Accordingly, exchanging currency is one of the relatively common transactions in recent times. However, people might not familiar with how the law regulates this issue; while it is important to pay attention to it. So, what are the regulations on foreign currency exchange in Vietnam? Let’s find out with LSX in this article.
- Ordinance on Foreign Exchange 2005, amended and supplemented in 2013
- Decree 96/2014/ND-CP
- Decree 89/2016/ND-CP
- Circular 07/2012/TT-NHNN
- Circular 32/2018/TT-NHNN
What is foreign currency exchange?
Hence the regulation in Article 2.1, Circular 07/2012/TT-NHNN; foreign currency is the currency of another country or territory or the common currency of the European Union and other common currency; used in international and regional payments.
Thus, the use of foreign currency is so common that there is a definition referring to the foreign exchange market. In fact, the foreign exchange market is where the trading of foreign currencies takes place; the foreign currency market of Vietnam; including the interbank foreign currency market and the foreign currency market between banks and customers.
To put it simply, “Foreign” means outside, “currency” means money, “foreign currency” means a foreign currency used for commerce and trade; or a currency that is not issued by the country’s central bank but is accepted for international payments; which used to pay directly or through a third currency.
Where is it legal to exchange foreign currency?
Following the provision of Article 3 of Circular 20/2011/TT-NHNN; the purchase and sale of foreign currency in cash by individuals must be carried out at locations permitted to buy and sell cash in foreign currency; within the operating network of the Bank or authorized credit institutions, in accordance with the provisions of law.
Particularly, the sale of foreign currency can also appear at foreign currency exchange agents of authorized credit institutions. Foreign currency exchange agents are economic organizations that fully satisfy the conditions in Decree 89/2016/ND-CP. Specifically, in Article 4 of Decree 89/2016/ND-CP on conditions for foreign currency exchange agents to provide services of receiving foreign currency payments for economic organizations, economic organizations may only conduct foreign currency exchange agency activities; after the allowance through the Certificate of registration of foreign currency exchange agent from the State Bank of Vietnam.
In order to know exactly where to buy and sell legal foreign currencies; people can visit the websites of credit institutions to buy and sell foreign currencies at these locations.
What to notice when exchanging foreign currency?
Hence the Circular 32/2018/TT-NHNN, project enterprises, investors actively convert the amount of Vietnamese dong on account No. 1 into foreign currency on the market for the purposes specified in GGU.
Secondly, on the date of the exchange rate announcement; the project enterprise and investor must notify the State Bank (Transaction Office) of the amount of VND to be converted and one (01) designated converting bank to perform foreign currency conversion for the project.
In case the foreign currency status of the converting bank is negative or positive but cannot satisfy all the foreign currency conversion needs of the projects at the same time; the converting bank or the project enterprise, the invest (through a conversion bank) to determine the remaining amount of VND to guarantee and support for conversion to perform the foreign currency conversion.
Lastly, on the basis of the request of the project enterprise, the investor, and the converting bank regarding the remaining amount of VND to guarantee and support for conversion; to perform the foreign currency conversion; the State Bank shall consider implementing currently selling foreign currency to the converting bank.
Procedure of foreign currency exchange?
For foreign currency exchange that the Government commits to guarantee the conversion
Firstly, in case the project enterprise or investor cannot convert foreign currency on the market; within the number of days specified in GGU of each project, project enterprise, investor (through the conversion bank) determine the remaining amount of Vietnam Dong; to guarantee the conversion and send it to the converting bank together with the invoice.
Secondly, on the date of the request for conversion, the converting bank sends an official letter enclosed with an invoice; requesting the State Bank (Transaction Office) to sell the remaining amount of foreign currency equivalent to the remaining amount of VND.
Thirdly, on the date of conversion, the foreign currency status of the converting bank shall inspect invoices and related documents and sell foreign currencies from the Exchange Rate Stabilization Fund; and manage the gold market for the bank to convert at the notified exchange rate.
Lastly, within two (02) working days from the date of conversion, the converting bank will sell foreign currency and transfer it to account No. 2 or an overseas account of the project enterprise, the investor at the announced exchange rate.
For foreign currency conversion, the Government is committed to supporting the conversion
Firstly, within two (02) weeks from the date of payment; the project enterprise and investor shall convert foreign currency on the market.
Secondly, after two (02) weeks from the date of payment; in case this demand cannot be fully converted in the market; the project enterprise and investor determine the remaining amount of VND to guarantee, and support for conversion shall be sent to the converting bank together with an invoice.
Thirdly, on the date of the request for conversion, the converting bank sends an official letter enclosed with an invoice; requesting the State Bank (Transaction Office) to sell the remaining amount of foreign currency equivalent to the remaining amount of VND.
Fourthly, within two (02) weeks from the date of the request for conversion, the State Bank (Transaction Office) checks invoices and related documents and sells foreign currencies from the Exchange Rate Stabilization Fund, and manages the gold market for the bank to convert at the selling rate of foreign currency of the State Bank.
Lastly, the converting bank shall sell foreign currency and transfer it to account No. 2; or an overseas account (as specified in the GGU of each project) of the project enterprise or investor at the foreign currency selling rate of the State Bank.
Pursuant to the provisions of Clause 6, Article 23 of Decree 88/2019/ND-CP, the act of paying the domestic debt in foreign currency against the law will be subject to a fine of between VND 100 million and VND 150 million.
Article 5 of Circular 20/2011/TT-NHNN stipulates that individuals who are Vietnamese citizens and authorized credit institutions are only allowed to trade in foreign currency at the rate of 100 USD/person/day.