By Vo Ha Duyen, Nguyen Quang Hung, Nguyen Truc Hien and Katrina Alday
August 2014

Vietnam continues to introduce regulatory reforms in an effort to improve the investment environment and regulatory framework ever since her accession to the WTO in 2007, and in response to external factors such as the 2008 global financial crisis. From 2011 to August 2014, the State Bank of Vietnam (SBV) has issued around 144 circulars, rendering banking and foreign exchange issues highly dynamic. Over the past year, to implement changes under the Amended Foreign Exchange Ordinance, the SBV issued various circulars regulating foreign exchange control. We discuss in this briefing note highlights of recently issued regulations on foreign exchange activities in Vietnam.

Regulations covered in this note include: 

  • Circular 32/2013/TT-NHNN regarding restrictions on using FCY in Vietnam (Circular 32)
  • Circular 05/2014/TT-NHNN regarding indirect investment Capital account to implement indirect investment in Vietnam (Circular 05)

  • Circuiar 19/2014/TT-NHNN of State Bank of Vietnam on foreign exchange control over direct investment activities (Circular 19)

  • Circular 16/2014/TT-NHNN regarding the using of FCY account and VND account of residents and non-residents (Circular 16)

  • Circular 21/2014/TT-NHNN guiding the scopes of foreign exchange operations, conditions, procedures for approving foreign exchange activities of credit institutions and foreign bank’s branches (Circular 21)

Capital Accounts in Investment Activities


On 12 March 2014, the SBV issued Circular 05 to govern the use and maintenance of indirect investment Capital accounts, which replaces Circular 03/2004/TT-NHNN (Circular 03). On 11 August 2014, the SBV also issued Circular 19 to govern the use and maintenance of direct investment Capital accounts. Circular 05 took effect on 28 April 2014 and Circular 19 takes effect on 25 September 2014.

To be consistent with the account name used in other foreign investment regulations and foreign exchange regulations that have been effective for several years, Circular 05 changes the name of capital contribution account” (CCA) to indirect investment Capital account (IICA), and Circular 19 changes the name of “specialty foreign currency (FCY) capital account” (“tài khoản tiền gửi vn chuyên dùng bằng ngoại tệ” in Vietnamese) to “direct investment capital account” (DICA). Within three months from the effective date of Circular 05 and six months from the effective date of Circular 19 respectively, investors and banks have to convert existing CCAs to IICAs and existing specialty FCY capital accounts to DICAs, which is mainly a change-of- name process in the bank’s internal system.

Below are the major changes introduced by Circular 05 and Circular 19.


An IICA is a current VND account opened and maintained by a foreign investor for payment transactions relating to indirect investment in Vietnam. A “foreign investor” is a non-resident conducting investment in Vietnam. A foreign investor must maintain ONE single IICA for all investment activities, covering indirect investment on the stock exchange market, the UPCOM market and also in non-public companies. In contrast, the repealed Circular 03 previously did not apply to investment on the stock exchange market. Funds in the IICA cannot be transferred to term deposits or saving deposits in Vietnam.

A DICA is a current account in VND or in FCY opened and maintained by a foreign invested company (FIC) or the foreign investor participant in a business cooperation contract for payment transactions relating to direct investment activities in Vietnam. The FIC could open a DICA in VND and a DICA in an FCY. In addition, for the purpose of obtaining offshore loans, the FIC could open DICAs in different FCYs provided that they are maintained with a same bank.

In principle, under relevant laws, direct investment refers to the investment where the foreign investor participates in contributing Capital for the establishment and/or participation in the management of an enterprise in Vietnam, while indirect investment is investment other than direct investment. Although Circular 05 and Circular 19 identify the accounts as capital accounts for direct investment or indirect investment, the distinction of direct and indirect investments does not seem important in the use of these Capital accounts as regulated.

Particularly, all cash Capital contributions into an FIC by the foreign investors and Vietnamese investors must be made via the FIC’s DICA. For this requirement, accordingly, it’s not relevant whether the foreign investor or Vietnamese investor participates in the management of the investment.

Additionally, under Circular 19, if a foreign investor makes a direct investment by acquiring shares or contributing capital in an existing company, the applicable requirements are as follows:

  • If the Vietnamese target company is granted an investment certificate, the Vietnamese target company must open a DICA and requirements under Circular 19 will apply;
  • If the Vietnamese target company does not have an investment certificate, the requirements under Circular 05 on IICAs will apply.


Under Circular 19, among payments that are made into or out of the DICA includes payments for Capital transfers or investment project transfers. It remains unclear whether this refers only to a capital transfer to which the FIC is a party (buyer or seller), or also a capital transfer in which the FIC is the target company.

In an earlier draft of Circular 19, payments for Capital transfers were classified into two types:

  1. payments between a resident and a non-resident (eg, case of a foreign investor buying shares from a Vietnamese seller); and

  2. payments between non-residents (eg, case of a foreign investor buying shares from a foreign investor).

According to that earlier draft, in case (i), payments must be made via the DICA, while, in case (ii), the parties may choose to either use the DICA or make payments offshore. Unfortunately, these provisions are removed from Circular 19 as finally issued, suggesting that the SBV intentionally wants to leave this issue ambiguous. This implies that, if payments for a transfer of shares between two foreign investors are not made via the FIC target’s DICA, the buyer of shares may have a risk of future rights of repatriation.


Circular 19 recognizes the pre-establishment costs of foreign investors before obtaining the investment certificate. In particular, the foreign investor could open a FCY account and transfer funds for pre-establishment costs. Such cost will be booked to the FIC after the investment certificate is obtained, in the form of capital or offshore loans from the foreign investor.

Use of FCY within the Vietnamese Territory

On 26 December 2013, the SBV issued Circular 32 to govern the use of FCY within the Vietnamese territory. Circular 32 took effect on 10 February 2014. Note that Circular 32 does not govern cross-border transactions.

Under Circular 32, within the Vietnamese territory, all transactions of offerings, payments, advertisements, quotations, pricing, prices in contracts, agreements and other similar forms of residents and non-residents are not allowed to be conducted in FCY except for explicitly permitted cases. Circular 32 provides a similar, but more detailed list of such permitted cases than repealed Decree 160.

Use of FCY Accounts

On 01 August 2014, the SBV issued Circular 16 to govern the use of FCY accounts and VND accounts in Vietnam. Circular 16 takes effect on 15 September 2014.

Circular 16 provides more clarity to the rights of a corporate non-resident to use FCY accounts maintained onshore Vietnam. Particularly, a corporate non-resident may use its FCY accounts to receive FCY from offshore, to receive FCY from another non- resident’s onshore account, to receive cash deposits of unused amounts previously drawn for employees to use for offshore business travels, to receive FCY purchased from a credit institution, and to receive other amounts as may be permitted under relevant foreign exchange laws.

A corporate non-resident may use its FCY accounts to pay FCY sold to a credit institution, to pay for current transactions and capital transactions, to pay for exchanges among different FCYs pursuant relevant laws, to pay for other conversions into FCY payment Instruments, to draw FCY cash for employees’ offshore business travels, to pay (in cash or bank transfer) salaries, bonuses and allowances to expatriate employees (both resident and non-resident employees), to pay to residents for the export of goods and services, and to pay for other transactions as may be permitted under applicable foreign exchange laws.

Circular 16 states that, within the territory of Vietnam, FCY may be transferred among accounts of the same entity or individual with the same bank or with different banks, except the case of State enterprises, which may be subject to separate regulations.

Credit Institutions’ Foreign Exchange Activities

On 14 August 2014, the SBV issued Circular 21 to govern the permitted scope of foreign exchange activities of and the conditons and requirements for granting foreign exchange licenses to credit institutions (which includes commercial banks, onshore branches of foreign banks and non-bank credit institutions). Each type of credit institutions may be regulated separately under Circular 21. Circular 21 takes effect on 15 October 2014.

Circular 21 classifies foreign exchange activities into two groups: (i) basic foreign exchange activities (Basic FX) and (ii) other foreign exchange activities (Other FX). Under Circular 21, the right of a credit institution to conduct Basic FX will be recorded in its Establishment and Operation License or an amendment thereof. On the other hand, the right to conduct other FX will be recorded in a separate, short-term, permit from the SBV for a specific product or group of products.

Basic FX can be Basic FX in the domestic market or Basic FX in the international markets. Similarly, Other FX can also be Other FX in the domestic market or Other FX in the international markets. Basic FX comprises of a range of foreign exchange activities typical in banks’ operations such as foreign exchange transactions, the four basic types of foreign exchange derivatives, FCY deposits and lending, FCY factoring, FCY remittances, discounting FCY valuable papers, etc.

Other FX are foreign exchange activities on which the SBV still wishes to exercise a close control, and include indirect investment out of Vietnam, foreign exchange derivatives other than the four basic types, derivatives in the international markets, and foreign exchange activities not explicitly listed as Basic FX under Circular 21.

Basic FX of onshore branches of foreign banks in the international markets do not cover lending out of Vietnam and issue of bonds in the international markets, but Basic FX of other commercial banks include these two activities.

Credit institutions, as of 15 October 2015, are required to reflect the current permitted Basic FX into their Establishment and Operation Licenses and obtaining new SBV permits for Other FX.