- Treatment of Breaches of Specialised Foreign Currency Deposit Account Regulation
- December 27, 2010 | Authors: Phu Thinh Dan; Kevin B. Hawkins; Dao Nguyen
- Law Firm: Mayer Brown JSM Vietnam Limited - Ho Chi Minh City Office
On 1 December 2010 the State Bank of Vietnam (SBV) issued Official Letter No. 9374/NHNN-QLNH (Letter) to reply to two questions raised by SBV's Long An Province Branch (Long An Branch).
Both questions are about the observance of the current provisions on foreign exchange control in respect of foreign direct investment into Vietnam.
Under Circular No. 04/2001/TT-NHNN of the SBV dated 18 May 2001 providing guidelines on foreign exchange control in respect of foreign-invested enterprises and foreign parties to business co-operation contracts, these entities are required to open a specialised foreign currency deposit account at a bank authorised to deal in foreign currency in order to conduct capital transfer transactions by foreign investors. These transfers comprise:
- Transfers into and out of Vietnam of legal capital or capital for implementation of a
- business co-operation contract by foreign investors;
- Transfers into and out of Vietnam of medium- and long-term foreign loan principal;
- Transfers out of Vietnam of interest and fees on medium- and long-term foreign loans for the purpose of repayment of foreign loans;
- Remittance out of Vietnam of legal profit and other income of foreign investors;
- Withdrawals of capital for the purpose of transfer into the foreign currency deposit account of an enterprise with foreign owned capital or a foreign business co-operation party;
- Deposits of capital from foreign currency accounts of enterprises with foreign owned capital or foreign business co-operation parties.
In the first case, Long An Branch sought the SBV's opinion on how to deal with breaches of such regulations by two foreign investors named Greenfield (Thailand) Ltd. and Oriental Ford Holdings Ltd. The SBV's Letter replies:
"The payment by Oriental Ford Holdings Ltd. to Greenfield (Thailand) Ltd. for the transaction of capital transfer at Greenfield Vietnam Joint Stock Company, which has been made outside the territory of Vietnam and not via a foreign-currency special-use capital account opened at a bank operating in Vietnam, has not yet complied with the regulations on foreign exchange control in respect of foreign direct investment into Vietnam. However, there are no specific provisions to deal with this administrative breach by these two companies. Therefore, the branch should issue an instrument to remind and require Greenfield Vietnam Joint Stock Company, Greenfield (Thailand) Ltd. and Oriental Ford Holdings Ltd. to draw experience."
In the second case, Long An Branch was advised by SBV to base on current regulations on foreign exchange control applicable to foreign direct investment in Vietnam to issue written guidelines to Oriental Ford Holdings Ltd. Such guidelines should clearly state that Vietnamese Dong proceeds from transfer of capital to three Vietnamese investors must be used to purchase foreign currency for remittance out of Vietnam to their home country.