Setting up a Foreign Currency Bank Account in Vietnam
In the event that a company has established operations and turned a profit within the Vietnamese market, challenges will remain with respect to ensuring that its proceeds may be sent abroad without a hitch. Whether it be a decision over the method of repatriation or when to take profits, the ways in which investors choose to approach the remittance process can have a significant impact on the quantity and timeframe under which profits will become accessible.
One of the first decisions that will have to be made by investors is that of banking. Upon entering the Vietnamese market, foreign investors who wish to remit profits to their home markets will be required to open a foreign currency bank account. This account is to be utilized for all foreign currency transactions carried out within the country.
For companies that have already established operations in Vietnam, foreign currency accounts will have been set up during the transfer of funds to capitalize given projects. Alternatively, those considering Vietnam as a destination for future investment should note that, while the use of foreign bank accounts is important at the latter stage of the remittance process, it is nonetheless crucial to finalize banking arrangements on the front end of investment.
Understanding which actions require the use of a foreign currency account, where restrictions are placed upon these types of accounts, and what documents must be prepared will all ensure that operations are optimized effectively.
Actions requiring foreign currency accounts
The following are transactions which require the use of a foreign currency bank account:
- Receipt of charter capital
- Increased capital expenditure in which the funding of such expenditure originates in third party countries
- Receipt of financing via loans from foreign sources
- Disbursement of loan payments to third parties outside of Vietnam (inclusive of interest)
- Disbursement of dividends and other profits to shareholders, the origins of which have been derived from Vietnam based operations
When selecting and operating a foreign currency account, investors are faced with a number of restrictions. The following are some of the most pressing issues that investors should prepare for when opening foreign currency accounts:
When opening a foreign currency account, investors are limited to the selection of a single account with a bank that has been licensed by the SBV. In practice, the only banks that will be able to operate foreign currency accounts for investors are those with this license. While limiting the selection of institutions, a number of large international banks such as Standard Chartered and HSBC are able to host foreign accounts. Individual banks should be contacted in order to ascertain their status with Vietnamese officials.
When opening foreign currency accounts, investors must select the account’s denomination. At present, foreign firms are limited to one foreign currency account in a single currency. Exceptions to this rule may be made in the event that investors can prove that the denomination of their overseas loans differ from the currency utilized in the funding FDI projects within the country.
Pursuant to the aforementioned limitations on foreign accounts, those seeking to switch banks may be required to close existing accounts prior to establishing relations with new financial institutions. In the event that this course of action is taken, the closure of accounts must be conducted in compliance with procedures outlined by respective banks.
Upon selection of a government approved bank, the following documentation should be prepared in order to open the foreign currency account. It should be noted that the specific requirements of banks may vary and that requirements may differ depending on the nature of FDI projects within the country (i.e. 100 percent Foreign Owned Enterprise vs Joint Venture).
Optimizing your remittance process
As Vietnam continues to attract record levels of investment, the importance of repatriation will only continue to increase, with banking playing a significant role. Those investing within the country are highly advised to maintain an up to date understanding of all regulations and procedures related to accounting, banking, and the general remittance process. Given the rapidly changing nature of regulation within the Vietnamese market, it is also highly advisable to consult with government bodies or other professional service firms should any concern arise over compliance and related procedures.
The following has been an excerpt from our Vietnam Briefing Magazine entitled: “Remitting Profits from Vietnam“. In this edition, we outline current regulations on remittance, including those regarding banking, and provide guidance on how to ensure compliance in order to repatriate profits in a timely fashion.
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