In accordance with Clause 1, Article 7 of Decree No. 70/2014/ND-CP, a resident is defined as an organization authorized to conduct one-way remittances abroad for the purpose of funding, aid, or other purposes as stipulated by the State Bank of Vietnam. Consequently, the activities of purchasing, transferring, and carrying foreign currency abroad by resident organizations for this one-way remittance purpose are guided by Circular No. 20/2022/TT-NHNN.
- Regulations on Foreign Currency Transactions
This regulation does not differentiate between domestic enterprises and foreign direct investment (FDI) enterprises. Therefore, it can be understood that FDI companies are also permitted to purchase foreign currency for the purpose of one-way remittance abroad to serve funding, aid, or other purposes.
- Cases of Purchasing Foreign Currency for Funding and Aid
According to Clause 1, Article 4 of Circular No. 20/2022/TT-NHNN, the cases of purchasing foreign currency for funding and aid by organizations include:
- Purchasing, transferring, and carrying foreign currency abroad to provide funding and aid in accordance with commitments and agreements between the State, Government, local authorities, and foreign entities. The source of funding and aid can be budgetary funds or funds from the organizations themselves.
- Purchasing and transferring foreign currency abroad to provide funding and aid for the recovery from natural disasters, epidemics, and wars. The sources of funding and aid are voluntary contributions from domestic organizations and individuals and/or the organizations’ own funds.
- Purchasing and transferring foreign currency abroad to support programs, funds, and projects established by domestic and/or foreign organizations aimed at promoting development in sectors such as culture, education (scholarship funding), and health. The funding source is the organizations’ own finances.
Note: In cases where a resident organization purchases foreign currency from an authorized bank to carry abroad for these purposes, the amount must be declared to customs, and the bank is permitted to issue a confirmation for carrying cash foreign currency abroad under regulations regarding foreign currency when exiting or entering the country.
- Cases of Purchasing Foreign Currency for Other Purposes
According to Clause 2, Article 4 of Circular No. 20/2022/TT-NHNN, the cases of purchasing foreign currency for one-way remittance abroad for other purposes by organizations include:
- Paying rewards to non-resident organizations or individuals abroad participating in programs or competitions held in Vietnam according to relevant legal regulations. The funding source for the rewards comes from non-resident entities or resident organizations.
- Conducting one-way remittances abroad for the following purposes from funding received from non-resident organizations or individuals:
- Allocating funding to foreign members participating in research projects and studies in Vietnam and abroad.
- Reimbursing funding for projects conducted in Vietnam according to commitments and agreements with foreign parties.
Amount of Foreign Currency Purchase
The amount of foreign currency purchased, transferred, or carried abroad is based on the amount specified in the relevant documents and certificates. Except for cases where foreign currency is purchased for funding programs, funds, and projects aimed at promoting development, the amount is capped at $50,000 or its equivalent in other currencies for a single transfer.
2. Note on Foreign Currency in Capital Transfer and Investment Projects of FDI Companies
According to Article 10 of Circular No. 06/2019/TT-NHNN, the payment for the transfer of shares or capital contributions in FDI companies is conducted as follows:
- Between investors who are non-residents or between investors who are residents, transactions do not occur through direct investment capital accounts.
- Between a non-resident investor and a resident investor, transactions must occur through direct investment capital accounts.
Accordingly, the currency for valuing and paying the capital transfer value in foreign direct investment activities in Vietnam is as follows:
- For capital transfers between two non-residents: Transactions may be conducted in foreign currency.
- For capital transfers between a resident and a non-resident, or between residents: Transactions must be conducted in Vietnamese Dong.
In conclusion, the regulations governing Foreign Direct Investment (FDI) companies in Vietnam regarding the purchase of foreign currency for remittances to foreign investors play a critical role in fostering a stable and attractive investment environment. By allowing these companies to remit profits, pay for services, and fulfill debt obligations, Vietnam not only meets the operational needs of FDI entities but also enhances its appeal as a destination for foreign investment. This framework ensures transparency and accountability through necessary documentation and approvals, thereby building trust between foreign investors and local businesses. As the international investment landscape evolves, FDI companies must remain informed and compliant with these regulations to optimize their financial strategies, contribute to Vietnam’s economic growth, and navigate the complexities of international finance effectively.
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Dinh Phuong Thao