating in BCC contracts;
- Collect money transfer payment for capital transfer value, investment project transfer according to regulations in Article 10 of this Circular;
- Revenue from transfer of profits shared in Vietnamese Dong from foreign investors, Vietnamese investors in companies with foreign direct investment, foreign investors participating in BCC contracts, foreign investors directly implementing PPP projects to increase capital, expand investment and business activities in Vietnam;
- Collect transfers from the payment accounts in Vietnamese Dong of the foreign direct investment company, foreign investors participating in BCC contracts, foreign investors directly implementing PPP projects to transfer capital, profits, and legal revenue abroad for foreign investors;
- Transfer of surplus capital from issuance of new shares to increase charter capital at foreign direct investment companies;
- Transfer revenues related to foreign loans in Vietnamese Dong of foreign direct investment companies permitted to borrow foreign loans in Vietnamese Dong (according to the provisions of law on foreign loans and debt repayment of enterprises);
- Other legal revenues related to foreign direct investment activities in Vietnam in Vietnamese Dong.
➧ Payment transactions:
- Transferring money to a payment account in Vietnamese Dong opened at a licensed bank of a foreign direct investment company, a foreign investor directly implementing a PPP project, a foreign investor participating in a BCC contract, or an oil and gas project operator (according to the provisions of the law on oil and gas) to carry out foreign direct investment activities in Vietnam;
- Expenses for transferring money to pay for the value of investment capital transfer, investment project transfer to the transferor in Vietnam or expenses for purchasing foreign currency to pay for the value of investment capital transfer, investment project transfer to the transferor abroad according to the provisions of Article 10 of this Circular;
- Purchase foreign currency for transfer to transfer profits and other legal sources of income in Vietnamese Dong for foreign investors abroad;
- Expenses for transferring direct investment capital in Vietnamese Dong to Vietnamese investors or expenses for purchasing foreign currency to transfer direct investment capital for foreign investors abroad (in case of reducing investment capital, ending, liquidating, terminating the operation of investment projects, PPP contracts, BCC contracts according to the provisions of law on investment);
- Transfer expenses related to foreign loans in Vietnamese Dong of foreign direct investment companies permitted to borrow foreign loans in Vietnamese Dong according to the provisions of law on foreign loans and debt repayment;
- Other legal expenses related to foreign direct investment activities in Vietnam in Vietnamese Dong.
Some frequently asked questions about direct investment capital accounts
1. Can I open a direct investment capital account at another bank?
Yes. To open a foreign direct investment account at another bank, a business needs to perform the following 2 steps:
- Step 1: Open a new direct investment capital account at another authorized bank;
- Step 2: Transfer all balance in previously opened account to new account, then close old account.
Only after completing these two steps can the enterprise use the new direct investment capital account to conduct transactions in accordance with the law.
2. Who can open a direct investment account?
- Enterprises established in the form of investment to establish economic organizations, in which foreign investors participate as members or shareholders, and this must carry out procedures to apply for an investment registration certificate according to the law;
- Enterprises not falling into the above cases, and have foreign investors owning 51% or more of charter capital;
- Project enterprise established by foreign investors to implement PPP projects;
- Foreign investors participating in BCC contracts, foreign investors implementing PPP projects in case of not establishing a project enterprise.
3. How are receipts and payments of accounts with direct investment capital regulated?
All receipt and expenditure transactions made on direct investment capital accounts must be made via bank transfer and are specified in detail in Circular 06/2019/TT-NHNN.
>> See details: Regulations on transactions on direct investment capital accounts
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