In furtherance of Article 125 of the Government�s Decree No.24/2000/ND-CP of July 31, 2000 detailing the implementation of the Law on Foreign Investment in Vietnam, the State Bank of Vietnam hereby provides specific guidance on the management of foreign exchange applicable to foreign-invested enterprises and foreign parties to business cooperation contracts as follows:

I. OBJECTS AND SCOPE OF REGULATION

1. This Circular applies to organizations licensed to conduct production and business activities in Vietnam under the provisions of the Law on Foreign Investment in Vietnam, including:

1.1. Enterprises with 100% foreign capital, enterprises of joint venture with foreign parties (hereafter referred to as foreign-invested enterprises);

1.2. Foreign parties to business cooperation contracts (hereafter referred to as foreign business cooperation parties).

Foreign individuals who work at foreign-invested enterprises or business cooperation contract projects that have foreign exchange and conduct foreign exchange activities shall have to comply with the provisions of Section II, Chapter I and Chapter III, Part Two of the State Bank�s Circular No.01/1999/TT-NHNN7 of April 16, 1999 guiding the implementation of the Government�s Decree No.63/1998/ND-CP of August 17, 1998 on foreign exchange management.

2. Foreign-invested enterprises and foreign business cooperation parties, when conducting foreign exchange-related transactions, including: opening and using accounts at domestic and foreign banks; converting foreign currencies; transferring capital into and out of Vietnam; transferring profits abroad; exchange rates; information and reporting, shall have to strictly abide by the provisions of this Circular and other Vietnam�s current regulations on foreign exchange management.

Foreign exchange activities of credit institutions, foreign-invested investment funds and other indirect investment forms shall not fall under this Circular�s regulation scope.

II. OPENING AND USE OF ACCOUNTS AT BANKS OPERATING IN VIETNAM

3. Opening and use of foreign-currency special-use capital deposit accounts:

3.1. Foreign-invested enterprises and foreign business cooperation parties shall have to open foreign-currency special-use capital deposit accounts at a bank licensed to deal in foreign exchange (hereafter referred to as licensed banks) to effect foreign investors� capital transfer transactions, including:

a/ Foreign investors� legal capital or capital for performance of business cooperation contracts brought into and out of Vietnam;

b/ Principals of long-term and medium-term foreign loans brought into and out of Vietnam;

c/ Interests and fees for long-term and medium-term foreign loans brought out of Vietnam to repay foreign debts;

d/ Profits and other lawful income amounts of foreign investors transferred out of Vietnam;

e/ Capital amounts withdrawn from these accounts and channeled into foreign-currency deposit accounts of foreign-invested enterprises or foreign business cooperation parties;

f/ Capital amounts deposited therein from foreign-currency deposit accounts of foreign-invested enterprises or foreign business cooperation parties.

3.2. In special cases, at the requests of foreign lenders, foreign-invested enterprises and foreign business cooperation parties shall be allowed to open at the licensed banks more accounts to receive foreign loans and repay foreign debts (other than foreign-currency special-use capital deposit accounts specified at Point 3.1 above).

4. Opening and use of foreign-currency deposit accounts:

Foreign-invested enterprises and foreign business cooperation parties may open and use foreign-currency deposit accounts at licensed banks to serve their own operations. The opening and use of foreign-currency deposit accounts shall comply with the provisions of Section I, Chapter I, Part Two of the State Bank�s Circular No.01/1999/TT-NHNN7 of April 16, 1999 guiding the implementation of the Government�s Decree No.63/1998/ND-CP of August 17, 1998 on foreign exchange management.

All foreign-currency revenues and expenditures of foreign-invested enterprises and foreign business cooperation parties shall be effected via their accounts opened at the licensed banks and in compliance with this Circular�s provisions and the current regulations on foreign exchange management.

5. The opening and use of Vietnam-dong accounts:

Foreign-invested enterprises and foreign business cooperation parties operating in Vietnam may open Vietnam-dong deposit accounts at banks. The opening and use of Vietnam-dong deposit accounts shall comply with the State Bank�s regulations and the guidance of the banks where such foreign-invested enterprises and foreign business cooperation parties open their accounts.

III. OPENING AND USE OF OVERSEAS FOREIGN-CURRENCY ACCOUNTS

6. Foreign-invested enterprises may open accounts at overseas banks to borrow medium-term and long-term foreign loans according to the provisions at Point 2, Section I, Chapter V, Part Two of the State Bank�s Circular No.01/1999/TT-NHNN7 of April 16, 1999 guiding the implementation of the Government�s Decree No.63/1998/ND-CP of August 17, 1998 on foreign exchange management.

7. Besides the account opening according to the provisions at Point 6 of this Circular, in special cases, foreign-invested enterprises may be permitted by the State Bank to open overseas accounts to serve other purposes on the following conditions:

7.1. Such enterprises are eligible for particularly important investment under the Government�s programs;

7.2. Such enterprises make investment in form of BOT, BOT or BT and need to open overseas accounts to fulfill their commitments;

7.3. Such enterprises invest in the fields of aviation, maritime, post, insurance and tourism and conduct international business operations requiring the opening of overseas accounts to effect clearing payment according to the international practices;

7.4. Such enterprises are permitted to set up their overseas branches or representative offices and need to open accounts in service of the operations of such overseas branches or representative offices;

8. The State Bank Governor shall base himself on the demand and necessity to open overseas accounts to consider and decide on other cases not specified at Point 7 of this Circular.

9. The State Bank Governor shall specify the objectives, use duration and foreign-currency balance on overseas foreign-currency accounts in his decisions permitting the opening and use of such accounts for each specific case.

10. Dossiers applying for permits to open overseas accounts: The subjects defined at Points 7 and 8 of this Circular that wish to open overseas accounts shall have to send their dossiers to the State Bank (the Foreign Exchange Management Department). Each dossier shall comprise:

10.1. An application for permit to open and use overseas account(s);

10.2. A written justification of the necessity to open overseas account(s);

10.3. A notarized copy of the investment license;

10.4. The plan for monthly foreign-currency revenues and expenditures of overseas account(s).

Within 15 (fifteen) working days after receiving complete and valid dossiers, the State Bank shall have to consider and decide whether or not to permit enterprises to open overseas accounts. In case of refusal to permit the opening of overseas accounts, the reasons therefor must be clearly stated.

11. Investment projects under the Petroleum Law shall be permitted to open overseas accounts according to the provisions of such Law and, within 15 days after their overseas accounts are opened, must register such accounts with the State Bank - the Foreign Exchange Management Department.

IV. FOREIGN CURRENCY CONVERSION

12. Foreign-invested enterprises and foreign business cooperation parties may buy foreign currency(ies) from licensed banks to satisfy the following transactions:

12.1. Current transactions specified in Appendix 3 to the State Bank�s Circular No.01/1999/TT-NHNN7 of April 16, 1999 guiding the implementation of the Government�s Decree No.63/1998/ND-CP of August 17, 1998 on foreign exchange management.

12.2. Other licensed transactions, including:

a/ Payment of principals of and interests as well as fees for short-term foreign loans (provided that the conditions for such loans are compliant with the State Bank Governor�s regulations on the borrowing and repayment of foreign loans by enterprises);

b/ Payment of principals and interests of as well as fees for medium-term and long-term foreign loans already registered with the State Bank;

c/ Payment of principals and interests of as well as fees for foreign-currency loans from the licensed banks operating in Vietnam;

d/ Transfer of legal capital, reinvestment capital or capital for performance of business cooperation contracts abroad upon the termination of operations due to the expiry of operation duration or pre-mature dissolution (including cases of capital assignment).

13. For foreign-invested enterprises and foreign business cooperation parties involved in particularly important projects in which investment is made under the Government�s programs, the licensed banks shall base themselves on the Prime Minister�s decisions and investment licenses� stipulations on ensuring foreign-currency balance for each project to meet the demand for foreign-currency balance of the said foreign-invested enterprises and foreign business cooperation parties. In cases where their foreign currency sources are not enough to meet the conversion demand, the licensed banks shall report such to the State Bank (the Foreign Exchange Management Department), so that the State Bank shall supply foreign currency(ies) to them under the Prime Minister�s decisions.

14. For foreign-invested enterprises and foreign business cooperation parties involved in projects for infrastructure construction and a number of other important projects in cases where the licensed banks meet with difficulties, being unable to fully satisfy the foreign currency conversion demand, the licensed banks shall have to report such to the State Bank (the Foreign Exchange Management Department), so that the latter shall consider and propose the Prime Minister to decide on the foreign currency support.

V. TRANSFER OF CAPITAL INTO OR OUT OF VIETNAM

15. Foreign-invested enterprises and foreign business cooperation parties shall have to contribute investment capital according to the schedule set in the joint-venture contracts, enterprises� charters or business cooperation contracts approved by competent bodies.

16. Foreign-invested enterprises and foreign business cooperation parties that have foreign currency revenue sources from overseas current transactions shall have to channel such into their foreign-currency deposit accounts opened at the licensed banks. The performance of the obligation to sell foreign currency(ies) by foreign-invested enterprises and foreign business cooperation parties shall comply with the Prime Minister�s regulations in each period.

17. Foreign investors may transfer abroad profits earned from their business activities, shared revenue amounts, income earned from the service provision and technology transfer, other money amounts and assets under their lawful ownership after fulfilling their financial obligations toward the Vietnamese State.

Upon operation termination or dissolution of enterprises, foreign investors may transfer abroad their legal capital, reinvestment capital, capital for performance of business cooperation contracts and assets under their lawful ownership. In cases where the to be-transferred amounts are larger than the initial capital and reinvestment capital, such amounts shall be transferred abroad only after being approved by the investment licensing bodies.

Foreign-invested enterprises and foreign business cooperation parties may transfer abroad foreign currency amounts to repay foreign loans, including principals, interests and fees according to the regulations of the Government and the State Bank on borrowing and repayment of foreign loans.

18. Depending on each foreign currency use purpose, when buying or transferring foreign currency amounts abroad, foreign-invested enterprises and foreign business cooperation parties shall have to produce to the licensed banks their investment licenses and documents evidencing the foreign currency use purposes as specified below:

18.1. For foreign currency(ies) for importing raw materials, materials, spare parts: Import permits (if any), commercial contracts; vouchers evidencing the goods delivery or performance of such commercial contracts;

18.2. For foreign currency(ies) for paying service charges to foreign parties: Service contracts with foreign parties and vouchers evidencing that the service contracts have been performed;

18.3. For foreign currency(ies) for transferring lawful profits and incomes abroad: Written records of the Managing Boards (or the Project Management Board for business cooperation contracts) on the profit sharing (or division of turnover for business cooperation contracts); the tax authorities� written certification of fulfillment of financial obligations toward the Vietnamese State.

In cases where they obtain written approval of the tax authorities, foreign-invested enterprises and foreign business cooperation parties shall be allowed to transfer their shared profit or income amounts abroad in installments in a year.

18.4. For foreign currency(ies) for transferring abroad wages and lawful incomes of foreign individuals working in foreign-invested enterprises and foreign business cooperation parties: Foreign-invested enterprises� and foreign business cooperation parties� written certification of amounts transferred abroad (total lawful income minus amounts for fulfilling the financial obligation and those expended in Vietnam); the competent tax authorities� written certification of fulfillment of the financial obligations toward the Vietnamese State.

18.5. For foreign currency(ies) for repaying principals of, interests and fees for loans: Foreign-currency borrowing contracts (or debt acknowledgment papers), debt repaying schedule. Particularly for medium-term and long-term foreign loans, besides the above-said documents, there must also be the State Bank�s written certification of registration of loans;

18.6. For foreign currency(ies) for transferring abroad legal capital, reinvestment capital or capital for performance of business cooperation contracts upon the operation termination or pre-mature dissolution: Decisions on dissolution of foreign-invested enterprises; decisions on invalidation of business cooperation contracts accompanied by reports on results of liquidation of enterprises or business cooperation contracts; the competent tax authorities� written certification of fulfillment of the financial obligations toward the Vietnamese State;

For cases where the foreign parties assign their capital to other partners, when buying and transferring foreign currency(ies), they shall have to produce the following papers: Registered contracts on capital assignment with the competent authorities� certification; the competent tax authorities� written certification of fulfillment of the financial obligations to the Vietnamese State (if such capital assignment yields profit);

18.7. For the buying and use of foreign currency(ies) in service of other current transactions, the licensed banks shall be entitled to request on the case-by-case basis foreign-invested enterprises and foreign business cooperation parties to produce necessary vouchers to prove the legality of such current transactions.

19. Necessary documents mentioned at Point 18 above may be originals or copies with signatures and certification seals of the general directors (directors) of foreign-invested enterprises, representatives of foreign business cooperation parties or lawfully authorized persons. In case of necessity, the licensed banks may check the originals to ensure the authenticity of the produced documents.

20. The licensed banks shall only be allowed to sell foreign currency(ies) to foreign-invested enterprises and foreign business cooperation parties for direct payment to foreign parties and permitted cases of domestic payment (sale of foreign currency(ies) for keeping on accounts of foreign-invested enterprises and foreign business cooperation parties is not allowed). Particularly, the sale of foreign currency(ies) for use for the following purposes must be effected via foreign-currency special-use capital deposit accounts (or accounts additionally opened to receive and repay foreign loans):

20.1. Transfer of investment capital and reinvestment capital of foreign investors abroad;

20.2. Transfer of lawful profits and incomes of foreign investors abroad;

20.3. Repayment of principals of, interests and fees for medium-term and long-term foreign loans abroad.

The duration from the buying and transfer of foreign currency(ies) by foreign-invested enterprises and foreign business cooperation parties into their foreign-currency special-use capital deposit accounts till the payment to foreign parties shall not exceed 5 working days.

VI. EXCHANGE RATES

21. The conversion of US dollar into Vietnam dong and vice versa for contribution of legal capital, capital for performance of business cooperation contracts shall be made at the average exchange rate on the inter-bank market between Vietnam dong and US dollar, announced by the State Bank at the time of capital contribution.

22. The purchase and sale of foreign currencies of various kinds related to business operations of foreign-invested enterprises and foreign business cooperation parties shall be effected at the buying and selling rates of the licensed banks at the time of transaction.

VII. INFORMATION, REPORTING AND HANDLING OF VIOLATIONS

23. Annually, by January 15 at the latest (for annual reports) and July 15 (for the first six months� reports), foreign-invested enterprises and foreign business cooperation parties shall have to report to the State Bank of Vietnam (the Foreign Exchange Management Department) and the State Bank�s branches in the provinces and centrally-run cities where they are located on the situation of investment capital disbursement.

24. Annually, by January 30 at the latest (for annual reports) and July 30 (for the first six months� reports), the State Bank�s branches in the provinces and centrally-run cities shall report to the State Bank (the Foreign Exchange Management Department) on the situation of investment capital disbursement by foreign-invested enterprises and foreign business cooperation parties in their respective localities.

25. Annually, by January 15 at the latest (for annual reports) and July 15 (for the first six months� reports), the foreign-invested enterprises allowed to open overseas accounts according to the provisions in Section III of this Circular shall have to report to the State Bank (the Foreign Exchange Management Department) on the use of such accounts.

26. Quarterly, by the 10th of the first month of the following quarter at the latest, the licensed banks (their headquarters) shall have to report to the State Bank (the Foreign Exchange Management Department) on the sale of foreign currency(ies) to foreign-invested enterprises and foreign business cooperation parties; the operation of foreign-currency special-use capital deposit accounts and accounts for receiving and repaying foreign loans (if any) of foreign-invested enterprises and foreign business cooperation parties.

27. Foreign-invested enterprises, foreign business cooperation parties and licensed banks, which violate the provisions of this Circular shall, depending on the seriousness of their violations, be sanctioned according to the provisions of the Government�s Decree No.20/2000/ND-CP of June 15, 2000 on sanctions against administrative violations in the monetary and banking field or handled according to other current law provisions.

VIII. IMPLEMENTATION PROVISIONS

28. This Circular takes effect 15 days after its signing and replaces the State Bank�s Circular No.02/TT-NH7 of June 28, 1997 guiding the foreign exchange management applicable to foreign-invested enterprises and foreign parties to business cooperation contracts and the State Bank Governor�s Decision No.468/2000/QD-NHNN7 of November 8, 2000 on the sale of foreign currencies to foreign-invested enterprises and foreign parties to business cooperation contracts.

29. The heads of the units attached to the State Bank, the directors of the State Bank�s branches in the provinces and centrally-run cities, the managing board chairmen and general directors (directors) of the banks operating in Vietnam, the general directors (directors) of foreign-invested enterprises and representatives of parties to business cooperation contracts shall, within the scope of their respective tasks and powers, have to organize, guide and deploy the implementation of this Circular.

For the State Bank Governor
Deputy Governor
DUONG THU HUONG