- Forms of foreign indirect investment in Vietnam
Foreign investors can invest indirectly in Vietnam through the following 07 forms, including:
– Contributing capital, buying and selling shares or contributed capital of foreign investors in foreign-invested enterprises that have not yet been listed or registered for trading on the Stock Exchange
– Contributing capital, buying and selling shares or contributed capital of foreign investors in enterprises whose stocks are listed or registered for trading on the Stock Exchange.
– Buying and selling bonds and other securities on the Vietnamese stock market.
– Buying and selling other valuable papers in VND issued by residents being organizations licensed in the Vietnamese territory.
– Entrusting investment in Vietnam dong through fund management companies, securities companies and organizations licensed to perform investment entrustment operations in accordance with the provisions of the law on securities; investment entrustment in Vietnam dong through credit institutions and foreign bank branches shall be permitted to perform investment entrustment operations in accordance with the State Bank’s regulations.
– Capital contribution and transfer of contributed capital of foreign investors in securities investment funds and fund management companies in accordance with the law on securities.
– Other forms of indirect investment as prescribed by law.
- IICAand Principles of Use
- Notion
Indirect investment account (or IICA) is a payment account in Vietnam dong opened by a foreign investor at a commercial bank, foreign bank’s branch licensed to do business and provide foreign exchange services in Vietnam to carry out revenue and expenditure transactions related to foreign indirect investment activities in Vietnam.
- Principle
When using IICA, foreign investors must comply with the following principles:
Firstly, all indirect investment activities of foreign investors in Vietnam must be carried out in Vietnamese dong. Transactions related to foreign indirect investment activities in Vietnam of foreign investors must be carried out through 01 (one) indirect investment capital account opened at 01 (one) authorized bank.
Secondly, when conducting foreign indirect investment activities in Vietnam in the forms specified in Article 5 of Circular 05/2014/TT-NHNN, foreign investors must comply with the provisions of Circular 05/2014/TT-NHNN, the provisions of the law on opening and using payment accounts, provisions of the Law on Securities, guiding documents of the Law on Securities, current provisions of the law related to capital contribution and purchase of shares of foreign investors in Vietnamese enterprises and activities of foreign investors on the Vietnamese securities market and other relevant provisions of law.
Thirdly, the balance on the IICA of foreign investors is not allowed to be converted into term deposits and savings deposits at credit institutions and foreign bank branches.
- 3. IICA Opening Procedure
Step 1: The foreign investor submits a set of documents directly or by post or electronic means to the bank authorized to open an account.
The dossier of opening an indirect investment capital account depends on the requirements of each bank, however, in general, enterprises opening an account need to provide the following documents:
- A copy of the Certificate of Enterprise Establishment;
- A copy of the charter;
- A copy of the passport/ID card of the legal representative;
- Decision on appointment of chief accountant/person in charge of accounting (depending on the size of the enterprise).
Step 2: The bank checks and compares the documents in the account opening dossier and requests the completion of the dossier (if any).
Step 3: The Bank and the Foreign Investor shall conclude an agreement on opening and using IICA.
Step 4: The bank announces the number, name of the payment account, and the start date of the account.
Step 5: The bank collects the seal sample, signature sample, digital certificate (if any) of the account holder or the account holder’s legal representative.
- Transactions made under IICA
- Collections
– Revenues from the sale of foreign currencies to licensed credit institutions;
– Revenues from the transfer of contributed capital, shares, sale of securities and other valuable papers, receipt of dividends and interests from bonds and valuable papers arising in Vietnam dong from foreign indirect investment activities in Vietnam;
– Collecting transfers from payment accounts in Vietnam dong of foreign investors opened at licensed banks;
– Collecting transfers from accounts of fund management companies, securities companies, credit institutions and foreign bank branches licensed to perform investment entrustment operations for foreign investors (applicable in case foreign investors make indirect investments in Vietnam in the form of investment entrustment);
– Other lawful revenue transactions in Vietnam dong of foreign investors related to foreign indirect investment activities in Vietnam.
- Spending transactions
– Expenditures for the implementation of foreign indirect investment activities in Vietnam in the forms specified in Article 5 of this Circular;
– Expenses for buying foreign currencies at licensed credit institutions to transfer capital, profits and lawful sources of revenue abroad;
– Expenses for payment of lawful expenses incurred in Vietnam;
– Expenses transferred to a payment account in Vietnam dong of a foreign investor opened at a licensed bank;
– Expenses for transferring funds to accounts of fund management companies, securities companies and organizations licensed to perform investment entrustment operations for foreign investors (applicable in case foreign investors make indirect investments in Vietnam in the form of investment entrustment);
– Other lawful expenditure transactions related to foreign indirect investment activities in Vietnam.
Above is the content of KALF’s consultation on Foreign Indirect Investment in Vietnam and IICA. All of our above advice is based on applicable legal regulations. If you have any questions or requests about legal issues, please contact us for timely answers.
