Opening and using VND accounts for foreign indirect investment activities
On 29 April 2025, the State Bank of Vietnam (“SBV”) issued Circular No. 03/2025/TT-NHNN (“Circular 03”) guiding the opening and use of Vietnamese Dong (VND) accounts for foreign indirect investment activities in Vietnam by non-resident foreign investors.
This Circular also amends certain provisions of Circular No. 06/2019/TT-NHNN dated 26 June 2019 on the management of foreign exchange for foreign direct investment activities in Vietnam (“Circular 06”). Circular 03 will replace Circular No. 05/2014/TT-NHNN (“Circular 05”) and enter into force on 16 June 2025.
The key highlights of Circular 03 are as follows:
1. More transactions can be conducted via Indirect Investment Accounts (IIAs)
Besides the already permitted inflow and outflow of cash transactions, Circular 03 supplements other forms of cash transactions via IIAs, including:
- Receiving dividends distributed to the foreign investor from the non-public local companies that the foreign investor has purchased capital interest or shares from.
- Receiving money to make deposits and collateral when purchasing stocks or receiving a deposit refund.
- Receiving transfers from an old IIA in cases where the investor had opened one at another licensed bank.
- Paying fees, charges, taxes, administrative penalties, and expenses related to foreign indirect investment transactions in Vietnam as prescribed in Circular 03.
These refinements provide greater transparency for foreign investors in specifying the purpose of money transfer orders so that authorised banks have a basis for comparing, inspecting, and retaining documents and executing transactions.
2. Foreign investors are no longer required to convert an IIA into a DICA after the acquisition of a domestic company
This requirement was provided in Article 9 of Circular 05 and is no longer provided in Circular 03. Previously, after a foreign investor had completed the acquisition of a non-public local company and was involved in the management of that company, it was required to close the IIA and transfer the accrued balance into a newly established DICA in VND.
However, this requirement was impractical. The local company (not the foreign investor) was required to open the DICA to receive the capital contribution by foreign investors, according to Article 5.1(a) of Circular 06.
Now, under the new legal framework, foreign investors are not required to close the IIA after completing the capital purchase in a local company. If foreign ownership in the local company exceeds 50% of the charter capital, a DICA must be opened as per Article 5 of Circular 06.
3. Compliance with Anti-money Laundering (AML) and Anti-terrorism and Financing for Proliferation of Weapons of Mass Destruction (ATF)
Circular 03 emphasises obligations under Vietnam’s AML and ATF regulations, applicable to licensed banks and foreign investors.
These regulations are specified in the Law on Anti-Money Laundering No. 14/2022/QH15 dated 15 November 2022 and the Law on Anti-Terrorism No. 28/2013/QH13 dated 12 June 2013, as amended from time to time.
According to Circular 03, all governed parties are explicitly required to comply with existing AML/CTF frameworks in account opening and transaction monitoring.
4. A foreign invested economic organisation (FIEO) subject to opening a DICA is now subject to the same 50% + foreign ownership threshold as provided in the Law on Investment
Circular 03 also amends some provisions of Circular 06, bringing new thresholds into alignment with the current Law on Investment:
- It replaces “foreign investors owning 51% or more of the charter capital” with “foreign investors owning more than 50% of the charter capital” (Article 3.2(b) of Circular 06).
- It replaces “the ratio of shares and capital contributions of foreign investors in this enterprise is below 51%” with “the ratio of shares and capital contributions of foreign investors in this enterprise is equal to or below 50%” (Article 5.6(a) of Circular 06).
As such, in addition to those FIEOs with a foreign investor as a founding shareholder or member at the time of its establishment and, therefore, subject to an Investment Registration Certificate (IRC), the following FIEOs are also required to open a DICA as per Circular 06 (amended by Circular 03):
- An enterprise in which, as a result of the capital contribution, share, or capital interest purchase by a foreign investor, the foreign investor’s ownership accounts for more than 50% of its charter capital (the previous threshold was 51%).
- An enterprise which is established as a result of demerger, merger, or consolidation and where the foreign investor’s ownership accounts for more than 50% of its charter capital (the previous threshold was 51%).
This shift ensures that any enterprise in which a foreign investor holds more than 50% of the charter capital must open a DICA under Circular 06, in line with the Law on Investment.
To recap, Article 5.1 of Circular 06 requires an FIEO, including those enterprises becoming an FIEO as a result of the foreign investor’s capital contribution or share/capital interest purchase, to open a DICA to conduct collection and payment transactions related to foreign investment activities.
Article 11.4 of Circular 03 provides for a transitional period of 12 months from the effective date of this Circular for enterprises with foreign investors owning more than 50% (but less than 51%) of their charter capital to open a DICA. During this transition period, foreign investors may continue using their existing IIA to conduct related capital contribution and share acquisition transactions until the new DICA is issued.
5. Legalisation of documents for opening IIAs to invest in the Vietnamese securities market are not required
Instead, Article 5.4 of Circular 03 provides guidance on the acceptable format for foreign-language documents to be submitted to open an IIA:
- Documents must be notarised and certified in accordance with Vietnamese law or foreign law within 12 months from the date that the licensed bank is allowed to receive the application.
- Translation into Vietnamese is optional based on the arrangement between the licensed banks and the foreign investors but ensuring the following principles:
- Licensed banks must verify and take responsibility for the accuracy and compliance of foreign-language documents with Circular 03.
- Translations must be provided upon request by competent authorities and be certified either by the bank or via notarisation.
These provisions are expected to streamline administrative procedures and significantly reduce the time foreign investors need to prepare documents for opening IIAs. Typically, obtaining legalised documents can take between one and three months (much longer than providing certified documents) which are now accepted under Circular 03.
Foreign investors opening an IIA to purchase capital interest or shares in a non-public local company are still required to submit legalised foreign papers to the licensed banks if such documents are issued by foreign competent authorities (Article 12.6(a) of Circular 17/2024/TT-NHNN). A checklist of documents for opening the IIA will be subject to Article 12 of Circular 17.
6. Certain foreign investors are now permitted to open multiple IIAs at licensed banks, subject to conditions
According to current securities regulations, certain foreign investors are allowed to register more than one securities trading code for their indirect investments in Vietnam’s stock market. Accordingly, they should be permitted to open additional IIAs corresponding to each granted trading code to manage their investment portfolios separately.
In this regard, Circular 03 specifies the categories of foreign investors entitled to this provision:
- A foreign securities company is allowed to open two IIAs corresponding to two securities trading codes granted: one for its proprietary trading and one for its securities brokerage activities.
- A foreign investment fund or a foreign organisation managed by multiple foreign fund management companies is allowed to open additional IIAs corresponding to the granted securities trading codes, in which each investment portfolio managed by one foreign fund management company is allowed to open one IIA corresponding to one granted securities trading code; an investment portfolio self-managed by the foreign fund or organisation that has been granted a separate securities trading code is also allowed to open one corresponding IIA.
- A foreign investor being an investment institution under a foreign government or a foreign investor being an investment or financial institution under an international financial organisation of which Vietnam is a member is allowed to open additional IIAs corresponding to the granted securities trading codes, in which each investment portfolio deposited at a custodian bank and granted one securities trading code is allowed to open one corresponding IIA.
Except for the circumstances above, a foreign investor is only permitted to open one IIA at a licensed bank to conduct transactions related to indirect investment. It should be noted that opening a joint account, registered and held by two or more holders, is not permitted for an IIA.
Besides, Circular 03 also changes the term of the bank account from “Indirect Investment Capital Account” (IICA) to “Indirect Investment Account”(IIA). This change is said to be consistent with the Ordinance on Foreign Exchange Control of 2005, as amended in 2013.
Disclaimer: This article and its content are for information only and are not given as legal or professional advice. they do not necessarily reflect all relevant legal provisions with respect to the subject matter. Readers should seek legal or professional advice before taking or refraining to take any action.
